China has emerged as the largest global PV market meaning relatively minor changes to policy can have a global impact. This is true of reports last week that its NDRC are contemplating a cut to solar tariffs.
Analyzing the impact of the potential cuts, Deutsche Bank says that the timing of such cuts would be surprising. The stock analysts had anticipated cuts in the second half of 2016. In an investor note issued in the wake of the reporting regarding the cuts, Deutsche Bank wrote that such cuts would likely be aimed at making solar more competitive with other generation sources.
We also believe the language around potential risk of retroactive tariff cuts is somewhat concerning as it could impact availability and cost of project financing, wrote Deutsche Bank analyst Vishal Shah. That said we note that the bigger issue with China is payments of subsidies in a timely manner.
Deutsche Bank reports that its China team anticipates the renewable energy surcharge is likely to be raised by 1-1.5c/kWh, to speed up subsidy payments. It has forecast a PV market of 13 GW in both 2015 and 2016, however notes that it is currently reviewing this given recent news.
Solar stocks including Yingli, Jinko and Canadian Solar are all thought likely to be negatively impacted by any tariff changes, Deutsche forecasts.