North Coast Solar Stocks

March 27, 2009

Solar: Is China Subsidy Limited to BIPV Installations?

Filed under: LDK, STP, YGE — Tags: , , , , — Jason @ 4:25 pm

Posted by Eric Savitz
barrons.com

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 today 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 (YGE) are the leading China-based BIPV players.

Gabelli & Co. analyst John Segrich today 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 flass 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.

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