China’s solar FIT: Analyst expectations

China’s new feed-in-tariff (FIT) government incentive program should boost its solar industry, says IHS iSuppli’s Photovoltaics (PV) Service report, which shares new installation estimates and some concerns in light of the nationwide FIT.

August 12, 2011 — China’s new feed-in-tariff (FIT) government incentive program should boost its solar industry, says IHS iSuppli’s Photovoltaics (PV) Service report, which shares new installation estimates and some concerns in light of the nationwide FIT.

Also read: China stamps solar FIT, but what does it mean?

Before China announced the new FIT, analysts expected China to install 1GW of photovoltaic power in 2011, and 1.4GW in 2012. Incentives could now push installations up about 50%, adding a combined (2011 and 2012) 1.5GW to the estimate (See figure). 2012 solar installations could reach a total of 2.4GW.

Figure. China photovoltaic installation forecast, with FIT upside (in MW). SOURCE: IHS iSuppli August 2011.

China has a robust photovoltaics supply chain, and this new government support is “increasing the confidence level” among these companies, said Glenn Gu, senior analyst for photovoltaics at IHS. Existing solar projects now have assured return on investment and new solar project construction will be accellerated.

China’s National Development and Reform Committee (NDRC) released its FIT document on July 24, marking the first-ever nationwide PV FIT in the country. Despite the strong impact of the NDRC move, the documentation provided by the government leaves several unanswered questions and details undefined. Subsidy period, regional rates, favored installation methods, and other information still needs to be clarified. There are worries that the source of subsidy capital (a Renewable Energy Tariff account raised from the public) may not be sufficient to fund all PV installations, which has caused massive FIT scale-backs in other countries. The Renewable Energy Tariff account in China has been suffering from a deficit since 2010, and the deficit is expected to widen starting in 2011.

IHS predicts that the Renewable Energy Tariff account will come out of deficit in 2014, and the majority of capital will be used to subsidize wind, biomass, and other non-PV projects.

Grid preparedness is another concern. FITs operate by reimbursing solar power producers for feeding into the electrical grid. Despite the energy devoted to solar power, especially in western China, the grid may not be equipped to honor these FITs.

See more information in the new IHS iSuppli report, “China PV Market: A FIT is Coming,” at http://www.isuppli.com/Photovoltaics/Pages/The-China-PV-Market-A-FIT-is-Coming.aspx?PRX

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