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Bhavin Shah (852) 2800-8538 bhavin.a.shah@jpmorgan.com 236 Asia Pacific Equity Research 20 April 2009 Table 129: Renewable energy targets in various countries Country Renewable energy targets Australia 9,500 GWh of electricity annually by 2010 Denmark 29% of electricity output by 2010 Finland 35% of electricity output by 2010 France 21% of electricity output by 2010 Germany 12.5% of electricity output by 2010 Italy 25% of electricity output by 2010 Japan 7% of TPES by 2010 Netherlands 9% of electricity output by 2010, 10% of primary energy by 2020 New Zealand 30 PJ of new capacity (including heat and transport fuels) by 2012 Spain 30.3% of electricity output by 2010 Sweden 60% of electricity output by 2010 United Kingdom 10% of electricity output by 2010 Source: International Energy Agency. Spain Since 2006 there has been an upsurge in the Spanish PV industry and in 2007 it recorded growth of over 400% in new installed capacity and surpassed the cap of 400MWp set by the Spanish government in 2007 itself, three years earlier than the target date. According to the most recent data from the National Energy Commission (Comisión Nacional de Energía) a total of 512MWp PV capacity was installed and connected to grid in Spain in 2007, taking the cumulative installed capacity in 2007 to 655MWp. This upsurge in PV installations can be attributed to a favorable policy environment in Spain. To cool down the explosive growth in PV installations, Spain introduced a new law on 26 September 2008 for PV systems commissioned after 29 September 2008 that included an annual cap on installations eligible for FIT and significantly lower FITs. The new law sets a cap of 400MWp on the total PV systems eligible for the FIT for 2009 and 2010 of which two-thirds is reserved for roof-top systems and the rest for ground-mounted systems. The new law also contains an additional quota of 60MWp for 2009 for ground-mounted systems. So, the total cap for 2009 is set at 500MWp (233MWp for roof-top systems and 267MWp for ground-mounted systems) and for 2010 at 460MWp (233MWp for roof-top systems and 227MWp for ground-mounted systems). FITs are applicable for 25 years and are annually adjusted for inflation. The new cumulative installation targets under the new law is 3,000MWp by 2010 and 10,000MWp by 2020. Table 130: Spanish solar energy subsidy—2008 vs. 2009 Royal Decree 661/2007 (expired 9/29/2008) Cap 371MW (not enforced) 10MWp €0.229764/kWh Royal Decree 1578/2008 (begins 1/1/2009) Cap 500MW (2009), 500MW (2010), 490MW (2011) Small Roof 20kWp and Ground €0.32/kWh Source: J.P. Morgan estimates.
Bhavin Shah (852) 2800-8538 bhavin.a.shah@jpmorgan.com Asia Pacific Equity Research 20 April 2009 Germany In Germany, the total installed capacity of all solar power installations rose from 3.8GWp in 2007 to around 5.3GWp in 2008. Germany has passed the “Renewable Energy Act” (EEG) with a goal to increase the percentage of renewable energy sources in power supply to at least 12.5% by 2010 and to at least 20% by 2020. The act obligates the grid operators to pay fixed feed-in tariffs to renewable power producers as per the pre-determined schedule. Feed-in tariffs are fixed for 20 years and are dependent on the renewable energy source, the year the installation was put into operation and the size of the plant. The law also has the provision for annual degression rate (the annual reduction rate in the feed-in tariff paid for electricity produced from renewable power systems). This degression rate is again dependent on the renewable energy source and the size of the plant. On 6 June 2008, one house of Germany’s parliament decided to increase digression rates to 8%-10% depending on the type of systems from 5%-6.5% up to 2008, although it was not as high as some had predicted. These rates will be in effect for the next four years. Inclusive of the higher digression rates in the new law, the industry still predicts grid parity in Germany by 2012-15. Table 131: New PV feed-in tariffs in Germany from 2009 onwards System Rooftop Rooftop Rooftop Rooftop Ground mounted 1000Kw (Any size) Feed-in Tariffs in € cents/kWh 43.01 40.91 39.58 33.00 31.94 Base Annual 8% for 2010, 8% for 2010, 10% for 2010, 10% for 2010, 10% for 2010, Reduction Rate 9% thereafter 9% thereafter 9% thereafter 9% thereafter 9% thereafter Source: Bundesverband Solarwirtschaft (BSW-Solar). US Solar tax credit gets eight-year extension At the federal level, the Energy Policy Act of 2005 established a 30% ITC for commercial and residential PV systems (and other solar and solar hybrid systems) with a cap of US$2,000 for residential PV systems. This act increased the tax credit from 10% previously to 30% of expenditures on PV systems. Under this act, all PV systems installed in 2006 and 2007 were eligible for the 30% ITC. However, the tax credit was later extended by a year to include the systems installed until December 2008. After failing to pass the bill to extend the ITC beyond 2008 many times previously, a tax extender bill was finally passed by US legislators and signed by President Bush on 3 October 2008. It extends the 30% solar ITC for residential and commercial solar systems for eight years until 2016, eliminates the cap of US$2,000 on tax credit for residential solar PV systems (effective for property placed in service after 31 December 2008) and allows utilities to claim a 30% ITC for large-scale solar-powered projects. Utilities were not allowed to claim for the credit in the previous bill. Solar tax credits can be also used against the Alternate Minimum Tax. Japan The “Residential PV Systems Dissemination Program” started in 1994 in Japan was highly effective in creating an initial market for residential PV systems in Japan. The program provided upfront rebates for PV systems to reduce the cost of the PV installation and to increase the adoption of PV systems in Japanese houses. The rebate was set at 50% of the installation cost in 1994 (around ¥900/watt) and was reduced in each subsequent year until 2005 (20 yen/watt) when the program was terminated. According to IEA data, during the 12 years (FY94-FY05) of this program, a total of 253,754 PV systems were installed amounting to a total PV 237
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