Power plan sparks rally in solar firms

Shares of mainland solar panel and parts producers rose yesterday after Beijing raised its 2015 target for solar farm installation by 167 per cent, but analysts say the rally will quickly lose steam unless Beijing unveils long-awaited details on subsidised power tariffs to show how it can achieve the target.

Boosting domestic demand and eradicating excess capacity are the keys for the oversupplied industry to regain pricing power.

Jiangsu-based GCL-Poly Energy, the world's largest maker of solar panel raw materials, rose 6.7 per cent to HK$1.92. Liaoning-based Solargiga Energy climbed 5.1 per cent to 41 HK cents.

"It is only a short-term reaction. The key to a sustainable rally is whether solar product prices can rebound next year," said Peter Yao Sheng, the head of utilities and clean energy research at BOC International. "Whether higher demand from the mainland can offset lower demand from Europe will depend on finalisation of the subsidies."

In January, the National Energy Administration set a target for solar power capacity to exceed 21 gigawatts by 2015, triple the 7GW at the end of last year. The State Council said on Monday it aimed to have more than 35GW of capacity by 2015, with 10GW to be added each year.

Beijing has been consulting the industry on the level of subsidised tariffs. For large-scale ground-mounted solar farms, it proposed four regional tariffs ranging between 80 fen (HK$1) and 1.10 yuan per kilowatt-hour. Yao said the proposed tariffs and subsidies could account for 10 per cent of project returns.

Analysts expect the subsidy policy will be announced next month after Beijing settles a trade dispute with the European Union, which has imposed a temporary 11.8 per cent import duty on Chinese-made solar power products. The tariff may rise to 47.6 per cent on August 7 if a solution is not found.

A European Commission document dated Friday said China wanted any agreement to expire by the end of next year, Reuters reported yesterday, with the wafers that make up panels excluded from tariffs and only a negligible cap on Chinese exports. The document described Beijing's requests as "difficult to implement".