China cuts solar subsidies
Governments worldwide are cutting back benefits to solar installers as panel prices drop.
We have a $5 price estimate for Yingli, which is at a 20% premium to its current market price.
China launched an aggressive project, Golden Sun, to boost solar installations. Home to seven of the world's eight largest solar panel manufacturers, China added a meager 490 megawatts of solar installations in 2010. (See: Suntech CEO pins hopes on Chinese growth to drive sales.)
Falling panel prices in 2011 led this number to increase to more than 2 gigawatts in 2011. A sharp fall in PV prices has helped the global installation base to grow despite countries pulling back subsidies. Many top executives are pinning hopes on the Chinese market doubling this year in order to avoid further deterioration in market conditions. Some hope that China will add as much as 5 gigawatts of capacity in 2012. In comparison, a last minute rush in Germany helped the world's largest market install 7.5 gigawatts of solar panels in 2011.
Dropping panel prices have made solar subsidies very attractive for installers around the world. This is in turn forcing governments to cut support to avoid excessive burden on budgets. Falling panel prices also help in inducing sales in emerging markets. We believe that sales in emerging countries including China are an important source of value for solar companies over the next few years.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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