China has smashed solar installation expectations in the first quarter of the year, and could well exceed its 17.8 GW annual target by more than 2 GW, suggest analysts from Deutsche Bank.
As reported yesterday in pv magazine, new solar PV installations completed in the first three months of 2015 reached 5.05 GW, way ahead of the projected 2-3 GW target for grid connections and a positive sign that momentum has returned to the Chinese PV market.
In analyzing the countrys performance, Vishal Shah of Deutsche Bank believes China has the potential to exceed 20 GW of new installations this year. Currently, Chinas cumulative solar PV capacity stands at just over 33 GW.
Easing policy outlook to slingshot solar into 2H
According to Shah, the Chinese government is intent on streamlining its feed-in tariff (FIT) payment process, shortening the period from nine months to 3-6 months. Provinces have begun processing allocating projects for the National Energy Administrations (NEA) 17.8 GW target for 2015, having had difficulty completing installations before the end of 2014.
With utility-scale solar PV installations climbing to 4.38 GW in Q1, Deutsche Bank calculates that around 3 GW of the 5.05 GW of overall capacity added came from installations begun in 2014, suggesting steady momentum for Q2 adding a further 5 GW before a strong ramp up after May. A potential FIT cut around that time could also trigger a surge of orders across the country as developers accelerate installations.
Shah writes: "Checks indicate that FIT rates could be cut by RMB 0.1/kWh around 10% – for new utility-scale solar farms in tier-one and tier-two areas with good solar resources." The FIT rate currently stands at RMB 7.5-8/W, delivering internal rates of return (IRR) in the high teens. This could fall to around 12% after the rate cut, which would come into effect on January 1 2016.
Looking further ahead, Deutsche Bank expects the NEA to raise its 2020 solar PV target to 100 GW as part of its new five year plan, meaning by the end of this year China could have reached more than 50 GW of cumulative solar PV capacity.