When Evergreen Solar Inc. filed for Chapter 11 bankruptcy Aug. 15, the company cited several market conditions that have impacted business, including a drop in silicon pricing, significant global capacity expansion and an end to industry subsidies in Germany and other key markets.

The company's troubles could force it to give back money it received in the form of tax breaks from the state of Massachusetts, according to a National Public Radio report.

The news could cast further doubt on the usefulness subsidies provide to the renewable-energy market.

The industry is struggling with a supply glut created over the past two to three years when subsidies in key European markets, namely Germany and Italy, drove demand, says Gordon Johnson, an alternative-energy analyst with Axiom Capital Management Inc.

"If you were a solar panel manufacturer everything you produced you could effectively sell, and the economics on this stuff at the time were such that you were basically getting paid back for the equipment you were investing in a matter of three to four months," Johnson says. "And you were getting return on capital of 200% to 300%."

But Germany and Italy have begun rolling back these subsidies, known as feed-in tariffs, significantly reducing demand and creating excess supplies.

Demand in Italy, the second-largest global solar market, will likely decline by approximately 19% this year, Johnson says. Meanwhile, supplies are expected to grow by nearly 100% because manufacturers ramped up capacity in 2010, he says.

Johnson says he expects more solar-panel manufacturers to file for bankruptcy in the coming years, including some larger companies.

"This is one of the most oversupplied industries I've ever seen," Johnson says. "Evergreen is just the tip of the iceberg."