The solar sector had a rally for the ages in 2013. Several solar stocks were up over 400%. Canadian Solar (NASDAQ:CSIQ) rallied 10-fold. Many of the trends that sparked solar's rally in 2013 should continue for 2014.

What will 2014 bring for the solar industry?

The leaders will continue to run
Solar costs will trend lower as cell conversion efficiency improves. Trina Solar (NYSE:TSL), Canadian Solar, and Jinkosolar (NYSE:JKS) will win more utility-scale projects as China institutes new feed-in tariffs that make internal rates of return for utility projects very attractive. 

American solar stocks such as SolarCity and SunPower will continue to see growth. Rooftop solar should continue to grow as solar energy achieves grid parity in more places and more companies follow Wal-Mart and Costco's lead in adopting commercial rooftop solar. 

As the distributed power companies grow, they should achieve greater economies of scale to cut soft costs, such as labor and systems design, which currently constitute anywhere between 52% to 64% of total installation costs. 

The Chinese solar market will pull ahead
China will widen its lead as the world's largest solar market in 2014.

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According to the Chinese Bureau of Energy, China has an official target of solar power target of 12 GW installed, or more than one quarter of the 43 GW of global solar installation expected in 2014. 

 China is aggressively adopting solar because pollution is a major problem in China. Sixteen of the world's 20 most polluted cities are Chinese. 

China's pollution will only get worse as its electricity usage increases with GDP growth. China needs energy solutions that create jobs, save the enviorment, and scale. Solar energy meets all three of those criteria. 

Japan will not see as much growth as it did in 2013 due to its 48 nuclear reactors likely to restart. 

Companies that did well in 2013 because of Japan, such as Canadian Solar, will also not benefit as much in 2014. 

LDK Solar will file for bankruptcy
My final prediction is that LDK Solar (NASDAQOTH:LDKSY) will file for bankruptcy in 2014.  The fundamentals are just too dire for LDK Solar to have any shot as an independent company. 

In its latest quarter filings, LDK Solar reported sales of $156.6 million and a net loss of $127 million. The operating margin was negative 49.5%. 

LDK Solar simply has too much debt and not enough customers. The Chinese government wants strong solar companies to acquire weaker companies to soak up excess capacity and improve efficiency.In my opinion, LDK Solar will undergo what Suntech Power underwent in November where international creditors basically forced Suntech Power to liquidate. 

The bottom line
In bull markets, stocks trade on perceived future value rather than realistic discounted cash flows. Optimistic sentiment and rising stock prices often lead to even greater optimism and higher stock prices. That positive cycle can continue unabated until a jarring negative catalyst causes the market to realize that expectations are too high. Given the immense trends in play and the likelihood that many solar stocks will turn profitable this year, I believe solar stocks have room to run in 2014.

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Jay Yao has no position in any stocks mentioned. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.