North Coast Solar Stocks

April 24, 2009

Texas Bill Would Boost Solar Subsidies

Filed under: FSLR, SPWR, STP — Tags: , , , , — Jason @ 11:00 am

Pacific Crest says First Solar, SunPower and Suntech would benefit.

Pacific Crest

THE TEXAS SENATE Wednesday passed a bill that would increase the subsidies for solar installations throughout the state; the bill has been forwarded to the House for approval.

The program calls for $500 million in solar incentives; it is designed to spend $100 million each year for five years. We estimate that the program will fund solar installations between 231 megawatt (MW) and 458 MW over the life of the program. At $5 per watt, this program should be worth $1.2 billion to $2.3 billion in additional sales to the solar industry.

We find this news to be incrementally positive for First Solar (FSLR), SunPower (SPWRA, SPWRB) and Suntech Power Holdings (STP), as these are the three primary companies that can handle utility-scale applications.

At least 30% of the subsidy needs to be used for small-size applications (distributed generation), but up to 70% of the program can be used for utility-scale applications. With the program’s effective date scheduled for Sept. 1, 2009, it should be an incremental driver for demand starting in 2010.

The legislation requires initial rebates to be $2.40 per watt for installations on residential buildings, $1.50 per watt for installations on commercial buildings, and $1 per watt for installations at industrial facilities.

For the residential customer, the rebate offered in Texas is more generous than the $1.90 per watt being offered under the California Solar Initiative. The new incentive would reduce the cost of a three kilowatt (kW) residential photovoltaic solar installation by $5,040, with the payback period being reduced from approximately 14 years to approximately nine years (our analysis only considers the new state program and existing 30% federal incentive, and ignores any benefit from county- or city-based incentives). The incentive levels will decline by at least 5% annually.

Electricity consumers will ultimately be paying for the solar subsidy. The bill calls for monthly surcharges of 20 cents for individuals, $2.00 for small businesses and $20.00 for large corporations.

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