China is moving to accelerate its deployment of distributed rooftop solar with new incentives and new financing tools akin to the SolarCity leasing model.
The National Energy Administration of China released a policy document earlier this week which provides extra subsidies for public entities and rural buildings.
China has aimed to add 8 gigawatts of distributed solar and 6 gigawatts of utility-scale PV in 2014. Meeting that 14-gigawatt target could put China ahead of Japan's solar totals and make China the global leader in production and demand for solar. Greentech Media suggests that China will finish the year at 11 gigawatts of PV, followed by Japan and the U.S.
This boosts the prospects of solar panel manufacturers in China, including Trina, Yingli, Canadian Solar, JinkoSolar and JA Solar, as well as the firms that support those Chinese companies such, as GT Advanced.
China set a tariff of 7 cents per kilowatt-hour for the projects, according to Bloomberg.
Vishal Shah of Deutsche Bank Equity Research cites these takeaways from the National Energy Administration document:
- All regions and provinces will focus on distributed generation (DG)
- The DG category includes any installation below 20 megawatts
- Potential new financial structures include loans, loan guarantees, and leasing models, as well as strategic partnerships between banks and PV installers
- The initiative will emphasize solar deployment on new construction, affordable housing, railway stations, highway service areas, airports, transportation hubs, major sports venues, parking lots and agricultural land
- Another area of focus will be standardization of quality engineering and safety for new installations, improved record management for PV projects and streamlined reporting processes
- Streamlined interconnection procedures will be implemented
- Utilities must fully consider potential for DG development in their planning/construction processes, including smart grid technology
Shah writes, "This is likely the document that most Chinese solar companies have been waiting for, as questions around the install targets for the year have largely centered around the breakdown between DG and utility scale."
DB also suggests that "DG deployments in 2014 will likely pick up in the fourth quarter and notably outperform the ~800 MW of DG installed in China in 2013. The policy was released one to two months later than expected, which makes outperformance beyond the 4-gigawatt target from DG difficult to achieve this year. However, we expect this will support a favorable setup into 2015." Shah adds, "Depending on the policy details, we see potential for business models similar to SolarCity in China driving further upside over the next few years."
Adam James, GTM Research solar analyst, notes, "As expected, the Chinese government has taken some concrete steps to help meet its ambitious DG target. In particular, streamlining the payment mechanisms and clarifying the options for generators choosing between the feed-in tariff and self-consumption rate should help the flow of financing into DG."