SolarCity business model could flourish in China: Deutsche Bank

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A SolarCity-style business model could flourish in China if policy changes allow it, according to Deutsche Bank analyst Vishal Shah.

The model could help the country achieve its ambitions for rooftop solar, which look increasingly likely to prove elusive for now.

A number of policy changes aimed to encourage local governments to incentivise distributed solar in agricultural, commercial and transport facilities have now been released.

“While DG [distributed generation] deployments in 2014 will likely pick up in the fourth quarter and notably outperform the ~800MW of DG installed in China in 2013, the policy was released 1-2 months later than expected,” said Shah in a research note adding that DG targets would now “be difficult to achieve”.

China had originally set itself a quota of 14GW of new capacity for 2014, with a split of 6GW of utility and 8GW of distributed generation (DG). Last month Wu Xinxiong, head of the National Energy Administration (NEA) said he hoped to see 13GW installed with the majority coming from DG.

The first half of the year, traditionally the slower half, ended with confusion over how much DG had been installed and what chance there was of anything close to 8GW being installed. Some analysts predicted that around 1GW of smaller rooftop projects would be connected.

Despite that, Shah expects the groundwork being laid now to bear fruit eventually.

“…This will support a favourable setup into 2015, particularly as further details around financing arrangements (leasing, loan guarantees, etc) are fleshed out in subsequent policy announcements at the federal and local level,” he continued.

“Depending on the policy details, we see potential for business models similar to SolarCity in China driving further upside over the next few years, and expect companies like Trina Solar with a manoeuvrable balance sheet to benefit,” he added.

Hear Vishal Shah’s views on the future of solar finance at Next Generation Solar Finance in New York on 29 September at the Andaz Hotel on Wall Street. Vishal joins a selection of 30 speakers from Solar City, JP Morgan, State Street Global Advisors, BlackRock, Anthony Fotopoulos, Chief Executive Officer of Conergy Americas, and many more.

See the full list here.

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