China Solar industry gets boost on German rule changes

Weaker demand in Germany may see industry focus shift back to China as prices drop.

In a release, Nomura says that the German government overnight released the final agreed version on the revised solar FIT policy structure. Most of the policy is the same as last draft released on 27th March and is applied retroactively from the initially proposed 1st April 2012.

That said there are two key additions: 1) A new category of rooftop systems of 10~40kW has been introduced which will receive €0.185/kWh in FITs; and 2) A cap of 52GW cumulative installations had been placed (24.7GW installed at end-2011) before new policy discussion. While the demand in 2Q12F has so far remained strong on grandfathered projects, we reiterate our prior view that new FIT rates are not conducive for strong demand from Germany for new projects. We expect ASPs to take a hit with demand shifting from Europe to China in 2H12F where ASPs are 5~10% lower. We continue to remain cautious on the industry given elusive profitability and continued macro-economic concerns.