Will China’s Solar Incentive Cuts Impact First Solar And SunPower?

by Trefis Team
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Last week, China indicated that it would be cutting its incentives for solar projects this year, in an effort to keep a check on its ballooning renewable energy subsidy costs. The move is expected to significantly reduce the country’s solar installations over the second half of 2017. For instance, the country has effectively put a cap of 10 gigawatts of new distributed solar projects in 2018, marking a decline from about 19 GW installed last year. Things could be more challenging in the utility-scale market, as China has abandoned its 13.9 GW installation target. This could come as a significant blow, as China built about 34 GW of utility-scale projects last year, accounting for close to a third of global demand. China is also cutting its feed-in-tariffs, which are the rates paid for power sent to the grid.

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It is possible that the move could have significant repercussions for the global solar market, as China installed roughly 53 GW of capacity in 2017, accounting for about 54% of global installations. According to a report from GTM research, the changes could cut the country’s forecast capacity by 40%, to 28.8 GW from 48 GW. The impact on SunPower and First Solar could be more mixed. While SunPower has some presence in the Chinese market, via strategic joint ventures, it still derives a bulk of its revenues from high-end panels and integrated solutions targeted at developed markets. First Solar could be more insulated, as it derives over 75% of its revenues from the U.S. market, where it currently enjoys some regulatory benefits, as it is not subject to the import tariffs to which its silicon-based rivals are subject. That said, considering China’s outsized position in the global market, it’s possible that these two companies could see a limited impact on their demand and pricing power.

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