France’s solar energy market could see a 500MW cap from 2011 in addition to the projects that have already received permits by the end of 2010, according to reports in French newspaper, Les Echos. The French Government estimates that 3.4GW of projects have received construction permits in 2010 and roughly 2GW of these projects could ultimately get built in the 18-month timeframe which stretches to the first quarter of 2012.
Vishal Shah, an analyst at Barclays Capital notes that if these projects are not completed, the Government may consider increasing the installation cap from 500MW to 800MW. Shah comments further that the new FiT proposal could mean that: (i) future permits will depend on project size – for projects above 100kW, the FiT would be determined by an auction process and (ii) for the residential market, tariffs could get adjusted by 20% in 2011 and 10% in 2012.
As a result of this news, Barclays Capital has improved its supply and demand outlook for the country. Since investors were expecting a 500MW cap with no additional projects receiving FiT payments, this news is positive for the French market. The revised regulatory outcome allows for an additional 3.4GW of projects to be completed potentially in 2011 or 1H12 (in the case of supply constraints) and thus improves the 2H11 demand expectations. “We are forecasting 750MW demand in 2011 and 2012, respectively. Potential upside to our demand forecasts exists as a result of the recent regulatory changes,” explains Shah.
“Recent regulatory changes support our near-term constructive thesis: Although set-up may appear to be less favorable for a positive earnings season trade given the recent move seen in the solar space, we see room for further near-term upside. We believe most of the recent move was driven by short covering as opposed to real buying. As the near-term policy backdrop for the sector continues to improve and as the broader equity markets continue to grind higher, we expect positive share-price momentum for high-beta solar stocks to continue even beyond the earnings season.”