Tech Hardware Supply Chain - Gazhoo

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
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