Confusion with China's Solar Subsidy

There’s one nagging bit of uncertainty about China’s solar subsidy program which could make a big difference in terms of which companies might benefit as result.

The issue is what types of installations are included in the program: as I noted in my rundown on Street reaction to the news, Hapoalim Securities analyst Gordon Johnson asserted that the program only covered what are known as “building integrated photovoltaic panels,” or BIPVs. That interpretation would suggestion the program is primarily targeted at new construction, rather than after-market installation on existing commercial buildings. (The program clearly does not address residential or utility applications.)

The focus on BIPV would explain the continued strong performance of Suntech (STP), which Johnson notes is the primary BIPV player in China.

Research firm Wedge Partners asserted in a research note Friday likewise asserted that the 20 RMB/watt subsidy program is specifically for BIPV installations of at least 50 KW. Wedge contends the program is focused on off-grid installations, and that “grid connection for solar power will not be feasible in China for at least two more years,” asserting China’s power grid is “poorly equipped to manage the variable power generated by solar installations. Wedge likewise noted that Suntech and Yingli Green Energy are the leading China-based BIPV players.

Gabelli & Co. analyst John Segrich Friday upped his rating on Suntech to Buy from Sell; he also moved to Hold from Sell on LDK Solar (LDK). Segrich also notes that Suntech is “one of the only players” in China offering a BIPV panel.

I asked Collins Stewart analyst Daniel Ries about the lack of clarity on the role of BIPV installations in the China subsidy program; he responded that “the wording did not make it very clear,” but did refer to “building integrated” installations. “Most BIPV is associated new new construction, such as cells in glass in an atrium,” he reports. “It is very hard to retrofit an existing building.” Ries says his contacts say that a separate ground-based solar program in China could coming, but that the timing is uncertain.

While most solar stocks lost ground Friday after Thursday’s huge rally, a few extended their gains:

• Suntech rose another 46 cents, or 4.1%, to $11.75.
• Yingli rose 14 cents, or 2.3%, to $6.15.
• Evergreen Solar (ESLR) rose 31 cents, or 15%, to $2.35.
• GT Solar (SOLR) rose 79 cents, or 13.5%, to $6.63.

Original post

Comments

[canb888:]

This is how the facts are twisted by Eric the China Solar basher:
Ministry of Finance said: "Priority will be given to building-integrated PV applications"
This writer selectively quoted someone who said:
"the program only covered what are known as “building integrated photovoltaic panels,” or BIPVs". Note the huge difference in the words "Priority" vs. "Only".

Question: Who do we trust, the Chinese Ministry of Finance who set the policy or someone who does not read Chinese and change the spirit of the new "interim measure" on solar incentives in China? Need I say more? Solars are moving up in a big way, don't fight the trend.

Mar 29 03:50 PM

[canb888:]

Look at other points:
1. Eric quoted someone saying:"the 20 RMB/watt subsidy program is specifically for BIPV installations ...". The official policy says: "Priority will be given to building-integrated PV applications", nowhere can I find "specifically for BIPV...". "Priority" became "specifically" to suit the author's opinion. "Specifically" is close to "only" that he used in my earlier comment. Eric already has his conclusion before looking at the documents/facts.

2. Eric quoted again someone saying: "the program is focused on off-grid installations"
while the Official Policy says: "Priority will be given to grid-connected building PV applications"

If Eric used the same logic as in the BIPV I pointed out earlier, he should be saying "only" support grid-connected.. applications". Instead he is quoting exactly the opposite.

How more biased can someone be?

Mar 29 04:07 PM

[aquaculture:]

Confused Savitz?
lol.

Mar 29 05:58 PM

[SubsidyEye:]

Eric, do you know whether there are local-content obligations attached to these subsidies, as there are (70% local-content) for wind-power projects?

Mar 30 08:51 AM

[vodop09798:]

Hey Folks,
THEY'RE BACK!!! Short interest on STP is almost 10%. In case anybody doesn't remember, 4% used to be considered high. They always pick on the biggest companies in a category. They always put out misrepresentations and innuendoes, designed to scare.
Don't listen to them.

Mar 30 11:52 AM

[Alphameister:]

Clearly Savitz is intellectually invested in the bearish case for solar stocks, and I appreciate the comments by canb888 showing the extent to which Eric will distort the truth in furtherance of his bearish bias.

Mar 30 01:57 PM

[Kee Ideas:]

This analysis has a detailed explanation of the subsidy program and its implication.

keeglobaladvisors.type...

Apr 03 10:18 AM