Trina Solar (NYSE:TSL), one of China’s largest solar panel manufacturers, expects installations in the U.K. to double this year with the residential and the utility scale sector together adding around 2 GW of capacity.  Most of the electricity generated in the U.K. comes from conventional thermal sources like natural gas (46%) and coal (28%). However, gas production from the country has been decreasing and imports have been rising, turning the country into a net natural gas importer. Considering the country’s increasing reliance on imported fuels, the government has developed its key energy policies to improve energy independence, including investing significantly in renewables. ((US EIA )) We believe that if Trina Solar is able to capitalize on the growing solar market in the U.K., it could partially offset weaker demand from other European markets like Italy, Spain and Germany.
Opportunities And Risks In The U.K. Market
- Why Are We Bullish On Trina Solar?
- How Is Trina Solar’s Revenue Mix Expected To Change Over The Next 5 Years?
- China, United States, Europe: What Is Trina Solar’s Revenue And Gross Profit Breakdown?
- How Has Trina Solar’s Revenue Mix Changed Over The Last 5 Years?
- What Drove Trina Solar’s Revenue And Gross Profit Growth Over The Last 5 Years?
- How Is Trina Solar Expected To Grow Over The Next 5 Years?
Largely Under-tapped Market: The solar sector’s presence in the U.K. remains marginal at best with a total installed capacity of around 1.8 GW (In comparison, Germany has over 30 GW). As of 2012, Trina Solar derived over 68% of revenues from the European market, out of which less than 5% were from the U.K.  Given that most European markets have been experiencing sluggish growth for solar installations, the U.K could provide a promising pocket of growth. The firm expects total demand from the U.K. to be around 800 MW in Q1 and 2 GW for the full year. ((Bloomberg))
Attractive Subsidies: The government has been providing attractive feed-in-tariffs (FIT) and has a target of installing 20 GW of solar power by 2020. FIT’s were initially set at around £0.43/kWh (US$0.69/kWh) in October 2011, and the government plans to reduce these rates to around £0.21/kWh by March, which are still quite attractive. The government has also introduced a system of rolling cuts for these FIT’s, which brings more predictability into the tariff structure. 
Products Well Suited For U.K. Rooftop Market: While most manufacturers have been postponing their capacity expansion plans, Trina Solar took a bold step of adding about 500 MW of cell and module manufacturing capacity last year to produce high efficiency modules end PV cells. The rooftop market in the U.K could prove to be an avenue for growth for the firm’s high efficiency monocrystalline modules that are compact in size and perform well under lower temperatures.
Weak Solar Resources Could Mean That Market Will Be Subsidy Driven: The U.K.’s average solar insolation is much lower than in countries like Spain and Italy. Achieving grid parity is still quite a long way off in the U.K due to this. Given these conditions, we believe that solar power is likely to be driven largely by subsidies rather than by its fundamental viability, at least in the medium term, until systems prices drop further.Notes: