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DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®
Client-Driven Solutions, Insights, and Access
13 January 2015
Global
Equity Research
2015 Solar Outlook Connections Series
Robust Demand and Attractive Valuations
Present Opportunity, Despite Oil Distraction
■ Overweight Solar sector in 2015 given low valuations: We are optimistic 2015 will allow the unwarranted correlation with oil to break down and a re-rating to occur given historically low valuations and solid growth prospects.
■ 21% growth forecasted in 2015: We expect the solar market to grow 21% in 2015 to 53 GWs with continued geographic diversification. Europe's share declines to 16%, Japan to 11% (from 18%) while the US outgrows the market to 16% due to the ITC step-down in 2017 and growth in rooftop markets. China remains ~26% of demand with 33% growth to 14 GWs. Solar still only represents 1.2% of electricity generation in the world. We forecast this grows to just 4% by 2020, suggesting our long-term forecasts could prove to be conservative given solar's emerging cost-competitiveness.
■ Oil continues to weigh on sentiment, but fundamental impact limited: Oil has fallen 52% in just four months, Natural Gas is down 28% while solar stocks have retrenched 23% (vs. S&P 500's 1% gain). We believe lower oil and natural gas will have limited impact on solar demand globally, as oil accounts for only 1.5% of generation in key solar markets and natural gas only represents a challenge for utility-scale solar in the US, but insulated due to support from Renewable Portfolio Standards, in our view.
■ Taking a more conservative stance on Japan given policy changes; a response to >6% penetration: We are lowering our demand forecast once again (now 23% decline y/y to 6 GWs) on continued regulatory setbacks proposed in December, including new curtailment rules which we believe could slash unlevered IRRs to <5%, jeopardizing the 69 GW pipeline.
■ Distributed generation still in early innings: We forecast the US residential rooftop market grows 62% from 1.2 GWs in 2014 to 1.9 GWs in 2015. Residential solar is still in the early innings of adoption, with only 0.7% penetration in the US; while residential solar costs have fallen over 40% in 4 years, enabling residential solar to now be economic in 32 states.
■ Top picks for 2015 – SUNE, SPWR, SCTY, VSLR, JKS: SUNE remains our top pick. We are also upgrading SPWR on valuation and approaching YieldCo catalysts. JKS remains our top-pick in the upstream manufacturing space given cost-leadership, downstream catalysts and relative valuation (trading at 4.6x our 2015 EPS estimate). While we are incrementally more positive on TSL and JASO given valuations, we are cautious on a relative basis given concerns in Japan which could disrupt global market. We remain U/P on YGE and SOL. We see favorable risk/reward for SCTY and VSLR and see the DG sector valuations as fundamentally too low, trading at 0.6x to 2.6x our EV/EBITDA-style metric on 2015 despite >60% growth. See page 55 for Target Price and estimate revisions for SOL, YGE, TSL.
The Credit Suisse Connections Series
leverages our exceptional breadth of
macro and micro research to deliver
incisive cross-sector and cross-border
thematic insights for our clients.
Research Analysts
Patrick Jobin
212 325 0843
Baiding Rong
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Maheep Mandloi
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Jennifer Ky
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Felix Remmers CFA
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Mathew Waugh
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13 January 2015
2015 Solar Outlook 2
PART I: Solar in 2015 We are optimistic 2015 will allow the unwarranted correlation with oil to break down and a
re-rating to occur given historically-low valuations and solid growth prospects. While we
are taking a more conservative stance on Japan following regulatory developments, we
are encouraged the emerging cost-competitiveness of solar energy will allow continued
industry growth given the low levels of penetration globally.
We have structured this report to address both overall market fundamentals and provide
our updated thoughts on important topics relevant for the sector.
■ Part I: Industry fundamentals into 2015 including sector valuations, and our sub-sector
views and top stock picks, followed by the case for solar's emerging economic cost-
competiveness and an update on the global supply/demand outlook.
■ Part II: Deep-dives on topics du jour: (1) The impact of lower oil, page 12,
(2) Thoughts on Japan policy changes, page 14, (3) The distributed generation market
and a deep-dive on the TAM, page 17, (4) The US Utility scale boom expected, page
29, and (5) The implications of the China/US trade dispute, page 33.
■ Part III: A more in-depth discussion on demand by country, supply of polysilicon and
solar module manufacturing capacity, page 37.
■ Appendix: Useful sector comps tables and geographic exposures, page 55.
Sub-sector Views for 2015 & Top Stock Picks
Distributed Generation: Valuations Attractive, Above-Sector Growth
We see particular bright spots of opportunity in the rooftop space (top picks: SCTY,
VSLR, SPWR) given low multiples and large growth opportunities. In 2015 we predict the
following themes will dominate discussions:
■ Large growth, despite lots of regulatory discussion: We expect the residential market
to grow 62% in 2015, outpacing the US market's 45% growth and 21% globally. There
will be some state-level setbacks (Salt River & APS) but also likely victories (CA's
NEM 2.0).
■ Loans grow as part of mix: Partially in response to potential tax equity constraints, we
believe loans will become a larger portion of the financing mix, potentially spurring
additional demand and alleviating financing bottlenecks.
■ Competition emerges from utilities, but share continues to consolidate with leaders:
We believe more utilities will enter the US-residential leasing/loan market following the
significant push NRG has made in the space. We continue to see shares consolidating
with companies with a proven track record, access to financing, and viable cost
structures (the biggest barrier to entry).
■ Valuation multiples (and disclosed metrics) evolve: The market continues to struggle
with relevant valuation metrics given the unique Retained Value estimates disclosed
by the companies. Surprisingly, even as costs continue to fall and the TAM expands,
equity valuations remain very low, in our view, with SCTY and VSLR trading at only
2.6x and 0.6x our 2015 EV/EBITDA-style metric with a CAGR of >60%. Below we
highlight what we view as the most relevant valuation frameworks. We predict over the
course of the year, more companies will augment the traditional "Retained Value"
metrics with more-widely accepted metrics, including Cash Flows (YieldCo framework
or combined entity) and levered equity NPV (with disclosed leverage assumptions).
13 January 2015
2015 Solar Outlook 3
Exhibit 1: DG Valuation Evolution: Retained Value Is Just a Starting Place, but Does Provide Useful Valuation Metrics
SCTY VSLR
Cash Flows to Firm: Target Price $ 97 $ 21
Upside 95% 147%
Rating OUTPERFORM OUTPERFORM
EV/EBITDA STYLE METRIC USING RETAINED VALUE
Post-leverage Equity Cash Flows: Current Market Value of Equity $ 5,643 $ 977
(+) Debt $ 1,325 $ 146
(-) Cash Balance $ (697) $ (367)
(-) Retained Value Balance $ (2,179) $ (399)
= Adj. Enterprise Value, current $ 4,093 $ 357
Incremental MWs Added in 2015 914 MWs 285 MWs
(x) Incremental Retained Value/Watt $ 1.72 $ 1.96
Cash Flow Yield & Levered NPV will become more meaningful = Incremental Retained Value in 2015 $ 1,573 $ 559
and relevant metrics as (1) funding sources diversify away from exclusively (/) Adj. Enterprise Value, current $ 4,093 $ 357
Tax Equity and loan products become part of the financing product offering, Current EV/EBITDA-Style Multiple, 2015 2.6x 0.6x
(2) portfolios reach critical size with material cash generation Target Price Implied Multiple 6.0x 3.2x
Note: MW Installed/yr CAGR (2014-16) 61% 89%
LEVERED NPV WATT ANALYSIS CASH FLOW YIELD VALUATION
Utilizing single-project model with observable inputs MW Portfolio YE2015 1995 MWs 509 MWs
allows a straightforward Discounted Cash Flow approach (x) Average Price ($/KWhr) $ 0.1450 $ 0.1470
Hypotehtical single-customer below: (x) Average Sunhours/year 1,450 1,346
Total Installation Cost / Watt $ 3.44 (-) Operating Costs ($/w/yr) $ 0.02 $ 0.02
Lease Rate ($/kwhr) $ 0.147 (-) Share of Cash Flows to Tax Equity, % 35% 60% <– Provides built-in
Tax Equity Funding ($/w) $ 2.23 = Cash Flow to Firm, before G&A allocation $ 247 $ 36 CAFD growth post
Tax Equity Return 15.5% (-) Debt / ABS Servicing $ (105) $ (30) flip
Unlevered Developer IRR 12.5% (-) ~1/3 of Cash G&A Allocation $ (45) $ (28)
Debt cost 4.20% = Cash Available for Distribution $ 96 $ (21) Debt cost
Debt Sources, fully amortizing $ 1.21 Current Implied Portfolio CAFD Yield 1.7% nm <– VSLR earlier
Equity Discount Rate 6.0% Target Price implied CAFD Yield 0.9% nm stage of growth
NPV/watt to Equity $ 1.44 Note: Portfolio MW CAGR (2014-16) 43% 116%
Metrics use same underlying inputs and
forecasts
DIST. CASH FLOW
RETAINED VALUE
LEVERED NPV
Source: Company data, Credit Suisse estimates.
■ Some near-term headline risks in DG: We note however, there could be near-term
headline risks as Salt River Project is likely to implement fixed fees (vote scheduled for
Feb 26th). We estimate SolarCity's exposure (cumulative installed base) is less than 50
MWs (less than 5% of the portfolio).
Downstream developers, YieldCos: SUNE top pick, SPWR screens attractive
In our opinion, companies with YieldCo structures are particularly advantaged in 2015
given their (1) cost of capital advantages – realizing higher multiples for solar assets than
peers, (2) ability to acquire pipelines and built assets to augment growth, differentiating
themselves vs. peers.
■ Top stock picks: Our top pick in this space remains SUNE, although we also see
opportunity for SPWR and JKS, both of which are likely to move forward with GP/LP
structures for solar asset ownership in 2015, in our opinion. We see a $34/share value
for SUNE (71% potential upside) and $35/share for SPWR (37% potential upside).
■ Catalyst-heavy year expected: We believe SunEdison's (DevCo) cash earnings power
will become increasing clear when the company drops assets to their yield co and
receives cash (4Q is the first quarter). We also expect an announcement to proceed
with an Emerging Markets yield vehicle in mid/late 2015. We anticipate SunPower will
also proceed (although no decision has been made at this time).
The opportunity is clear, with growth-adjusted yields indicating a <3% yield is still too
conservative (see Exhibit 2). The mechanics are simple – the development company can
build solar assets and drop them down to the yield vehicle at a price that (1) still provides a
~15-25% development margin and cash flow, and (2) allows dividend per share growth for
the YieldCo, further providing for a lower yield and consequently higher accretive growth
opportunities, as the yield entities buys the projects at an 8-10% levered equity yield yet
pays with capital that "costs" <3% (dividend yield) enabling the 15%+ growth.
13 January 2015
2015 Solar Outlook 4
Exhibit 2: YieldCo Dividend Growth Targets and Dividend Yields
NEP
NYLD
TERP
PEGI
ABY
R² = 0.3632
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%
Cur
rent
Div
iden
d Y
ield
2 year DPS CAGR (2015-17 based on IBES est)
YieldCos MLPs
Source: Company data, Thomson Reuters, Credit Suisse estimates, assumes current annualized yield and 2014-16 CAGR for MLP and 2015-17 CAGR for YieldCos
■ SunEdison (SUNE, Outperform, $34 TP): SunEdison and TerraForm Power
continue to demonstrate the power of the YieldCo. In addition to announcing the large
First Wind acquisition, which further expands the development pipeline and CAFD
growth, the companies have recently (1/7/2015) announced the down-downs of 26
MWs of distributed generation assets with unlevered CAFD of $5m, a healthy ASP of
$2.73/w for SUNE's development efforts allowing a high-teens gross margin (we pencil
16-25% likely for these types of DG assets) and at the same time providing accretive
growth for TERP with a ~10.6% unlevered equity yield (unlevered CAFD after TE
payments / equity consideration, before corporate debt). We estimate a ~12.5%
levered return is possible (exceeding the guidance range of 8-10%).
■ SunPower (SPWR, Outperform, $35 TP): While sentiment has deteriorated with
fears of policy changes in Japan and the impact of low oil, we believe this presents an
opportunity. While SunPower has ~15% exposure to Japan (LTM revenues), their
exposure is >90% commercial and residential rooftops, which is not impacted by the
policy changes aimed at utility-scale projects. We derive our $35 Target Price from a
SOTP approach that includes monetization of assets through a YieldCo vehicle
(market-realized value at an initial 3% yield given growth prospects underpinned by
pipeline) and an 8x DevCo EBITDA multiple on 2016 estimates. We believe an 8x
EBITDA multiple is warranted, and likely conservative, given the growth prospects as
the company is targeting a >17% EBITDA CAGR through 2019.
■ China Singyes (750-HK, Outperform, HK$16.4 TP): Singyes remains our top pick for
the HK listed solar space. Its strong presence in Zhuhai and Wuwei county, as well as
the strategic cooperation with GCL and GCL New Energy to develop 500MW projects
in 2015, give us confidence of its steady and strong EPC volume growth in 2015.
Current valuation of 7.9x 2015 PE and 1.6x PB with 23% ROE looks attractive to us.
Solar manufacturing: Stable/Improving Fundamentals, Several Wildcards in 2015
We see the solar manufacturing industry continuing to self-correct from oversupply leading
to pricing stability, supportive margins, and healthy balance sheets for most. While
valuations remain attractive (8.4x earnings on average, with JKS at 4.6x), we maintain a
neutral bias given the potential disruption caused by adverse regulatory developments in
Japan and modest FX headwinds.
■ Fundamentals improving, valuations attractive: Given modest stability in pricing and
continued cost reduction efforts, we forecast gross margins improve from an average
of 16.9% to 17.6% in 2015, with profit margins improving 200bps on average.
Valuations are compelling, trading at 8.4x NTM PE on average vs. historic average of
12x and the S&P's 16x. We point out JKS and JASO in particular, trading at 4.6x and
4.8x our 2015 estimate, respectively.
13 January 2015
2015 Solar Outlook 5
Exhibit 3: Improving Fundamentals Expected... with stable
pricing, gross margins to improve 1-2% in 2015
Exhibit 4: … profit margins expanding, JKS leads at
~10%, others in 1-5% range, YGE lags given high leverage
(15)%
(10)%
(5)%
0%
5%
10%
15%
20%
25%
30%
35%
40%1Q
102Q
103Q
104Q
101Q
112Q
113Q
114Q
111Q
122Q
123Q
124Q
121Q
132Q
133Q
134Q
131Q
142Q
143Q
144Q
14E
1Q15
E2Q
15E
3Q15
E4Q
15E
1Q16
E2Q
16E
3Q16
E4Q
16E
JASO JKS SOL TSL YGE
(20)%
(15)%
(10)%
(5)%
0%
5%
10%
15%
20%
25%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
E1Q
15E
2Q15
E3Q
15E
4Q15
E1Q
16E
2Q16
E3Q
16E
4Q16
E
JASO JKS SOL TSL YGE
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Exhibit 5: Solar Manufacturing Valuations: Average Sector Multiple of 8.4x IBES NTM Consensus EPS
8.4x
0.1x
5.1x
10.1x
15.1x
20.1x
25.1x
30.1x
35.1x
Jul 2
010
Sep
201
0
Nov
201
0
Jan
2011
Mar
201
1
May
201
1
Jul 2
011
Sep
201
1
Nov
201
1
Jan
2012
Mar
201
2
May
201
2
Jul 2
012
Sep
201
2
Nov
201
2
Jan
2013
Mar
201
3
May
201
3
Jul 2
013
Sep
201
3
Nov
201
3
Jan
2014
Mar
201
4
May
201
4
Jul 2
014
Sep
201
4
Nov
201
4
JKS.N TSL YGE CSIQ JASO Average
Source: IBES Consensus.
■ …but not without risks from Japan, FX pressures, China policy, margin pressures from
tariffs: Key risks to our estimates include Japan policy disruption, which could impact
global pricing (Japan has been a premium market for most companies). FX pressures
also present a potential near-term headwind (with 9.5%-12.4% changes in key
markets, as highlighted below) and the ongoing US/China trade process. While we
could see a margin boost from lower preliminary rates, this is not certain.
Stock views:
■ JinkoSolar (JKS, Outperform, $45 TP): Jinko Solar remains our top stock pick in the
upstream manufacturing space given their cost leadership in manufacturing, proven
downstream execution capabilities, relative valuation and nearing opportunity to
leverage a YieldCo/Growth IPP structure. Our SOTP-derived $45 Target Price (144%
potential upside) is highlighted below in Exhibit 7.
■ Trina Solar (TSL, Neutral, $16), JA Solar (JASO, Neutral, $12): TSL’s valuation
appears compelling at 6x consensus PE on 2015, and trading at 0.6x book value
today, but we note 23% exposure to Japan and the lack of near-term catalysts such as
downstream asset portfolio. The balance sheet is relatively healthy with $741.2m net
13 January 2015
2015 Solar Outlook 6
debt (102.3% of mkt cap) but we note the potential need to access the public markets
for contemplated cell and module expansion initiatives. JASO’s valuation appears
compelling at 5.1x 2015 consensus earnings and trading at 0.4x book value today, but
we note 36% exposure to Japan and the lack of updates on their YieldCo or HoldCo
strategy. Balance sheets are relatively healthy with $208.2 m net cash (43.8 % of mkt
cap) but we note the potential need to access the public markets for overseas capacity
expansion.
■ Yingli Green Energy (YGE, Underperform, $2.00 TP) and ReneSola (SOL,
Underperform, $1.75 TP): YGE’s earnings outlook remains challenging and valuation
metrics less supportive. We remain concerned the lack of meaningful earnings
visibility, constrained balance sheets ($2,012m net debt, 5.5x market cap) will lead to
further underperformance this year. We have consequently lowered our YGE Target
Price to $2.00. SOL’s earnings outlook remains challenging and valuation metrics less
supportive. We remain concerned the lack of meaningful earnings visibility and large
net debt position ($664m) will lead to further underperformance this year. We have
consequently lowered our SOL Target Price to $1.75.
■ GCL (3800.HK, Outperform, HK$2.5 TP): We expect GCL’s cost leadership to
remain unchallenged thanks to further cost reductions of both the new FBR facility and
Siemens facilities. Investor confidence could gradually recover after management
abandoned the wafer spin-off plan. Upstream wafer price could be positively
supported in 2H15 by potential rush order in China, given subsidy cut expectation by
2015 year end.
■ Meyer Burger (Underperform, TP SFr 5.00): Considering the ongoing high cash
burn of c.SFr8-10m per month, we see risks that investors will once again start to
question the quality of the balance sheet. In our view, larger orders are unlikely to
materialise before H2 2015 as we think existing customer could continue to expand
capacity with limited capex by buying distressed assets or smaller technological
upgrades of existing lines.
13 January 2015
2015 Solar Outlook 7
FX headwinds: FX has changed about 7% on average against the companies since Q3.
To date the Yen has depreciated 12.4% against the RMB over Q3 average with an
average decline of 9.3% in Q4. Euro has depreciated 9.5% against the RMB over Q3
average with an average decline of 6% in Q4. USD has more or less remained stable
against RMB. Looking at recent geographic exposures, we see JASO & TSL exposed the
most to Japan, and SOL & YGE exposed to Europe.
Exhibit 6: FX Presents Potential Margin Pressures for
Group
Exhibit 7: JinkoSolar's value uplift from potential
downstream vehicle: $45/Target Price (138% upside)
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
9.00
Jan-
14
Feb
-14
Mar
-14
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep
-14
Oct
-14
Nov
-14
Dec
-14
Jan-
15
FX
rat
e
USDRMB EURRMB JPyRMB
note: dotted lines indicate quarterly averages
Yen has depreciated 12.4% against RMB over Q3 avg
Euro has depreciated 9.5% against RMB over Q3 avg
USD has remained stable against RMB
Japan exposure
as % of MW 2013 1Q'14 2Q'14 3Q'14 4Q'14E 2014E
JASO 18% 30% 27% 36%
TSL 7% 30% 18% 23% 22%
JKS 10% 15% 8% 15-20%
SOL 5% 23% 23% 7%
YGE 10% 25% EU exposure
as % of MW 2013 1Q'14 2Q'14 3Q'14 4Q'14E 2014E
SOL 39% 40% 39%
YGE 18% 20% 15% 12-15% 15%
JKS 14% 25-30%
JASO 9%
TSL 31% 11% 3% 6%
JKS: Solar Downstream Value
YE2014 Portfolio Mid-2015 Portfolio
High Yield Low Yield High Yield Low Yield
Solar Downstream Portfolio (MWs) 813 813 1,100 1,100
Project CAFD ($/w) $ 0.07 $ 0.07 $ 0.07 $ 0.07
Payout Ratio* (%) 85% 85% 85% 85%
Assumed Yield (%) 7% 4% 7% 4%
Downstream Portfolio Value ($m) $ 691 $ 1,209 $ 935 $ 1,636
JKS Equity Ownership (pre offering) 55% 55% 55% 55%
JKS Value ($m) $ 380 $ 665 $ 514 $ 900
JKS Value ($/share) $ 9.8 $ 17.1 $ 13.2 $ 23.2
*Note: Payout ratio could be ~40-60% for a growth IPP
JKS: Module Manufacturing Value
2015 Forecasts (CS Est)
Low MultipleHigh Multiple 2014
MW Shipments (MW) 3,040 3,040 2,749
Gross Profit ($m) $ 460 $ 460 $ 357
Opex ($m) $ 208 $ 208 $ 191
Non-Op Items ($m) $ (87) $ (87) $ (80)
Profit ($m) $ 156 $ 156 $ 108
Earnings/Share ($/share) $ 4.01 $ 4.01 $ 3.30
Earnings Multiple 8x 15x 5.7x
Value/share $ 32.1 $ 60.2 $ 18.9
SOTP Valuation Summary
Value/share
Downstream $9.8 to $23.2
Manufacturing $32.1 to $60.2
Total Value $42 to $83
Upside (%) 122% to 341%
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Exhibit 8: Summary Valuation Comps Upside/ P/E EV/EBITDA P/B
Ticker Rating Price Target Downside 2014 2015 2016 2014 2015 2016 2014 2015 2016
JKS OUTPERFORM $ 18.45 $ 45.00 143.9% 5.6x 4.6x 3.0x 7.4x 6.7x 5.6x 1.2x 1.0x 0.7x
JASO NEUTRAL $ 7.91 $ 12.00 51.7% 6.8x 4.8x 4.6x 2.8x 1.9x 1.2x 0.5x 0.4x 0.4x
TSL NEUTRAL $ 8.68 $ 16.00 84.3% 12.1x 10.3x 9.1x 5.2x 5.2x 5.1x 0.6x 0.6x 0.6x
SOL UNDERPERFORM $ 1.28 $ 1.75 36.7% (3.5)x 25.8x 3.7x 7.6x 5.2x 3.7x 1.0x 0.9x 0.7x
YGE UNDERPERFORM $ 1.99 $ 2.00 0.5% (2.3)x (6.7)x (5.7)x 10.3x 7.5x 8.0x 15.8x (11.2)x (3.8)x
SPWR OUTPERFORM $ 25.51 $ 35.00 37.2% 20.1x 19.8x 14.7x 14.6x 15.2x 12.6x 2.9x 2.8x 2.5x
FSLR NEUTRAL $ 42.83 $ 70.00 63.4% 15.1x 9.0x 11.9x 6.0x 3.6x 3.8x 0.9x 0.8x 0.8x
SUNE OUTPERFORM $ 19.92 $ 34.00 70.7% (23.8)x 282.2x 32.0x (108.2)x 32.5x 23.8x 57.9x (38.9)x (13.7)x Source: Credit Suisse estimates
Exhibit 9: Estimates Summary – CS vs. Consensus EPS
CS Cons CS Cons CS Cons CS Cons CS Cons CS Cons CS Cons CS Cons
JKS $ 0.99 $ 0.92 $ 0.23 $ 0.62 $ 0.94 $ 1.02 $ 1.40 $ 1.14 $ 1.44 $ 1.19 $ 3.30 $ 2.54 $ 4.01 $ 3.72 $ 6.18 $ 4.36
JASO $ 0.37 $ 0.32 $ 0.38 $ 0.27 $ 0.25 $ 0.32 $ 0.57 $ 0.44 $ 0.46 $ 0.51 $ 1.16 $ 0.97 $ 1.65 $ 1.54 $ 1.72 $ 1.76
TSL $ 0.07 $ 0.15 $ 0.12 $ 0.16 $ 0.30 $ 0.25 $ 0.21 $ 0.32 $ 0.21 $ 0.39 $ 0.72 $ 0.90 $ 0.85 $ 1.47 $ 0.95 $ 1.67
SOL $ (0.11) $ (0.13) $ 0.05 $ (0.01) $ 0.00 $ (0.03) $ 0.01 $ 0.02 $ (0.01) $ 0.05 $ (0.37) $ (0.38) $ 0.05 $ 0.03 $ 0.34 $ 0.19
YGE $ (0.16) $ (0.13) $ (0.17) $ (0.13) $ (0.04) $ (0.04) $ (0.03) $ 0.00 $ (0.05) $ 0.04 $ (0.88) $ (0.86) $ (0.30) $ (0.13) $ (0.35) $ (0.00)
SPWR $ 0.22 $ 0.24 $ 0.17 $ 0.25 $ 0.40 $ 0.32 $ 0.42 $ 0.40 $ 0.29 $ 0.40 $ 1.27 $ 1.32 $ 1.29 $ 1.37 $ 1.73 $ 1.84
FSLR $ 0.82 $ 0.75 $ 1.40 $ 0.84 $ 1.25 $ 0.98 $ 1.12 $ 1.20 $ 0.98 $ 1.44 $ 2.84 $ 2.76 $ 4.75 $ 4.52 $ 3.59 $ 4.10
SUNE $ (0.09) $ (0.33) $ (0.09) $ (0.26) $ 0.02 $ (0.23) $ 0.07 $ (0.19) $ 0.07 $ (0.13) $ (0.84) $ (1.10) $ 0.07 $ (0.80) $ 0.62 $ (0.50)
2015 20164Q14 1Q15 2Q15 3Q15 4Q15 2014
Source: Company data, IBES Estimates, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 8
Big picture: Solar No Longer Niche, Economics
Closer to Parity
Two major trends are driving the adoption of solar: (1) solar is becoming an increasingly
cost-competitive source of electricity in many countries and (2) there is an increased
consumer and geopolitical desire to reduce pollution and encourage the use of renewables.
Solar costs continue to decline: Panel prices have declined more than 66% since 1Q11
and more than 80% since 2008. The total cost of installing utility-scale solar has fallen
57% in the US in just the past three years. Residential solar has seen a similar cost curve,
dramatically opening new markets based on economic cost competitiveness.
Exhibit 10: US Utility-Scale Solar Installed Cost has
Declined 57% since 1Q11 – now ~$1.68/watt on average
Exhibit 11: Cost to Install US Residential Solar System
Has Declined 42% Since Early 1Q11
$ 1.50
$ 2.00
$ 2.50
$ 3.00
$ 3.50
$ 4.00
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Inst
alle
d C
ost (
$/W
)
$ 3.00
$ 3.50
$ 4.00
$ 4.50
$ 5.00
$ 5.50
$ 6.00
$ 6.50
$ 7.00
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14
Sys
tem
Cos
t/W
Source: SEIA/GTM, Credit Suisse estimates. Source: SEIA/GTM, Credit Suisse estimates.
Large opportunity to be part of the global generation fleet: Solar is still a small portion
of the total energy mix, representing just 1.2% of electricity generation. There are strong
commitments from many countries to adopt renewables, including solar. China has a
target to install 100 GWs of solar by 2020, India plans to install 100 GW solar by 2022,
and 29 states in the US have Renewable Portfolio Standards which we believe could add
~79 GW from 2014 to 2030, not even considering the proposal to increase the renewable
mandate to 50% in California. The EU plans to increase renewables to 20% by 2020.
Exhibit 12: Only 1.2% of the World's Electricity is Generated from Solar
8.0%
2.6%2.1% 1.9% 1.8%
1.3% 1.2% 1.2% 1.1% 1.0% 0.9% 0.8% 0.8% 0.8% 0.7%0.3% 0.2% 0.2% 0.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Ger
man
y
Japa
n
Aus
tral
ia
UK
Tha
iland
Res
t of E
urop
e
Chi
le
Tot
al
Indi
a
Res
t of A
fric
a
Sau
di A
rabi
a
Chi
na
Sou
th A
fric
a
US
Oth
ers
Can
ada
Res
t of L
atA
m
Mex
ico
Bra
zil
Source: IEA, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 9
Solar's cost competitiveness is emerging in many areas in several segments: Today,
solar is economic vs. residential electricity rates in many states in the US and across many
countries globally.
Exhibit 13: Subsidized Residential Solar is More
Economical than Retail Rates in Many States in the US
Exhibit 14: Unsubsidized Residential Solar is More
Economical than Retail Rates in Key Markets Globally
$ (0.01)
$ (0.01)
$ (0.00)
$ 0.00
$ 0.00
$ 0.00
$ 0.01
$ 0.01
$ 0.02
$ 0.02
$ 0.03
$ 0.04
$ 0.04
$ 0.04
$ 0.04
$ 0.06
$ 0.06
$ 0.11
$ 0.13
$ 0.30
Missouri
Washington
Pennsylvania
Florida
Utah
Oregon
Delaware
Texas
Maryland
New Jersey
Colorado
New Mexico
Arizona
Vermont
Massachusetts
North Carolina
California
Connecticut
New York
Hawaii
Subsidized DG Savings over Retail Rates ($/kWh)
$ (0.16)
$ (0.12)
$ (0.11)
$ (0.08)
$ (0.06)
$ (0.05)
$ (0.03)
$ (0.02)
$ (0.01)
$ (0.00)
$ 0.01
$ 0.02
$ 0.03
$ 0.04
$ 0.07
$ 0.08
$ 0.09
$ 0.11
$ 0.14
$ 0.15
$ 0.29
Russia
Canada
China
South Korea
Saudi Arabia
India
Turkey
US
UK
Taiwan
Japan
France
Brazil
South Africa
Iran
Mexico
Italy
Chile
Germany
Spain
Australia
Unsubsidized DG Savings over Retail Rates ($/kWh)
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Exhibit 15: Residential Solar is Economic in Many Locations Today… Note: Markets (Dots) Above the Lines Indicate Residential Threshold Has Been Reached. Each line represents financing cost assumptions.
Japan
USA (TAM $163bb,
1375TWh)
Italy (TAM $24bb, 70TWh)
South Korea
France (TAM $44bb,
149TWh)
Portugal (TAM $5bb,
14TWh)
Greece
China (TAM $40bb,
512TWh)India
CA (TAM $14bb, 90TWh)NJ (TAM $5bb, 29TWh)
AZ (TAM $4bb, 33TWh)TX (TAM $15bb,
137TWh)
NY (TAM $9bb, 51TWh)
UK (TAM $29bb, 112TWh)
EU - 27 (TAM $271bb, 803TWh)
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0
Resi
dentia
l re
tail
rate
, $
/kW
h
Sunshine (Hrs per Day)
8.0% 7.0% 6.0% 5.0% 4.0% 3.0%LCOE for WACC atLCOE for WACC atLCOE for WACC atLCOE for WACC at Source: Credit Suisse Clean Technology Equity Research, IEA, EIA, Eurostat. Note: Assumes installation cost of $3.5/watt, 25 year asset life; US retail tariff adjusted for 30% Investment tax credit; TAM represents total accessible market of annual energy payments for residential electric customers in $bb and TWh
Comparing unsubsidized utility-scale solar to the cost of building new thermal generation
also demonstrates the emerging cost competitiveness. Our analysis suggests solar is
competitive in many regions compared to natural gas peaking power plants (Exhibit 16).
We find promising results even when comparing unsubsidized solar to base load coal
power, indicating there are a handful of markets where utility scale solar could compete
with coal power in the medium term, without subsidies, as the cost of solar continues to
decline (Exhibit 17).
13 January 2015
2015 Solar Outlook 10
Exhibit 16: More markets are at parity today, without
subsides, when comparing to new Natural Gas plants
Exhibit 17: Utility-scale Solar vs. Coal Power
51% 46%
34% 33% 30% 28% 26% 26% 23% 22% 17% 17%5% 1% 1%
-4% -4%-13% -18%
-97%-115%
Chi
le
Indi
a
Sou
th A
fric
a
Aus
tral
ia
Bra
zil
Tai
wan
Japa
n
Sou
th K
orea
Spa
in
Chi
na
Italy
Tur
key
Sau
di A
rabi
a
Mex
ico
Iran
Ger
man
y
Fra
nce
UK
US
Can
ada
Rus
sia
Util
ity s
olar
sav
ings
ove
r pe
aker
nat
ural
gas
, %
Unsubsidized Economic cost-parity requires further solar cost reductions or policy mandates
Solar makes sense vs. Natural Gas peakers without any subsidies ..
-9% -13% -13% -13% -13%-21% -23%
-36%-43%
-54% -55% -55% -55%-65% -70%
-94% -94% -94%
-126%
-147%-154%
Sau
di A
rabi
a
Mex
ico
Sou
th A
fric
a
Iran
Chi
le
Bra
zil
Indi
a
US
Spa
in
Italy
Tur
key
Aus
tral
ia
Japa
n
Tai
wan
Sou
th K
orea
Ger
man
y
Fra
nce
UK
Can
ada
Rus
sia
Chi
na
Util
ity s
olar
sav
ings
ove
r co
al p
ower
, %
Unsubsidized utility-scale solar isnot economic vs. ditry unscrubbed coal power.... but it's not too far off in many markets, even at today's
cost structure
Source: Credit Suisse Clean Technology Equity Research, IEA, EIA, Eurostat, OpenEI. Note: Interactive model available upon request. Note: Assumes 6% WACC and no subsidies. For solar, assumes cost of $1.6/W and 30 yr lifetime. For natural gas, assumes 25% capacity factor, and 30 yr lifetime. Natural gas prices vary by country. The US Henry Hub price ($3/MMBTU) was used for: US, Russia, Canada, Mexico, Saudi Arabia, and Iran. A UK import price ($7/MMBTU) was used for: UK, Brazil, and South Africa. The Germany import price ($8/MMBTU) was used for: Germany, France, Spain, Italy, and Turkey. The Japan import price ($11/MMBTU) was used for: Japan, China, India, South Korea, Taiwan, Australia, and Chile.
Source: Credit Suisse Clean Technology Equity Research, IEA, EIA, Eurostat, OpenEI. Note: Interactive model available upon request. Note: Assumes 6% WACC and no subsidies. For solar, assumes cost of $1.6/W and 30 yr lifetime. Coal plant assumes $3/w capex for most markets, 80% utilization factor, and $2.5/mmBTU fuel cost.
13 January 2015
2015 Solar Outlook 11
Solar Supply/Demand Fundamentals
■ Solar demand growth of 21% to 53 GWs: We expect the solar market to grow 21%
in 2015 to 53 GWs with continued geographic diversification. Europe's share declines
to 16%, Japan to 11% (from 18%) while the US outgrows the market to 16% due to
the anticipated ITC step-down in 2017 and growth in rooftop markets. China remains
~26% of demand with 33% growth to 14 GWs (from 10.6 GWs in 2014).
■ Oversupply gradually self-correcting, modest Cell capacity expansion warranted
for Tier I: Given announcements, we expect total cell capacity to increase by 3.5 GWs
in 2015 to 75 GWs (72 GWs excluding First Solar). Tier 1 capacity represents 41.4
GWs, suggesting the capacity expansion is warranted (part of Tier II/III is obsolete).
With demand increasing ~9 GWs next year, the oversupply is gradually correcting.
■ Polysilicon price to remain in check with new Tier 1 capacity, no need to climb
the cost curve yet: With nearly 19% growth of Tier 1 poly capacity from announced
expansions, plus continued reduction in poly intensity (cell efficiency improvements),
we believe there is enough Tier 1 polysilicon of 58.7 GWs to keep poly below the next
step in the cost stack of ~$23/kg. Stable poly pricing is expected near term, with
downward pressure longer-term as new low-cost capacity is built.
Exhibit 18: Demand Forecasted to Grow 21% in 2015 Exhibit 19: S/D Balancing – Modest Expansion Warranted
1 3 4 11 11
14 16 19 20
1 2
3
5 6
8
13 7 9
1 1
2
6 8
6
4 4
5
0 1
1
1 1
2
3 5
7
17
18 15
8 8
8
9 9
9
2
3 5
5
11
14
17 21
24
21 GW
27 GW29 GW
36 GW
44 GW
53 GW
62 GW65 GW
74 GW
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
Dem
and
(GW
s)
Other markets
Europe
India
Japan
US
China
25 28
35
42
50
59 61
48
54
61 64
67 69
71
58
63 63
69 72 74 74
-
10
20
30
40
50
60
70
80
2011 2012 2013 2014 2015 2016 2017
GW
Demand (ex thin film)
Total wafer capacity (exthin film)
Total cell capacity (exthin film)
Source: Credit Suisse Clean Technology Equity Research. Source: Credit Suisse Clean Technology Equity Research.
Exhibit 20: Poly Cost Stack Exhibit 21: New Poly Capacity
$17.0
$21.4
$0
$5
$10
$15
$20
$25
$30
$35
Po
ly c
ash
co
st $
/kg
2015 Poly Capacity
if 2
0% h
igh
er d
eman
d
2015
bas
e ca
se -
50 G
W
Supply/Demand Summary 2013 2014 2015 2016 2017
Total poly capacity 333,260 368,210 430,070 470,210 491,060
(-) semi demand (from msi data, assuming 3gm/sq ini) 27,182 29,356 31,705 34,241 36,980
Total poly capacity available for solar 306,078 338,854 398,365 435,969 454,080
polysilicon usage per watt, gm/watt 5.3 5.1 5.0 4.9 4.8
Total solar poly capacity (ex semi) MW 57,751 66,442 79,673 88,973 94,600
Thin Film supply, FSLR MW 1,900 2,300 2,700 3,100 4,100
Total solar capacity (poly + thin film), MWs 59,651 68,742 82,373 92,073 98,700
Tier-1 capacity (poly + thin film), MW 41,998 48,044 58,661 65,837 71,917
Demand MW 36,417 43,916 53,044 61,775 65,302
Demand (ex thin film) MW 34,517 41,616 50,344 58,675 61,202
Total wafer capacity MW (ex thin film) 61,211 64,077 66,992 68,821 70,877
Total cell capacity MW (ex thin film) 63,342 69,056 72,176 73,676 74,476 Polysilicon Capacity (MT) 2013 2014 2015 2016 2017
Tier 1 Suppliers
Hemlock Semiconductor 32,000 32,000 32,000 32,000 32,000
Wacker Polysilicon 52,000 52,000 56,000 75,000 80,000
REC Silicon 17,500 20,000 20,000 20,000 23,000
Tokuyama 17,200 19,500 26,860 31,000 31,000
Daqo 5,000 6,150 12,150 12,150 25,000
SunEdison 9,000 19,000 22,500 22,500 22,500
OCI 42,000 42,000 52,000 52,000 52,000
GCL Silicon 65,000 72,000 90,000 97,000 97,000
Tier 1 Capacity 239,700 262,650 311,510 341,650 362,500
Tier 1 Growth 2.0% 9.6% 18.6% 9.7% 6.1%
Tier 2 Capacity 52,300 62,300 75,300 85,300 85,300
Tier 3 Capacity 43,260 43,260 43,260 43,260 43,260
Total Capacity 335,260 368,210 430,070 470,210 491,060
% growth y/y 3.9% 9.8% 16.8% 9.3% 4.4%
Source: Credit Suisse Clean Technology Equity Research. Source: Company data, Credit Suisse Equity Research.
13 January 2015
2015 Solar Outlook 12
TOPIC: Impact of Cheap Oil & Gas Solar stocks have been pressured by the dramatic decline of oil & natural gas prices, with
many concluding solar is no longer economic and consequently demand will fall. We
disagree and contend there should not be material adverse impact to solar demand. The
stock impact is dramatic (Exhibit 22). Over the past 4 months Oil has fallen 52%, Natural
Gas is down 28% while solar stocks have retrenched 23% (vs. S&P 500's 1% gain).
■ Oil only represents 4% of electricity production globally according to the World
Bank (and only represents 7%-8% of generation capacity). In major solar markets,
oil only represents 1.5% of electricity generation. Natural gas is more meaningful,
accounting for 15% of generation in key markets, but pricing is location-dependent.
(NG in Japan is still ~$15/mmbtu). In the US, Natural Gas peakers have already been
more economic than solar in most areas. Only in the long-term, without any
subsidization or renewable requirements, would lower natural gas pricing make the
"grid parity" threshold more challenging (Exhibit 24). In purely economic-driven parts
of the market (<10% of current demand) we could see modest pressure.
■ Many markets are Feed-in-Tariff (FIT) driven, with no direct relationship with
commodity prices. These countries include some of the largest solar markets: Japan,
China (partially) and most demand in Europe (including UK and Germany). Policy
support could waver over time given the increased implicit subsidies with renewables,
but overall the trend has been to continue to support the transition to a lower-carbon
economy. Over the long term, even if oil prices remain low (or very low), given the
increased carbon/pollutant intensity of fossil fuels, we believe policy will be supportive.
■ Markets without Feed-in-Tariffs, such as the US, are only partially driven by relative
cost competiveness as renewable portfolio standards provide a regulatory necessarily
to procure renewable electricity without requiring it to be the lowest-cost source. As we
write in this report (See "TOPIC: US Utility Scale Boom") there is visibility to more than
79 GWs of solar demand driven by Renewable Portfolio Standards that are already in
place, assuming 50%/50% mix between wind and solar to meet the requirements.
■ Distributed generation is multiple steps insulated from direct commodity price
movements, as most retail electricity pricing is determined from capital recovery,
profits, and commodity fuel costs for a diversified base of generation assets (coal,
etc.). Commodity fuel prices are often less than a third of the total cost observed at the
retail level. Further, the continued need to invest capital (T&D, emission control,
renewable assets) has typically more than compensated for lower commodity fuel
prices. See Exhibit 25 for the historical relationship.
Exhibit 22: Strong Correlation Between Solar and Energy Exhibit 23: Oil is a Small Portion of Electricity Mix
2.3
2.8
3.3
3.8
4.3
4.8
20.0
40.0
60.0
80.0
100.0
120.0
8/1/2014 9/1/2014 10/1/2014 11/1/2014 12/1/2014 1/1/2015
Solar Index (LHS) WTI (LHS) NG (RHS)
3.9%10.5%
1.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
World Major OilProducers
Major SolarMarkets
Oil
Nuclear power
RenewablesourcesHydropower
Natural gas
Coal
Source: Bloomberg, Credit Suisse estimates Source: World Bank, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 13
Policy support shelters most impact of commodity price movements; Oil largely
irrelevant, Natural gas matters more: We do not expect any Volume/EPS impact due to
lower oil prices to our solar coverage as the project developers operate in solar markets
which are driven by government policy (detached from oil price movements), with
subsidies that enable solar to be cost competitive even if oil is at $60/barrel, or in
segments where the retail rates are not impacted directly by the oil prices (i.e., most
rooftop markets with the exception of Hawaii). Policy in major markets provides demand
support for solar, including the 30% tax credit in the US, feed-in-tariffs in China/Japan/UK,
the national solar mission in India, in addition to renewable/solar/low-carbon-emission
targets in the US, Europe, China, India and many countries. Over the long term, even if oil
prices remain low (or very low), given the increased carbon/pollutant intensity of oil
generation, we believe policy will still support renewables and/or provide for incremental
thermal power generation of natural gas.
Even in oil-driven electricity markets, solar remains cost competitive in a "modestly
low oil” environment: Utility solar demand in North America and Europe is unlikely to
decline due to lower oil price as they compete with natural gas which has been the
cheapest source of electricity in those regions for quite some time and the recent decline
in oil prices hasn't resulted in similar decline in natural gas prices in those regions (oil
would need to remain at $47/barrel for 30 years for a subsidized utility-scale solar plant to
no longer be cost-competitive, not even considering the environmental constraints of
building oil-fueled generation capacity). Developing countries like China and India see a
major part of their energy coming in from and coal (which still remains cheaper to oil) and
the countries are lobbying for more nuclear and renewables to address energy deficit and
pollution concerns.
Distributed solar is unlikely to face pressures due to lower oil as retail electricity prices
won't see the full effect of lower oil prices due to stable transmission and distribution costs.
In Hawaii – a region with higher distributed solar penetration and higher oil imports –
electricity generated from oil is more economic than rooftop solar only if oil is sustained
below $50/bbl (and Hawaii is still only 0.03% of the global solar market). We expect sunny
regions like the Middle East could burn more oil for electricity as they have the
infrastructure to produce electricity from crude oil (without much treatment) and access to
low cost fuel, but the Middle East only represents <1% of solar demand globally and other
policy measures are being considered to incent renewables, irrespective of oil, in our view.
Exhibit 24: Economics of Utility Scale Solar, Oil & Natural
Gas for Electricity Generation
Exhibit 25: US Retail Electricity Pricing & Commodity
Prices (Oil & Nat Gas) Shows Only Partial Linkage
$0.08
$0.11
$0.14
$0.12
$0.09
$0.08
$0.08
$0.11$0.10
$0.07
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
US US EU Japan Middle East
with ITC no subsidy
Util
ity s
cale
LC
OE
$/k
Wh
Solar LCOE @ today's cost 2017 cost
@ $4.5/mmbtu, 50% cf
Oil LCOE @ $80/bbl
@$60/bbl
@ $70/bbl
Nat Gas at $4.5/mmbtu 20% capacity factor
@ $4.5/mmbtu, 40% cf
$ -
$ 20.00
$ 40.00
$ 60.00
$ 80.00
$ 100.00
$ 120.00
$ -
$ 2.00
$ 4.00
$ 6.00
$ 8.00
$ 10.00
$ 12.00
$ 14.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Oil
($/b
bl)
Ele
ctric
ity P
rices
($/
mw
hr),
Nat
Gas
Pric
e ($
/mm
btu)
Nat Gas ($/mmbtu) Residential ($/mwhr) Commercial ($/mwhr)
Industrial ($/mwhr) Oil ($/bbl, RHS)
Source: Company data, Credit Suisse estimates
Note: "cf" = capacity factor. Oil economics for 50% capacity factor
Source: EIA, Bloomberg, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 14
TOPIC: Japan Regulatory Changes Grid stability concerns prompting adverse regulatory
developments that can jeopardize growth (or worse)
■ Very recent developments disconcerting – curtailment policy matters: Concerns
are mounting that the Japan solar market will face a potential decline given adverse
regulatory developments, most recently in December 2014, including grid penetration
rate limits for solar by utility, expanded curtailment rules (360 days), and potentially
changing the FIT received by "approved" projects with METI that don't have the final
connection letters. We admit the situation is fluid – and can change.
■ Lowering 2015 forecast to 6 GWs, 23% y/y decline: With the new rules proposed to
become effective January 15th, we have lowered our 2015 Japan forecast to 6 GWs
(from an already low forecast of 6.5 GWs), implying a 23% decline vs. 2014. Our
principal concern is that new curtailment capabilities could slash project IRRs to <5%
(from >8%) making projects uneconomic or at least presenting severe difficulties in
underwriting projects given the risk of future curtailment). Sudden market declines are
not unheard of – similar disruptions occurred where annual solar demand fell
dramatically (e.g. Germany's 56% decline in 2013 and Spain's 96% decline in 2009).
■ Little read-through to other markets: We note these developments are a
consequence of success – Japan has reached a 6.8% penetration rate of solar, the
second highest major country globally. The policies were spurred by a whopping 69
GW pipeline of "approved projects" and a set Feed-in-Tariff that was providing high
returns to competent developers.
Exhibit 26: Japan historical installation by mix Exhibit 27: Japan installation forecast: Peak in 2014
112 114 132 140 140 131 142 130 100 88 83 94 86 88 86 90 94 96
98 116
282
481 481 455
275
445 419
568 509 493 483 444
683 765
563 561
210 230
414
620 620 586
417
575 519
656 592 587 569
532
769
855
657 658
6.6 6.9 7.3
7.9 8.5
9.1 9.5
10.1
10.6
11.3
11.9 12.4
13.0 13.5
14.3 15.2
15.8 16.5
0
2
4
6
8
10
12
14
16
18
0
100
200
300
400
500
600
700
800
900
1,000
Jan-
13
Feb
-13
Mar
-13
Apr
-13
May
-13
Jun-
13
Jul-1
3
Aug
-13
Sep
-13
Oct
-13
Nov
-13
Dec
-13
Jan-
14
Feb
-14
Mar
-14
Apr
-14
May
-14
Jun-
14
Cum
ulat
ive
inst
alle
d ca
paci
ty (
GW
)
Mon
thly
Inst
alla
tions
(M
W)
Solar residential Non-residential Cumulative (RHS)
1.01.2
1.9
6.0
7.8
6.0
4.04.4
4.85.3
5.9
1.6%
2.6%
3.4%
3.9%
4.4%
5.0%
5.6%
6.3%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Solar demand, GW Solar generation as % of total mix
Source: METI, Credit Suisse estimates Source: METI, Credit Suisse estimates
FiT policy support drives installations…: Japan installed 6 GW in 2013, up from ~1.2
GW in 2011 and 1.86 GW in 2012. Historically, the growth in installations was driven by
the national Feed-in-Tariff. In July 2012, the Renewable Energy Act re-introduced the FiT
to decrease the country's dependence on fuel imports and nuclear energy. Japan
consumes ~1,088 TWh of electricity annually, ~80% of which is sourced from fossil fuels
(mostly imported). The FiT is designed to decline annually and offers ~JPY 32-37/kWh in
the current financial year (ending March). The FiT program is funded by an electricity
surcharge of JPY 0.75/kWh (~$0.006/kWh) on all consumers. We anticipate an increase in
surcharges in the future to support additional solar/renewable installations under the FiT
as current budget surplus can support only 1.6 GW of solar.
13 January 2015
2015 Solar Outlook 15
…however, grid stability concerns have recently emerged: On September 24, 2014, to
September 30, 2014, five of the ten utility companies in Japan (27% of Japan's electricity
demand) announced the restriction of renewable projects' grid connection requests due to
concerns of grid capacity. On December 18, 2014, the Ministry of Economy, Trade and
Industry (METI) announced the results of their grid capacity study of seven utilities, and
found they can support ~24 GW of solar projects (41% of METI-approved capacity).
However, 24 GW represents 43% of peak demand in these utilities and only ~5.2 GW
have been connected to-date, thereby providing visibility for 18.5 GW of future growth in
the seven studied utilities. Total solar installations in the country represent just 10.4% of
total peak demand. A 43% penetration would imply total solar demand of 68 GW in the
country.
Exhibit 28: Electric utilities in Japan & FiT Exhibit 29: Solar is well penetrated in Japan
Japan FiT in JPY/kWh >=10kW <10kW
Apr 2012-Mar 2013 40.0 42.0
Apr 2013-Mar 2014 36.0 37.8
Apr 2014-Mar 2015 32.0 37.0
3.5%4.7% 4.7% 5.1%
5.7%6.9%
8.1%9.1%
10.6%
14.7%
6.8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Solar Installed (since Jul'12) as % of Peak Demand
17.9% 17.8%
29.8% 30.7%
44.1%39.1%
45.3%54.1%
77.9%
109.7%
43.4%
0%
20%
40%
60%
80%
100%
120%
Approved Projects (since Jul'12) as % of Peak Demand
Source: Wikimedia, METI Source: METI
Note: Red represents utilities with grid connection restrictions.
Exhibit 30: In 7 Studied Utilities, There Is Sufficient Grid Capacity (23.7 GW) for Only 58%
of Approved Projects within those areas (40.8 GW)
8.2
5.5 5.6
1.2
2.2
0.7 0.4
17.8
10.8
5.3
2.9 2.5
1.00.6
46% 51%
105%
41%
88%
71%
62%
(10.0)%
10.0%
30.0%
50.0%
70.0%
90.0%
110.0%
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Kyushu Tohoku Chugoku Hokkaido Shikoku Hokuriku Okinawa
Cap
acity
as
% o
f app
rove
d
Cap
acity
, GW
Grid Capacity Available for Solar (GW) Capacity Approved by METI (GW)
Shading indicates utilities with solar grid connection restrictions
Source: METI, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 16
Exhibit 31: Total of 69 GW of Solar METI-Approved, of which Only 11 GW Installed (as of 9/2014) Electric Demand and Capacity Installed (7/2012 - 9/2014) Approved by METI (as of 9/2014) Solar Installation Penetration Rate Solar Approval Penetration Rate
Utility Company
FY13
Consumption
, GWh
FY13 Peak
Demand,
GW
FY12
Installed
Capacity,
GW
Small-Scale
Installations
(<10 kW), MW
Large-Scale
Installations
(>10 kW),
MW
Total
Installations,
MW
Small-Scale
Approvals
(<10 kW),
MW
Large-Scale
Approvals
(>10 kW),
MW
Total
Approved,
MW
Installed as
% of
Approved
Installed as
% of
Consumption
Installed as
% of Peak
Demand
Installed
Solar as %
of Grid
Capacity
Hokkaido 30,635.9 5.4 10.4 39.1 270.4 309.6 50.0 2,869.5 2,919.5 10.6% 1.3% 5.7% 3.0%
Tohoku 77,452.0 14.0 31.3 190.1 470.0 660.1 232.3 10,641.1 10,873.4 6.1% 1.1% 4.7% 2.1%
Chubu 127,069.7 26.2 41.3 453.9 1,366.7 1,820.6 560.7 7,493.2 8,053.9 22.6% 1.9% 6.9% 4.4%
Kansai 140,413.9 28.2 44.0 339.8 977.7 1,317.4 412.1 4,605.1 5,017.2 26.3% 1.2% 4.7% 3.0%
Chugoku 58,980.0 11.1 20.6 185.6 711.0 896.5 221.4 4,812.8 5,034.3 17.8% 2.0% 8.1% 4.4%
Shikoku 27,214.0 5.5 12.0 93.3 487.2 580.5 113.6 2,308.0 2,421.6 24.0% 2.8% 10.6% 4.9%
Kyushu 84,449.8 16.3 28.9 349.1 2,056.7 2,405.8 429.7 17,487.0 17,916.7 13.4% 3.7% 14.7% 8.3%
Okinawa 7,555.7 1.5 2.6 22.8 115.8 138.6 28.2 570.3 598.6 23.1% 2.4% 9.1% 5.3%
Hokuriku 28,078.2 5.3 10.8 34.2 148.6 182.8 41.0 901.1 942.1 19.4% 0.9% 3.5% 1.7%
Tokyo 266,692.1 50.9 85.5 692.3 1,880.1 2,572.4 834.0 14,353.2 15,187.2 16.9% 1.3% 5.1% 3.0%
Total 848,541.2 159.1 287.3 2,400.3 8,484.1 10,884.3 2,923.0 66,041.3 68,964.4 15.8% 1.7% 6.8% 3.8% Source: METI, Credit Suisse estimates
Grid stability concerns have prompted curtailment policy changes: On December 19,
2014, METI announced that effective on January 15, 2015, it will allow utilities to curtail
solar generation without compensating project owners (extended from 30 days/yr currently
to 360 hr/yr). Curtailment greater than 360 hr/yr must be compensated, except for utilities
where the grid has reached saturation (Hokkaido, Tohoku, Shikoku, Kyushu and Okinawa,
and potentially Hokuriku, Chugoku). Though the new curtailment policy goes into effect on
January 15, 2015, it is retroactive for all projects that are not connected to the grid and do
not have a Renkei-shoudakusho letter (grid connection agreement). Under current FiT
rates of 32 JPY/kWh (~$0.27/kWh) for utility-scale, we calculate that the unlevered IRR of
solar projects will decrease from 8.4% without curtailment to 4.7% with 360 hr/yr of
curtailment. Under the FiT rates of the 2012/2013 fiscal years, we calculate that unlevered
IRRs decrease from 11.9%/10.1% without curtailment to 7.5%/6.1% with curtailment. We
believe that curtailment will reduce project IRRs and render some projects economically
unviable. Because the new curtailment policy will be effective shortly (January 15, 2015),
we do not expect projects to be able to rush to obtain a grid connection agreement.
Exhibit 32: Under Current Utility-scale FiT Rates, the New Solar Curtailment Policy
Reduces Unlevered IRRs from 8.4% to 4.7%
FiT (JPY/kWh) FiT ($/kWh) No curtailment 120 hr/yr curtailment 360 hr/yr curtailment
FiT I (4/2012-3/2013) 40.0 0.3377 11.9% 10.4% 7.5%
FiT II (4/2013-3/2014) 36.0 0.3039 10.1% 8.8% 6.1%
FiT III (4/2014-3/2015) 32.0 0.2701 8.4% 7.2% 4.7%
Unlevered IRR
Too low to be economically v iable
Source: METI, Credit Suisse estimates. Note: We assume an all-in cost of $2.60/W, 1450 sunhours/yr, and a 20-year contracted period. 120 hour curtailment presented as proxy for 30-day curtailment policy (effectively 120 hours of reduced compensation)
FiT rates to be locked-in at grid connection agreement time (not submission &
approval from METI): Historically, FiT rates have been determined by when project
developers applied for METI approval or submitted the third utility application (whichever
occurred last). Effective on April 1, 2015, FiT rates will be locked-in at a later step of
project development when the grid connection agreement is signed (if utilities delay
signing it for 270 days, FiT rates will automatically be fixed on the 271st day). This FiT
policy change will not affect projects that already submitted the grid connection agreement.
Given that this new FiT rule goes into effect in April, we expect project developers to rush
to obtain a grid connection agreement to lock-in the current FiT rate, though the time until
project completion will vary by project. Current FiT rates will expire at the end of March
2015 and we expect lower FiT rates to be announced for the next fiscal year. Projects that
had anticipated locking-in more favorable FiT rates may no longer be economically viable.
The total METI-approved project list stands at ~69 GW as of 2Q14, of which only ~11 GW
of projects have been connected to the grid. We believe the new rules will help prune the
list of applications to a manageable level.
13 January 2015
2015 Solar Outlook 17
TOPIC: Rooftop Solar Still Early Innings of Adoption
We believe 2015 will be another strong growth year for the distributed generation market
in the US. We forecast residential distributed generation grows 62% from 1.2 GWs in 2014
to 1.9 GWs in 2015. Residential rooftop solar is still in the early stages of adoption, with
only <0.7% penetration; because the cost to install residential solar as fallen >40% in 4
years, rooftop solar is now economic in 32 states.
We believe that the industry is at a tipping point of adoption, given the increased cost
competitiveness of rooftop solar and consumer awareness. We believe that, at the current
cost structure and subsidy environment, 36 million households (44% of total) are potential
solar adopters. At the forecast industry cost structure for 2017 with the reduced subsidy,
we believe that 37 million rooftops (46%) still are viable adopters. Even without any explicit
tax credits or state subsidies, we believe that 23 million customers are viable adopters.
Exhibit 33: Large Unpenetrated Market (0.7% today) Exhibit 34: 36 million Homes Viable Adopters Today
0.7%
compared to 82 million rooftops in US
Solar is today installed on ~0.5 million rooftops
0.1%,0.7 GW
0.7%,3.4 GW
6.0%,29.2 GW
44.0%,215.3 GW
5.2%,25.7 GW
45.9%,224.8 GW
2010A 2014E 2020E Today's costwith subsidy
Today's costw/o subsidy
2017 costwith no state
subsidy
Residential solar TAM, % of rooftops
Cumulative residential solar installed
Source: Census, EIA, Credit Suisse Clean Technology Research. Source: Census, EIA, Credit Suisse Clean Technology Research.
Exhibit 35: Residential Distributed Generation Penetration is Still Scratching The Surface with all states <1%
penetration except California (2.3%), Hawaii (11.8%) and Arizona (1.7%) Cumulative Residential MWs deployed by YE2014 & Corresponding Penetration Rates
28 MWs0.2%
31 MWs0.5%
1,683 MWs2.3%
10 MWs0.2%
12 MWs0.3%
308 MWs1.7%
134 MWs1.1%
22 MWs
0.5%
41 MWs
0.1%
3 MWs0.0%
46 MWs0.2%
9 MWs
0.0%
4 MWs
0.0%
7 MWs0.0%
6 MWs0.0%
5 MWs
0.0%
30 MWs
0.1%
13 MWs
0.1%
52 MWs
0.1%
122 MWs
0.3%
241 MWs11.8%
2 MWs
0.1%
13 MWs
0.7%
95 MWs
0.6%
29 MWs0.3%
210 MWs0.8%
8 MWs
0.4%
38 MWs
0.3%
WA
OR
CA
NV
ID
UT
WY
CO
MT ND
SD
NE
AZ
NM OK
TX
KS
MO
IA
MN
WIMI
AR
LA
MSAL
GA
FL
TN
KY
ILIN
OH
WV
VA
NC
SC
PA
NJ
MD DE
NYVT
NH
MA
CT
ME
RI
HI
AK
Source: Credit Suisse Clean Technology Equity Research.
13 January 2015
2015 Solar Outlook 18
Exhibit 36: Subsidized Residential Solar Economic in 32 States Today (30% ITC + State Subsidies)… Note: top rate represents effective LCOE of residential solar ($/kwhr), bottom rate depicts average residential rate paid
$0.099
$0.088
$0.117
$0.119
$0.103
$0.107
$0.105
$0.169
$0.102
$0.128
$0.025
$0.104
$0.117
$0.107
$0.113
$0.112
$0.109
$0.112
$0.085
$0.124
$0.103
$0.131
$0.095
$0.131
$0.113
$0.121
$0.118
$0.104
$0.120
$0.126
$0.132
$0.115
$0.123
$0.115
$0.127
$0.116$0.156
$0.128
$0.109
$0.123
$0.138
$0.124
$0.131
$0.101
$0.052
$0.100
$0.123
$0.117
$0.124
$0.109
$0.128
$0.117
$0.144
$0.146 $0.147
$0.149
$0.145
$0.115
$0.146
$0.135
$0.131
$0.104
$0.114
$0.125
$0.118
$0.121
$0.088$0.125
$0.054
$0.114
$0.129
$0.117
$0.147
$0.096
$0.144
$0.139
$0.152
$0.154
$0.083
$0.209
$0.179
$0.203
$0.086
$0.387
$0.090
$0.180
$0.138
$0.181
$0.123
$0.166
$0.137
$0.165
$0.092
$0.202
$0.137
$0.159
$0.135
$0.141$0.119
$0.137
WA
OR
CA
NV
ID
UT
WY
CO
MT ND
SD
NE
AZ
NM OK
TX
KS
MO
IA
MN
WI
MI
AR
LA
MSAL
GA
FL
TN
KY
ILIN
OH
WV
VA
NC
SC
PA
NJ
MD DE
NYVT
NH
MA
CT
ME
RI
Source: Credit Suisse Clean Technology Equity Research. Note: Assumes $3.5/w costs today, $2.25/w in 2017+, 6% WACC
Market Analysis
The U.S. solar market can be broadly divided into residential, commercial, and utility scale
segments. The quarterly installation run rate has grown at a CAGR of 61% since 1Q10,
primarily driven by utility scale projects, which grew at a CAGR of 113%. A total of 8.1 GW
of utility scale solar PV projects have been installed through 3Q14, the majority of which
were large-scale projects awarded in 2010 and 2011 during the initial Renewable Portfolio
Standard-driven procurement cycle.
The residential and commercial segments have grown at CAGRs of 43% and 30%,
respectively, since 1Q10. The commercial segment overshadowed residential installations
for a long time, but 1Q14 saw more residential installations. There are currently 3.0 and
4.8 GWs of installed capacity in the residential and commercial segments, respectively.
The top 5 residential markets are California, Arizona, Hawaii, New Jersey, and Colorado
due to better sunshine and/or higher utility rates and state subsidies.
Exhibit 37: U.S. Solar Market by Segment Exhibit 38: Residential Market Growth by State
56 60 63 67 72 68 75 88 107 111 128 147 168 171 195 260 241 273 308 63 64 94 115 168 224 175
261 305 210 251 305 248 226 228
404 231
273 221
23 56 22 167 38
74 227
445 133
498 310
861
328 542 539
1,444
879 715 825
142 180 179
349 278
366 477
794
545
819 689
1,313
744
939 962
2,108
1,351
1,260
1,354
-
500
1,000
1,500
2,000
2,500
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
US
Sol
ar in
stal
latio
ns, M
W
Residential installations Non-Residential Utility
107 111
128
147
166 166
186
260
241 247
-
50
100
150
200
250
300
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
MW
Others
Colorado
New Jersey
New York
Hawaii
Arizona
California
Source: GTM, Company data, Credit Suisse estimates. Source: GTM, Company data, Credit Suisse estimates.
13 January 2015
2015 Solar Outlook 19
A >5% Residential Solar Penetration Rate Is Not Out of the Question: We estimate
the demand to continue to grow at a CAGR of 36% through the end of this decade (2014-
2020) due to increased awareness among customers, declining panel/system prices,
lower financing costs, in addition to strong growth in the next two years before the 30% tax
credit sunsets by end of 2016. Our projections imply that by 2020, 4.6m households in the
U.S. will have adopted solar, or 5.6% of total rooftops and 12% of what we believe to be
customers that are viable (considering physical, credit, and economic criteria).
Exhibit 39: U.S. Residential Solar Market to Grow at a 36% CAGR Reaching ~5.6% Penetration Rate by 2020
1.2 1.5 1.8 2.3 3.3 5.0
8.7
11.7
15.4
20.3
27.2
0.3% 0.3% 0.4% 0.5%0.7%
1.1%
1.8%
2.4%
3.2%
4.2%
5.6%
0%
1%
2%
3%
4%
5%
6%
0
5
10
15
20
25
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Pen
etra
tion
as %
GW
Inst
alle
d
Cumulative Residential Solar (GW) Residential Penetration as % of Available Rooftops
Summary 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 12-'20 CAGR
Residential solar capacity installed in period (GWs) 0.2 0.3 0.5 0.8 1.1 1.7 3.7 3.0 3.7 4.9 6.8 33.9%
y/y growth 23.6% 62.5% 57.4% 36.4% 58.7% 119.3% (19.0)% 24.3% 32.9% 38.2% 0.7%
Residential solar capacity, cumulative (GWs) 0.7 1.0 1.5 2.3 3.3 5.0 8.7 11.7 15.4 20.3 27.2 35.1%
Residential Solar customers added in period, rooftops in millions 0.03 0.04 0.07 0.10 0.18 0.28 0.61 0.50 0.62 0.82 1.14 30.6%
Residential Solar customers, cumulative, millions 0.1 0.2 0.3 0.4 0.6 0.9 1.5 2.0 2.6 3.4 4.6 34.1%
Residential Solar customers, cumulative as % of total roofs 0.1% 0.2% 0.3% 0.5% 0.7% 1.1% 1.8% 2.4% 3.2% 4.2% 5.6% Source: Credit Suisse Clean Technology Equity Research. Historic data source: GTM, EIA. Note: Interactive model available upon request.
A significant driver of the adoption has been fueled by the reduction in cost of solar
systems, primarily due to solar module cost declines and subsidies.
Exhibit 40: Panel ASP Has Declined >66% Since 1Q11 and
More than 80% Since Highs in Late 2008
Exhibit 41: Cost to Install Residential Solar System Has
Declined >40% Since Early 1Q11 (leaders already <$3/w)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Mar
-07
Aug
-07
Jan-
08
Jun-
08
Nov
-08
Apr
-09
Sep
-09
Feb
-10
Jul-1
0
Dec
-10
May
-11
Oct
-11
Mar
-12
Aug
-12
Jan-
13
Jun-
13
Nov
-13
Apr
-14
Sep
-14
Silicon $/W Non-Si cost $/W Margin $/W
$ 3.00
$ 3.50
$ 4.00
$ 4.50
$ 5.00
$ 5.50
$ 6.00
$ 6.50
$ 7.00
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Sys
tem
Cos
t/W
Source: EnergyTrend, Company data, Credit Suisse estimates. Source: SEIA/GTM, Credit Suisse estimates.
13 January 2015
2015 Solar Outlook 20
The combination of consumer choice and economic viability can create steep adoption
curves. While not a perfect corollary, we look at the technical evolution of mobile phones
and how consumers quickly adopted mobile phone technology when the economics were
compelling to do so.
Exhibit 42: Cellular Phones Adoption Increased with
Decline in Call Costs to Customers
Exhibit 43: Hawaii Now Has ~14% Penetration of Rooftop
Solar Given It Was First State to Reach Economic Viability
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1985 1988 1991 1994 1997 2000 2003 2006 2009A
vg R
even
ue p
er V
oice
Min
ute
$/m
in
Mob
ile c
ellu
lar
pene
trat
ion
%
Mobile cellular penetration (LHS)
Average Revenue Per Voice Minute (RHS)
2.21% 2.42%3.50%
20.8%
6.7%
13.9%
0%
5%
10%
15%
20%
25%
as % of MW peakdemand ^
as % of kWh energyconsumed ^
as % of buildings
Net Metering Penetration
California Hawaii
^ represents data for top 3 utilities in CA Source: World Bank, FCC, CTIA, Credit Suisse. Source: Company data, Census, EIA, Credit Suisse estimates.
Fragmented but Consolidating Residential Market
The residential solar industry remains highly fragmented, as the top 5 installers account for
only 45.1% of the market and the next 5 installers account for 6.7%, leaving 55% of the
market represented by participants with less than 2% market share. According to data
from the Solar Foundation, more than 10,000 establishments offer solar installation
services in the U.S., of which ~80% are small installers with only one to two solar workers.
According to the California Solar Initiative, there are 2,955 registered solar installers in
California alone.
Given the meaningful economies of scale, as there are significant overhead expenses
associated with residential solar deployments including fleet operations and sales/G&A
expenses, and because there are often challenges accessing financing (tax equity is more
readily available to the top providers owing to tax credit recapture risks), the industry is
starting to consolidate, with the leaders outgrowing the market.
Exhibit 44: 1Q 2014 U.S. Residential DG Market Shares Exhibit 45: Industry Consolidation Continuing
SolarCity, 28.9%
Vivint Solar, 8.6%
Sungevity, 2.8%
Verengo, 2.5%
Solar Universe, 2.2%
Next 5, 6.7%
Others, 48.2%
21% 20%26%
32%27% 28%
33%39%
10%6%
8%
9%
7% 8%
14%
16%
69% 74%66%
59%66% 64%
53%46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Res
iden
tial s
olar
mar
ket s
hare
SCTY VSLR Others
Source: Company data, GTM/SEIA, Credit Suisse estimates. Source: GTM/SEIA, Credit Suisse estimates.
13 January 2015
2015 Solar Outlook 21
Returns Are Attractive Today – But Costs Matter
Cost leaders in the residential solar leasing space are securing high-return customers, in
our view, with mid-teens unlevered IRRs that can support 100% (or more) leverage at
<6% cost of capital (a feature specific to ABS and tax equity structuring). The value
proposition for the customer is compelling: no upfront capital and the potential ~10-30%
savings vs. utility rates.
Exhibit 46: Cost Structure Matters – Scale and
Operational Expertise Drives Cost Efficiencies
Exhibit 47: Compelling Economics: Estimated ~$1.44/w
NPV (~12.5% unlevered IRR) including RECs & Renewal
Company Costs/Watt Company Scale*
Vivint Solar** $3.68/w 90 MWs
SolarCity*** $3.70/w 287 MWs
Typical Costs $3.75-$4.75/w <30 MWs
$ 3.68 $ 3.70
$3.75-$4.75
$ 2.50
$ 3.00
$ 3.50
$ 4.00
$ 4.50
Vivint Solar SolarCity Typical
All-
in R
esid
entia
l Cos
t/Wat
t
Contracted Revenue
$ 2.65
Tax Benefits net$ 1.59
REC/PBI, $ 0.36
Renewal Revenue, $ 0.70
$ 5.30
Direct Costs$ 2.66
Opex, $ 0.78
O&M-Contracted
O&M-Renewal $ 0.19
Net Present Value$ 1.44 $ 4.04
PV Inflows @ 6% PV Outflows @ 6% Addl. Leverage NPV to VSLR
$/w
att
Source: Company data, Credit Suisse estimates ** 1H14 costs; VSLR adjusted for Micro-inverter use & WIP build; SolarCity costs include SBC and normalized by deployments, not on bookings; adjusted to just reflect residential.
Source: Company data, Credit Suisse estimates. Key assumptions: total initial cost of $3.44/watt, pricing of $0.147/kwhr with 2.9% escalator, ITC of 30%, SRECs of $0.03/kwhr for 15 yrs Note: Interactive single-customer return model available upon request.
How We Calculate the Residential Market Potential
We estimate residential solar TAM of 36 million viable rooftops (215 GW) in the U.S. at
today's costs and subsidies. At the forecasted costs and reduced subsidy levels for 2017,
we calculate a TAM of 37 million residential roofs, or 225 GW of potential solar capacity.
To arrive at our calculations, we take into account the physical feasibility (unobstructed
sunshine available on roofs), economic feasibility (whether solar is economical versus
average utility rates), good credit scores, and regulatory support (mainly federal and state
subsidies). Our use of 82 million rooftops before any exclusions is based on data from the
Census as the number of 1-unit detached houses in the United States.
■ Physical Feasibility: Not every house is ideal for solar, given shading or lack of
rooftop area that receives adequate sunshine. According to a study by UCLA, 17.9%
of all residential rooftop space in the U.S. is viable for solar (taking into consideration
slope, orientation, shading, etc.). If we assume that every 1 kW of solar on a roof
needs ~75 sq. ft. of area, a small 4 kW system would need at least 300 sq. ft. of
rooftop area. Given median rooftop size assumptions, we estimate that approximately
75% of houses can accommodate at least a small solar system (~25% of rooftops are
either too small or have conditions that would prevent the adoption of solar).
■ Credit Feasibility: We then assume a credit score feasibility factor of 85.9% based on
the number of homeowners who have FICO scores above 660 (according to a study
from the University of Pennsylvania).
Viable Households at Today's Costs & Subsidies: We calculate an economic feasibility
factor of 68.3% of residential customers based on today's solar system cost of ~$3.5/watt,
federal subsidy of 30% ITC, and additional state-level subsidies. Multiplying the excluding
factors, we calculate that 36m (44%) of residential rooftops are viable of the 82 million
single house rooftops.
Viable Households at 2017's Cost Structure & Reduced Subsidy: With the reduced
ITC of 10%, but with industry system costs declining to ~$2.25/watt, we estimate an
13 January 2015
2015 Solar Outlook 22
economic feasibility factor of 71.3%. We do not include any state-level subsidies in 2017
and beyond. This results in 37m viable rooftops.
Exhibit 48: U.S. Residential Solar DG TAM
Subsidized Unsubsidized Subsidized Unsubsidized
Physical feasibility factor 75.0% 75.0% 75.0% 75.0%
Credit feasibility factor 85.9% 85.9% 85.9% 85.9%
Economic feasibility factor 68.3% 8.1% 71.3% 44.5%
% Viable rooftops 44.0% 5.2% 45.9% 28.7%
Total rooftops, million 82 82 82 82
Viable rooftops, million 36 4 37 23
Average system size, kW/rooftop 6.0 6.0 6.0 6.0
TAM, GW 215 26 225 140
US Residential Solar TAM
calculations
For 2017 all-in cost of $2.25/WFor today's all-in cost of $3.50/W
Source: Credit Suisse Research, Census, DOE, EIA, UCLA, UPenn.
Incentives Matter Today
The most substantial incentive driving solar demand in the U.S. is the federal investment
tax credit (ITC) of 30% of the fair market value of a system. Under the current rules, the
ITC would decline from 30% to 10% starting January 1, 2017. We currently assume the
tax credit steps down in 2017.
In addition to the ITC, many states have additional upfront subsidies based on installation
size and project costs. Note that only state-wide incentives are shown, though many states
have utilities that additional offer subsidies.
Exhibit 49: State-Level Residential Solar Incentives (ex. the 30% Federal Tax Credit)
State
Sunhours/Yr
(net derate)
Upfront
Residential
Subsidies ($/w)
Comments (subsidy expiration or
program budget)
Idaho 1,415 $ 1.50 Not specified, credit total over 4 yr
Washington 1,058 $ 1.25 2020
Louisiana 1,294 $ 1.14 2017
North Carolina 1,381 $ 1.05 2015
South Carolina 1,403 $ 0.88 Not specified
Connecticut 1,207 $ 0.75 $10 M total
New Hampshire 1,235 $ 0.75 Varies by year
New York 1,227 $ 0.75 2023
Oregon 1,114 $ 0.70 2017
Hawaii 1,622 $ 0.56 Not specified
Iowa 1,106 $ 0.54 2016
District of Columbia 1,283 $ 0.50 $2 M/yr
Arizona 1,824 $ 0.25 2018
Maryland 1,314 $ 0.25
Massachusetts 1,266 $ 0.25 $1.5 M/Q
Vermont 1,081 $ 0.25 2016, afterwards 2.4% credit
Montana 1,392 $ 0.13 Not specified Source: DSIRE, Credit Suisse estimates. Note: No additional incentives in other states. Does not include city/county/utility level incentives. Subsidy calculations assume a 4kW system size, $3.5/watt average cost. Note that some programs have limitations on service territory, number of customers, or system size.
13 January 2015
2015 Solar Outlook 23
Exhibit 50: Subsidized Residential Solar Economic in 32
States Today (30% ITC + State Subsidies)…
Exhibit 51: …32 States Economic at 2017 Cost (10% ITC)
$0.099
$0.088
$0.117
$0.119
$0.103
$0.107
$0.105
$0.169
$0.102
$0.128
$0.025
$0.104
$0.117
$0.107
$0.113
$0.112
$0.109
$0.112
$0.085
$0.124
$0.103
$0.131
$0.095
$0.131
$0.113
$0.121
$0.118
$0.104
$0.120
$0.126
$0.132
$0.115
$0.123
$0.115
$0.127
$0.116$0.156
$0.128
$0.109
$0.123
$0.138
$0.124
$0.131
$0.101
$0.052
$0.100
$0.123
$0.117
$0.124
$0.109
$0.128
$0.117
$0.144
$0.146 $0.147
$0.149
$0.145
$0.115
$0.146
$0.135
$0.131
$0.104
$0.114
$0.125
$0.118
$0.121
$0.088$0.125
$0.054
$0.114
$0.129
$0.117
$0.147
$0.096
$0.144
$0.139
$0.152
$0.154
$0.083
$0.209
$0.179
$0.203
$0.086
$0.387
$0.090
$0.180
$0.138
$0.181
$0.123
$0.166
$0.137
$0.165
$0.092
$0.202
$0.137
$0.159
$0.135
$0.141$0.119
$0.137
WA
OR
CA
NV
ID
UT
WY
CO
MT ND
SD
NE
AZ
NM OK
TX
KS
MO
IA
MN
WI
MI
AR
LA
MSAL
GA
FL
TN
KY
ILIN
OH
WV
VA
NC
SC
PA
NJ
MD DE
NYVT
NH
MA
CT
ME
RI
$0.149
$0.088
$0.109
$0.119
$0.141
$0.107
$0.098
$0.169
$0.095
$0.128
$0.111
$0.104
$0.113
$0.107
$0.105
$0.112
$0.101
$0.112
$0.086
$0.124
$0.096
$0.131
$0.089
$0.131
$0.105
$0.121
$0.110
$0.104
$0.112
$0.126
$0.123
$0.115
$0.115
$0.115
$0.118
$0.116$0.145
$0.128
$0.142
$0.123
$0.128
$0.124
$0.122
$0.101
$0.121
$0.100
$0.114
$0.117
$0.116
$0.109
$0.120
$0.117
$0.134
$0.146 $0.137
$0.149
$0.135
$0.115
$0.136
$0.135
$0.122
$0.104
$0.106
$0.125
$0.110
$0.121
$0.112$0.125
$0.114
$0.114
$0.120
$0.117
$0.137
$0.096
$0.134
$0.139
$0.142
$0.154
$0.128
$0.209
$0.167
$0.203
$0.097
$0.387
$0.127
$0.180
$0.145
$0.181
$0.124
$0.166
$0.128
$0.165
$0.130
$0.202
$0.127
$0.159
$0.126
$0.141$0.120
$0.137
WA
OR
CA
NV
ID
UT
WY
CO
MT ND
SD
NE
AZ
NM OK
TX
KS
MO
IA
MN
WI
MI
AR
LA
MSAL
GA
FL
TN
KY
ILIN
OH
WV
VA
NC
SC
PA
NJ
MD DE
NYVT
NH
MA
CT
ME
RI
Source: Credit Suisse Clean Technology Equity Research, EIA, NREL, DSIRE. Note: Assumes $3.5/w costs today, $2.25/w in 2017+, 6% WACC. Interactive model available upon request.
Source: Credit Suisse Clean Technology Equity Research, EIA, NREL, DSIRE. Note: Assumes $3.5/w costs today, $2.25/w in 2017+, 6% WACC. Interactive model available upon request.
GTM Research performed a similar analysis to identify states where solar is economical,
concluding that 7, 8, and 14 states in 2014/2015/2016 are at or below parity, which is
expected to drop to 8 states in 2017 when the ITC is reduced to 10% (from 30%). As costs
continue to decline, GTM forecasts 28 states to be at or below parity, primarily in the
southwest and northeast. Note that GTM analyzed each utility rate structure and included
the ITC, but did not take into account state-level incentives and used slightly higher costs.
Exhibit 52: 7 States Currently at or above Grid Parity… Exhibit 53: …doubles to 14 States in 2016…
Source: GTM. Note: 2014 regional system price inputs range from $3.28/W-$3.72/W; WACC 9.6%
Source: GTM. Note: 2016 regional system price inputs range from $2.80/W-$3.17/W; WACC 9.6%
Exhibit 54: …drops to 8 States in 2017 due to the ITC
reduction…
Exhibit 55: … and grows to 28 States in 2020 as solar
costs continue to decline
Source: GTM. Note: 2017 regional system price inputs range from
$2.59/W-$2.87/W; WACC 8.2%
Source: GTM. Note: 2020 regional system price inputs range from
$2.09/W-$2.35/W; WACC 8.2%
13 January 2015
2015 Solar Outlook 24
The Year of Utility Rate Reform Proposals – A Consequence of Success
If we are correct in our penetration rate forecasts, we would anticipate utilities to
implement regulatory rate changes to reduce the economic viability of rooftop solar by
petitioning for a reduction in net metering rates (explained below) or by imposing minimum
bill requirements/fixed surcharges for having solar systems installed (restructuring rate
constructs).
Currently, 44 states have mandated net metering rules that allow residential solar to net
meter energy. This means that when a system produces more energy than the home can
consume, the excess power is exported to the grid (at a retail rate), and when power is
needed from the grid, it is purchased at the retail rate (i.e., free "storage" on the grid, a
margin-less transaction for the utility).
We calculate that on average ~34% of energy produced by a residential solar system is
sold back to the grid under a net metering tariff, and ~66% of the power is consumed on
site. Under the Public Utility Regulatory Policy Act (PURPA), residential customers have a
federal right to serve their own load, with certain limitations.
Exhibit 56: Net Metering Example—Average Daily Electricity Consumption and Solar
Generation for a House in LA
solar electricity
generation curve
load cruve with
storage
load curve
load curve with solar
1 3 5 7 9 11 13 15 17 19 21 23
Hrs
surplussolar
Source: NREL, Openei.org, Credit Suisse estimates.
Exhibit 57: Net Metering Rules Exist in 44 States Exhibit 58: 25 States Have Net Metering Caps
State policy
Voluntary utility program(s) only
DC
Source: DESIRE, Credit Suisse estimates. Source: NREL, Credit Suisse estimates.
To date, there have been numerous rate proceedings to reduce the implicit subsidy of net
metered energy (Utilities typically argue that power sent back to the grid ought to get
credited at wholesale rates plus a small premium, and solar companies argue that the
solar should get credited at the full retail rate or even at a premium given it often coincides
with peak demand times and does not result in transmission and distribution losses.)
■ Arizona: Arizona Public Service asked to impose a significant fixed surcharge for
customers to reduce what it believed to be a cost shift to non-solar customers.
13 January 2015
2015 Solar Outlook 25
Ultimately, the Arizona regulators authorized ~$4.8/month for a regular system
installed after January 1, 2014 (previously installed systems will be grandfathered into
the program). The utility will determine a new tariff as part of a general rate case in
the coming years.
o Salt River Project (co-op utility) plans to impose a monthly service fee for
solar connection (proposing $50/month – but vote taking place February 26),
reduce retail rates to $0.04/kWh (from $0.10/kWh) which would reduce net
metering value, and impose a monthly peak demand charge ($32 for 4 kW,
$82 for 10 kW). The total monthly bill increase for solar customers is ~$50 on
average. The board plans to vote on these rate changes on February 26.
■ California: Under bill AB 327 (signed Oct. 2013), California has authorized net
metering with full retail rates up to a 5% penetration level. (California is currently at
~2.4% for the three major utilities.) After that is reached, the California Public Utilities
Commission will determine new tariffs and potentially impose a net metering fee. We
believe that the new rate will still be attractive, given Governor Brown's commitment to
distributed generation.
o California PUC will likely release a preliminary tool (developed by E3) by
late January to calculate tariff structures on rooftop solar. By mid-year we
expect preliminary tariffs will be proposed. The new tariff will be in-place
by the end of 2015 (and will be utilized once the 5% net metering cap is
reached).
■ Colorado: Xcel Energy filed a request with the Colorado Public Utilities Commission
to reduce net metering rates (currently at retail rates), arguing that it believed high net
metering rates shift costs to non-solar customers. The commission decided to
investigate net metering rates over four hearings, two of which remain.
■ Nevada: NV Energy (public utility) has proposed raising fixed charges to $15.25 (from
$10) for all residential customers and is lobbying for other changes to the state's net
metering policy. The Public Utilities Commission of Nevada has asked the state
legislature to review the state's net metering policy and may modify it to allow utilities
to impose additional fees on net metering customers.
■ Massachusetts: In July, the Massachusetts legislature failed to pass a bill that would
have authorized a minimum bill for all utility customers, eliminated net metering caps,
lowered virtual net metering rates, and replaced the state's solar renewable energy
credits (SRECs) with a fixed declining block grant structure. Instead, net metering
caps were slightly increased to 5% for public installations and to 4% for private.
■ Wisconsin: The Wisconsin Public Service Commission authorized WE Energies
(IOU) to increase fixed monthly charges to ~$16 (from ~$9) for all residential
customers and to impose a solar fee for all customers with solar systems
($3.90/kW/month, average size of 4 kW implies fees of $182/year). Net metering
credits paid to customers will also be reduced to $0.03/kWh (from the current
$0.14/kWh). Current solar customers will not be affected by the solar fee or net
metering tariff change under a 10-year grandfather period.
■ New Mexico: The Public Service Company of New Mexico (IOU) has proposed
increasing residential rates by ~12% and imposing a solar interconnection fee of
$6/kW/month (average size of 3-5 kW implies fee of $18-30/month). If approved, the
solar interconnection fee would apply to solar systems installed after January 1, 2016
(existing systems would be grandfathered into the program).
■ New York: The New York Public Service Commission authorized raising the net
metering cap to 6% (from 3%) and New York currently does not charge a net metering
fee. However, the state recently announced plans to end the On-Bill Recovery Loan
13 January 2015
2015 Solar Outlook 26
program, which allowed customers to repay loans for their solar systems through
charges on their utility bills.
■ South Carolina: An agreement has been filed with the Public Service Commission of
South Carolina to guarantee net metering without tariffs until 2020. The net metering
policy will be revisited in 2020 and any changes will apply to new customers
immediately and to existing customers after December 31, 2025. In mid-December
2014 South Carolina approved the policy to become the 44th state to allow net
metering.
Holistically, the rate constructs currently used for residential customers are relatively
simple in many states and do not attempt to allocate costs of the distribution infrastructure
separately (instead all costs are amortized on net kWh volume consumed). Salt River
Project, effectively a muni utility, recently highlighted this difference as one reason to
reform their rates:
Exhibit 59: Salt River Project - Variable vs. Fixed and How Cost Allocation Is Approached
Source: Salt River Project (http://www.srpnet.com/prices/priceprocess/pdfx/bb120514b.pdf)
One can sensitize the potential impact of fixed surcharges on customer-level economics.
Assuming a $10/month charge, the NPV of a customer would be reduced by 16.5%
(unlevered IRR declines from 12.5% to 11.3%).
Exhibit 60: Assessing the Potential Impact on Value/Customer If Fixed Charges Are
Imposed Example provided utilizes Credit Suisse estimates for Vivint Solar (example of economic sensitivities)
$/month charge NPV/watt NPV/watt Unlevered IRR
$ 1.26 $ 1.26 12.5% 12.5%
$ - $ - $ 1.44 $ - $ - 12.5%
$ 5 $ 5 $ 1.33 (8.2)% $ 5 11.9% -60 bps
$ 10 $ 10 $ 1.21 (16.5)% $ 10 11.3% -121 bps
$ 15 $ 15 $ 1.09 (24.7)% $ 15 10.7% -181 bps
$ 20 $ 20 $ 0.97 (33.0)% $ 20 10.1% -242 bps
$ 25 $ 25 $ 0.85 (41.2)% $ 25 9.5% -303 bps
$ 30 $ 30 $ 0.73 (49.4)% $ 30 8.9% -365 bps
$ 35 $ 35 $ 0.61 (57.7)% $ 35 8.3% -427 bps
$ 40 $ 40 $ 0.49 (65.9)% $ 40 7.6% -490 bps
$ 45 $ 45 $ 0.37 (74.2)% $ 45 7.0% -553 bps
$ 50 $ 50 $ 0.25 (82.4)% $ 50 6.4% -617 bps Source: Credit Suisse estimates. Key assumptions: charge borne by leasing company, total cost of $3.44/watt, pricing of $0.147/kWh with 2.9% escalator, ITC of 30%, SRECs of $0.03/kWh for 15 yrs.
13 January 2015
2015 Solar Outlook 27
US Commercial Rooftops - Also a Large Opportunity
The US commercial segment consumes 1,338,448 GWhrs a year according to EIA in 2013
(about 96% of the residential market). If we assume 10% of commercial consumption
could come from distributed generation (rooftop or ground mount on site), the opportunity
would equate to 76.4 GWs of solar capacity (assuming an average 20% utilization factor).
This amount of capacity is about 16.1x what has been installed to-date in the commercial
segment. Triangulating this figure further, there are 9 million commercial rooftops in the
US according to the Commercial Building Inventory, implying a 8.8% penetration rate if the
average size of a commercial system is 100 KWs.
While there are a host of challenges unique to the commercial segment, including
tenant/lessor relationships, lease length, and lack of standardized credit metrics for private
commercial entities, we do expect the commercial segment to grow from an annual
runrate of ~975 MWs in 2014 by a CAGR of 34.9% over the next two years before the ITC
steps down.
When we analyze the cost competitiveness of commercial solar, we preliminarily find that
solar is economic for 79.5% of customers (using average retail price data from EIA) but
the analysis has significant limitations as (1) the EIA data does not bifurcate demand vs.
energy charges, which are very important for commercial rate tariffs, and (2) the cost of
commercial installations can vary widely – some can approach utility-scale costs of $1.6/w
while others are close to residential-costs of >$3/w.
13 January 2015
2015 Solar Outlook 28
Storage: Could Reduce Net Metering risks
The evolution of economic storage could mitigate many of the net metering and utility rate
reform risks while also potentially increasing project economics by (i) increasing the size of
solar systems and providing dispatchable resources to address issues that could emerge
at higher levels of penetration (i.e., >10%), (ii) reduce peak demand levels which generally
happen in the evenings – utilities have started unbundling their rates with peak demand
charges on customers ranging from ~$8/kW/month for Salt River Project (SRP) to
~$18/kW/month for Georgia power, (iii) Peak demand hours are also expected to shift to
the evening; storage would allow solar systems to dispatch energy accordingly.
We expect storage to become more relevant in the next few years as Tesla's gigafactory is
expected to reduce the cost to produce each battery pack by 30% by 2017 (costs
~$150/kWh today) and to double global lithium ion battery cell production by 2020. The
gigafactory is expected to produce 50 GWh/year of storage by 2020 and 15 GWh/year are
expected to be used in stationary storage. As Tesla and other electric vehicle
manufacturers ramp up, the adoption of electric vehicles could also be transformational by
increasing the consumer's total electricity consumption.
Storage is still not economic for residential customers with current rate constructs and at
today's battery cost. Industry sources have indicated that commercial-scale storage IS
economic today given the high demand charges for commercial customers.
Exhibit 61: Commercial Storage: ~15% IRRs today with SGIP, ~10% without subsidy in PG&E
Source: GTM Research Presentation.
We studied the impact of storage in a hypothetical house in LA with 5kW of solar capacity
installed generating 9.2 MWh annually generates surplus electricity of ~4 MWh. Such a
system can benefit from 30% higher $ savings with a battery storage in place if the
customer pays an unbundled electricity rate with a lower generation tariff (~$0.15/kWH), a
nominal annual fixed tariff (for meter access, T&D etc..) ~$110/yr, and a peak demand fee
of ~$8/kW (in line with SRP's recent rate case), and assuming storage cost of ~$350/kWh.
Exhibit 62: Storage is poised to benefit from the changing rate structure
Exhibit 63: Solar generation vs load curves
$ -
$ 100
$ 200
$ 300
$ 400
$ 500
$ 600
single tariff unbundled tariff
- with NEM charge - with storage & NEM
solar electricity
generation curve
load cruve with
storage
load curve
load curve with solar
1 3 5 7 9 11 13 15 17 19 21 23
Hrs
surplussolar
Sources: Credit Suisse, OpenEI, assumes 5kW solar installation, unbundled tariff includes monthly fee and peak charge, storage cost of ~$350/kWh
13 January 2015
2015 Solar Outlook 29
TOPIC: US Utility Scale Solar Boom We expect the US solar market to grow 45% in 2015. While we expect rooftop markets to
grow 47% on a smaller base, the Utility segment is also expected to see strong growth in
2015 and 2016, ahead of the reduction of the 30% Investment Tax Credit. According to
GTM Research, there is already visibility to 15.3 GWs of utility-scale pipeline with 5.3 GWs
in 2015 and 7.2 GWs in 2016. Currently, 29 states and DC representing 56% of total US
retail electricity sales have RPS policies, which provides visibility to ~79 GWs of utility-
scale solar needed by 2030 (analysis below).
Exhibit 64: US Solar Demand Forecast by Segment: Strong Utility Demand Expected
Ahead of 2017 Reduction in 30% Investment Tax Credit (declines to 10% in 2017)
0.4 0.6 1.7
2.9 3.6
5.2
7.0
3.0 4.0 0.9
1.8
3.3
4.8
5.7
8.3
12.7
7.4
9.3
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
Utility Residential Commercial
Source: Company data, Credit Suisse estimates
Renewable mandates & looming 30% ITC step-down will drive utility scale demand:
In addition to federal and state incentives, many states have encouraged the adoption of
renewables through renewable portfolio standards (RPS), which are enforceable targets
for the percentage of electricity generated from renewable sources. Currently, 29 states
and DC representing 56% of total US retail electricity sales have RPS policies. Of states
with RPS policies, 17 states and DC have solar targets, including several which also have
credit multipliers for solar. According to the Berkeley Lab, 78% of cumulative RPS capacity
additions have been wind and 16% were solar. However, in the last few years RPS-related
solar additions have grown and in 2013 more RPS solar capacity was added than wind.
Exhibit 65: 29 States and DC have Renewable Portfolio
Standards (RPS) policies
Exhibit 66: RPS Capacity Additions Shifting Towards
Higher Solar Mix given Cost declines
Source: DSIRE. Source: Berkeley Lab
Assuming that 50% of RPS requirements are met with solar, we expect ~79GW of utility-
scale solar would need to be completed from 2014 through 2030. With a pipeline of 15.3
13 January 2015
2015 Solar Outlook 30
GWs, there is a need for considerable solar contracting left for the US. Note these
estimates do not include the recent proposal by California Governor Brown to increase the
state's renewable portfolio standard to 50% which was unveiled January 6th.
Exhibit 67: Visibility to 79 GWs Incremental Solar Capacity Required in US to Meet
Current Renewable Portfolio Standards (RPS)
Incremental Solar Capacity Required in US to Meet Current RPS79 by... 2020 by... 20300% 0.0 GWs 0.0 GWs
10% 11.9 GWs 15.8 GWs20% 23.9 GWs 31.7 GWs30% 35.8 GWs 47.5 GWs
Solar share of 40% 47.8 GWs 63.4 GWsincremental renewable 50% 59.7 GWs 79.2 GWs
capacity additions 60% 71.7 GWs 95.0 GWs70% 83.6 GWs 110.9 GWs80% 95.6 GWs 126.7 GWs90% 107.5 GWs 142.6 GWs
100% 119.5 GWs 158.4 GWsNote: Assumes solar capacity factor of 22.0%, wind capacity factor of 40.0%
Source: Credit Suisse Equity Research Note: Interactive model available upon request.
Utility solar pipeline continues to expand: In 2012 and 2013, virtually all of the utility-
scale solar pipeline growth was driven by RPS requirements, causing the pipeline to
contract in 4Q13 when utilities had procured enough solar to meet RPS obligations for the
next few years. Pipeline growth was revitalized in 2014 as only 55.3% of the pipeline was
driven by RPS requirements, 30.9% by EPA regulations and competitiveness with natural
gas, and 13.8% by post-2016 power needs. More than half the pipeline is expected to be
constructed in California – a state with higher sunshine, and a higher RPS (33% by 2020).
Exhibit 68: Utility-Scale Solar Pipeline Contracted in 2013,
Revitalized in 2014
Exhibit 69: >50% of the Utility-Scale Solar Pipeline is
Currently in California, but Geographies are Diversifying
10.5 10.6
12.1
12.6
11.7
12.5
13.5
14.5
15.3
8
9
10
11
12
13
14
15
16
4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Pip
elin
e, G
W
5.9
3.0
6.9
3.7
7.4
3.6
7.9
4.2
8.3
7.0
0
1
2
3
4
5
6
7
8
9
California Rest of US
Pip
elin
e, G
W
2010 2011 2012 2013 2014
Source: GTM, Credit Suisse estimates Source: Company data, Credit Suisse estimates
There is a pronounced decline expected in the US utility-scale market following the
scheduled reduction in the 30% investment tax credit. According to singed PPA
agreements that have been aggregated by GTM Research, only 1.3 GWs of projects are
scheduled to be completed after 2016 while 7.2 GWs are scheduled to be completed in
2016. Anecdotally, we have heard many private developers are attempting to accelerate
project completions to 2016 (even with a PPA that starts >2016) and qualifying for the
30% ITC by arranging bridge power offtake agreement (i.e., 1 – 2 years).
13 January 2015
2015 Solar Outlook 31
Exhibit 70: ITC expected to have meaningful impact on Utility scale demand
5.3 GWs
7.2 GWs
1.3 GWs
0.0 GWs
1.0 GWs
2.0 GWs
3.0 GWs
4.0 GWs
5.0 GWs
6.0 GWs
7.0 GWs
8.0 GWs
2015 2016 Post 2016
Contracted US Utility-Scale Solar PPAs by Online Date
Tax Credit dropsto 10% (from 30%)
Source: GTM Research/SEIA US Solar Market Insight
..but utility scale projects are highly competitive given fewer barriers to entry:
Project PPAs have declined significantly over the last few years due to declining system
costs and lower financing costs. System costs have declined due to panel price declines
from ~$1.90 in 2012 to $0.70/watt today, and decline in balance of system costs due to
economies of scale (see exhibit below). Financing costs have declined due to YieldCos
(like SUNE's YieldCo – TERP) which can finance projects a lower yield thereby making
projects more competitive in the market. Media also reports that recent projects in Western
Texas and Georgia were bid at PPAs as low as $0.05-$0.06/kWh implying unlevered IRRs
of mid-single digit (assuming 30% ITC, all in system cost of ~$1.70/watt). Similarly, 100
MWs in Idaho were awarded PPAs at ~$0.063/kwhr on a levelized basis (developed by
First Wind – being acquired by SunEdison) which implies low returns.
Exhibit 71: Utility-Scale Solar PPA Rates have Declined to
$50-75/MWh
Exhibit 72: Utility-Scale Solar Installed Cost has Declined
57% since 1Q11 – now ~$1.68/watt on average
$ 1.50
$ 2.00
$ 2.50
$ 3.00
$ 3.50
$ 4.00
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Inst
alle
d C
ost (
$/W
)
Source: GTM Research. Source: GTM/SEIA, Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 32
Exhibit 73: Module Price Changes
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Mar
-07
Jun-
07
Sep
-07
Dec
-07
Mar
-08
Jun-
08
Sep
-08
Dec
-08
Mar
-09
Jun-
09
Sep
-09
Dec
-09
Mar
-10
Jun-
10
Sep
-10
Dec
-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Dec
-14
Silicon $/W Non-Si cost $/W Margin $/W
LCOE ~20c/kWH
LCOE ~9c/kWH
LCOE ~8c/kWH LCOE ~7c/kWH
Sources: CS Estimates, PV Insights, Energy Trend, Company Financials (pre 2011)
The 2016 Rush – Tax Equity in Focus
Potential Tax Equity Constraints Emerging – but unlikely to be an unsurmountable
challenge: Tax equity supply is constrained in the US as the market is controlled by a few
players. The US tax equity market has ~15-20 big tax equity investors which include large
financial institutions (bulge bracket banks, retail banks, and insurance companies) and
large corporates with a higher tax appetite (Google, GE, utilities, etc.). These players
together supply $6b in tax equity. This tax equity is enough to support ~10 GW of solar
projects annually (assuming tax equity provides 30% funding and a utility-scale system
ASP of $2/watt). This should be sufficient for our 2015 US installation forecast of ~7.1GW,
but might create tight supply in 2016 where we forecast solar demand of ~11.4 GW.
Potential outcomes of a tight tax-equity supply: We expect this short supply of tax
equity from the existing base of corporates and financial institutions will result in either tax
equity expanding to corporate profit pools or developers shifting more towards a loan
structure. To date, we have been frustrated by the lack of non-energy related corporate tax
equity providers, with only several notable exceptions: Google and Liberty Media.
Companies are addressing this potential bottleneck by introducing more loan-based
products (i.e., SolarCity's MyPower offering) which do not need tax equity as the ITC is
monetized by the homeowner.
Also, we continue to believe that tax equity flows to the top tier companies, further
encouraging share consolidation. SolarCity and Vivint have both announced recent tax
commitments, with SolarCity raising $750m in FMV ($350 in 1/7/2015 with JP Morgan,
$400m with BofA 12/11/2014) which equates to approximately $300m in committed tax
equity, on our assumptions. Vivint Solar announced additional tax equity funds covering
~91 MWs during their Q3 release.
13 January 2015
2015 Solar Outlook 33
TOPIC: Trade Disputes US/China Trade Dispute (Almost Behind Us)
Two recent positives - potential reprieve with 2012 rate reduction and less risk to re-
opening prior trade case: On New Year's Eve the Department of Commerce announced
preliminary adjustments to the 2012 trade case, with rates of ~17.5% (vs. prior ~30.7% for
most companies). If ultimately adopted, the lower tariffs could alleviate some of the margin
pressures and permit lower solar module pricing in the US.
Lower preliminary rates for 2012 case: The Department of Commerce announced their
preliminary review of AD and CVD rates for the 2012 trade case on Dec 31. Yingli,
Canadian Solar, JinkoSolar and Trina Solar were determined to have 15.68% CVD and
1.82% gross AD rates (collectively 17.5%, before the net adjustment), lower than the prior
rates of 15.24% CVD and 15.42% net AD (30.66% collectively) for YGE, CSIQ, JKS and
23.75% for TSL. Trina Solar may lose some of their advantage (previously they had the
lowest tariff under the 2012 case of ~23.75% but may now share the same, but lower, rate
with several other Tier 1 producers). Oddly, JA Solar (JASO) was not reviewed and may
be subject to the prior rates, putting them at a relative disadvantage, unless changes are
made during the review process.
Higher rates for the Chinese companies under latest Trade Case is a non-event: The
Department of Commence also announced final rates on December 16th for the more
recent trade case that covers modules made outside of China (or only partially-Chinese
content). The last hurdle for that case will be the ITC's final determination on January 29th.
While the final rates were higher for the Chinese companies and lower for the Taiwanese
(see bottom of Exhibit 4), this is a non-event as it does not change the likely trade routes
(see Exhibit 74). Using the 2012 trade case's original rates would already be the most
economic route… made even better if the annual adjustment results in lower rates under
the 2012 case for all-Chinese content.
Exhibit 74: Trade Routes – Lowest Cost will be 2012 Case, with or without the recently proposed adjustments
15%
$ 0.52
$ 0.60
$ 0.67 $ 0.72
$ 0.64
$ 0.96
$ 0.76
$ 1.23
$ 0.84
$ 0.69 $ 0.70 $ 0.70
$ 0.35
$ 0.45
$ 0.55
$ 0.65
$ 0.75
$ 0.85
$ 0.95
$ 1.05
$ 1.15
$ 1.25
$ 1.35
No
Dut
ies
At A
ll
Chi
nese
Mod
ule
+T
aiw
an C
ell (
2012
Loop
hole
)
2012
Dut
y (A
llC
hine
se C
onte
nt)
-T
SL
2012
Dut
y (A
llC
hine
se C
onte
nt)
-M
ost O
ther
Chi
nese
Cos
2012
Dut
y w
ith 2
015
Adj
ustm
ent (
All
Chi
nese
Con
tent
) -
Mos
t Oth
er C
hine
se…
Tai
wan
with
Chi
naC
ompo
nent
All
Tai
wan
Mod
ule
Chi
na w
ith T
aiw
anC
ell
Waf
er fr
om c
hina
Non
Chi
na/T
aiw
an
RE
C S
olar
US
Mo
du
le P
rici
ng
to O
bta
in 1
0% G
ross
Mar
gin
Gross Margin of 10%
Transfer margin
Import Tariff
Additional mfg cost
China base case mfg cost
ASPs prior to the trade case: Pricing of high 60s
permitted decent low 20% margins using
Taiwanese Loophole
New Possibility underPreliminary Rates
Current Solution....
32.9% 22.9% 13.2% 7.7%17.6%
(23.7)%
2.1%
(58.0)%
(8.1)%11.4% 10.0%
(100.0)%
(50.0)%
0.0%
50.0%
Gro
ss M
arg
in a
t $0
/.70/
W A
SP
%GM for a $0.70/W ASP
Source: Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 34
Chinese manufacturers and US downstream developers could benefit: This could
provide a margin boost for Chinese manufacturers. Under the prior rates and current
pricing in the US, gross margins for US shipments were ~8-15%. All else equal, if the
preliminary rates stick, margins for US shipments could improve to 17-24%, in our view,
depending on cost structures (JKS maintains cost-leadership and highest margins). In our
view, US module pricing could decline slightly in response, as non-Chinese manufacturers
with higher cost structures will remain in the US market. Slight pricing reductions in the US
(while at the same time allowing margin increases for manufacturers) could benefit
companies such as SunEdison (SUNE), SolarCity (SCTY) and Vivint Solar (VSLR) who
purchase modules.
DOC denies request to re-open 2012 case: SolarWorld had petitioned the Department
of Commerce on July 1st to re-open the 2012 case entirely under the premise that the
discovery of cyber-espionage constituted "changed circumstances" which would permit a
rehearing. In letters to SolarWorld dated Dec 31, the Department of Commerce denied the
request.
Next steps: Additional comments will be received and companies will have the
opportunity for a re-hearing or to rescind a review request. The DOC is expected to issue
an order within 120 days (i.e., finalized around April 2015) at which point the duties will
become effective.
Time to build duty free shops: Manufacturers had put their expansion plans on hold due
to uncertainty around the trade case. Now with more clarity, we believe China based
manufacturers will announce capacity expansion outside China which qualify as duty-free
under the new import duty rules. Tier-1 China based companies like JKS and TSL are
scouting locations in SE Asia, South America and North America to potentially build new
factories. Our capacity expansion tracker also shows that most of the cell/module capacity
new builds are happening outside China.
Exhibit 75: Trade Case AD/CVD Rate Summary Final Proposal Preliminary
Countervailing Duties Total Duties Countervailing Duties Total Duties
(CVD + Net AD) (CVD + Net AD)
Dumping Margin Dumping Margin Cash Deposits (effective
Net Dumping Margin)
2014 Trade Case: Chinese Companies
Trina Solar 49.79% 26.71% 76.50% 18.56% 26.33% 10.74% 29.30%
ReneSola 38.72% 78.42% 117.14% 26.89% 58.87% 55.49% 82.38%
JinkoSolar
Yingli 38.72% 52.13% 90.85% 26.89% 42.33% 20.38% 47.27%
JA Solar
Canadian Solar
Hanwha SolarOne
Wuxi Suntech 27.64% 52.13% 79.77% 35.21% 42.33% 14.03% 49.24%
Others (those not listed above) 38.72% 165.04% 203.76% 26.89% 165.04% 165.04% 191.93%
2014 Trade Case: Taiwanese Companies
Gintech Energy Corporation na 27.55% 27.55% na 27.59% 27.59%
Motech Industries na 11.45% 11.45% na 20.86% 20.86%
All Others na 19.50% 19.50% na 24.23% 24.23%
Preliminary Final Original Ruling (2012 Case)
2012 Trade Case w/ Preliminary 2014 Adjustments (As of Dec 31, 2014) - Applies to Modules with All Chinese Made Content 2012 Trade Case (as disclosed in final rulings) Applies to Modules with All Chinese Made Content
Trina Solar 15.68% 1.82% 17.50% 15.97% 18.32% 7.78% 23.75%
Wuxi Suntech 15.68% 1.82% 17.50% 14.78% 31.73% 21.19% 35.97%
Yingli 15.68% 1.82% 17.50% 15.24% 25.96% 15.42% 30.66%
Canadian Solar 15.68% 1.82% 17.50%
JinkoSolar 15.68% 1.82% 17.50%
JA Solar n.r. n.r. n.r.
Some others 15.68% 1.82% 17.50%
Others in China (includes ReneSola) n.r. 249.96% 238.56% 15.24% 249.96% 239.42% 254.66%
(preliminary, announced July 25, 2014)
Anti-Dumping Duties
(preliminary, announced June
2, 2014)
Anti-Dumping Duties
(final proposal, announced
Dec 16, 2014)
(final proposal, announced Dec 16, 2014)
Source: Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 35
Exhibit 76: 2012 CVD Rates; Preliminary (12/31/2014) Exhibit 77: 2012 AD Rates; Preliminary (12/31/2014) CVD
Company Subsidy Rate
Lightway Green New Energy Co., Ltd. 22.73%
Shanghai BYD Co. Ltd., Shangluo BYD Industrial Co., Ltd and
BYD Company Limited 8.63%
Remaining Companies Subject to Review (see below) 15.68%
Remaining companies:
1. Baoding Jiansheng Photovoltaic Technology Co., Ltd.
2. Boading Tianwei Yingli New Energy Resources Co., Ltd.
3. Beijing Tianneng Yingli New Energy Resources Co. Ltd.
4. Canadian Solar International Limited.
5. Canadian Solar Manufacturing (Changshu) Inc.
6. Canadian Solar Manufacturing (Luoyang) Inc.
7. Changzhou NESL Solartech Co., Ltd.
8. Changzhou Trina Solar Energy Co., Ltd.
9. Chint Solar (Zhejiang) Co., Ltd.
10. CSG PVTech Co., Ltd.
11. DelSolar Co., Ltd.
12. De-Tech Trading Limited HK.
13. Dongfang Electric (Yixing) MAGI Solar Power Technology Co.
Ltd.
14. Eoplly New Energy Technology Co., Ltd.
15. Era Solar Co., Ltd.
16. ET Solar Energy Limited.
17. Hainan Yingli New Energy Resources Co., Ltd.
18. Hangzhou Zhejiang University Sunny Energy Science and
Technology Co. Ltd.
19. Hendigan Group Dmegc Magnetics.
20. Hengshui Yingli New Energy Resources Co., Ltd.
21. Himin Clean Energy Holdings Co., Ltd.
22. Innovosolar.
23. Jiangsu Green Power PV Co., Ltd.
24. Jiangsu Jiasheng Photovoltaic Technology Co., Ltd.
25. Jiangsu Sunlink PV Technology Co., Ltd.
26. Jiawei Solar Holding.
27. Jinko Solar Co., Ltd.
28. Jinko Solar Import and Export Co., Ltd.
29. Jinko Solar International Limited.
30. Konca Solar Cell Co., Ltd.
31. Kuttler Automation Systems (Suzhou) Co. Ltd.
32. LDK Solar Hi-tech (Suzhou) Co., Ltd.
33. LDK Solar Hi-tech (Nanchang)
34. Leye Photovoltaic Science & Technology Co., Ltd.
35. Wuxi Suntech
36. Lixian Yingli New Energy Resources Co., Ltd.
AD
Exporting Company
AD (Exporter
Dumping Margin)
Yingli Energy (China) Company Limited/Baoding Tianwei Yingli
New Energy Resources Co., Ltd./Tianjin Yingli New Energy
Resources Co., Ltd./Hengshui Yingli New Energy Resources Co.,
Ltd./Lixian Yingli New Energy Resources Co., Ltd./Baoding
Jiasheng Photovoltaic Technology Co., Ltd./Beijing Tianneng
Yingli New Energy Resources Co. Ltd./Hainan Yingli New Energy
Resources Co. Ltd 1.82%
Canadian Solar International Limited 1.82%
Canadian Solar Manufacturing (Changshu) Inc. 1.82%
Canadian Solar Manufacturing (Luoyang) Inc. 1.82%
Changzhou Trina Solar Energy Co., Ltd./Trina Solar (Changzhou)
Science and Technology Co., Ltd. 1.82%
Chint Solar (Zhejiang) Co., Ltd. 1.82%
De-Tech Trading Limited HK 1.82%
Eoplly New Energy Technology Co., Ltd. 1.82%
Hangzhou Zhejiang University Sunny 1.82%
Energy Science and Technology Co., Ltd. 1.82%
Jinko Solar Import and Export Co., Ltd. 1.82%
LDK Solar Hi-tech (Nanchang) Co., Ltd. 1.82%
Ningbo Qixin Solar Electrical Appliance Co., Ltd. 1.82%
Renesola Jiangsu Ltd. 1.82%
Shanghai BYD Co., Ltd. 1.82%
Shenzhen Topray Solar Co. Ltd. 1.82%
Sopray Energy Co., Ltd. 1.82%
Star Power Inte rnational Limited 1.82%
Sun Earth Solar Power Co., Ltd. 1.82%
Yingli Green Energy Holding Company Limited 1.82%
Yingli Green Energy International Trading Company Limited 1.82%
Zhejiang Sunflower Light Energy Science & Technology Limited
Liability Company 1.82%
PRC-Wide Entity 238.56%
Source: Department of Commerce Source: Department of Commerce
Exhibit 78: China – 2012 US trade case summary – Chinese manufacturers to ship under
2012 trade case (or adjusted in 1H2014) 2014 trade case (applies to Chinese modules using cells from any country)
Preliminary
CVD
Preliminary
Net AD
Preliminary
Total DutyFinal CVD
Final AD*
not cash
effective
Final Total
Duty
Trina Solar 18.6% 10.7% 29.3% 49.8% 26.7%
ReneSola 26.9% 55.5% 82.4% 38.7% 78.4%
JinkoSolar 26.9% 55.5% 82.4% 38.7% 78.4%
Yingli 26.9% 20.4% 47.3% 38.7% 52.1%
JA Solar 26.9% 20.4% 47.3% 38.7% 52.1%
Canadian Solar 26.9% 20.4% 47.3% 38.7% 52.1%
HSOL 26.9% 20.4% 47.3% 38.7% 52.1%
Wuxi Suntech 35.2% 14.0% 49.2% 27.6% 52.1%
Others 26.9% 165.0% 191.9% 38.7% 165.0%
Gintech 27.6% 27.6% 27.6%
Motech 44.2% 44.2% 11.5%
All Others 35.9% 35.9% 19.5%
2012 Trade Case applies to Modules with All Chinese Made Content
CVD Net AD Total Duty
Trina Solar 16.0% 7.8% 23.8%
Suntech 14.8% 21.2% 36.0%
Yingli 15.2% 15.4% 30.7%
Canadian Solar 15.2% 15.4% 30.7%
JinkoSolar 15.2% 15.4% 30.7%
JA Solar 15.2% 15.4% 30.7%
Some others 15.2% 15.4% 30.7%
Others in China (includes ReneSola)15.2% 239.4% 254.7%
Chinese Solar
Manufacturers
Taiwanese Solar
Manufacturers
not
announced
yet
Chinese Solar
Manufacturers
Source: Company data, Credit Suisse estimates, CVD = countervailing duty, AD = antidumping duty
13 January 2015
2015 Solar Outlook 36
As a consequence of closing the 2012 loophole, Taiwanese solar cell producers
have seen a significant impact in mid-2014
Exhibit 79: Monthly cell sales declined 37% in mid-2014 Exhibit 80: Wafer sales down 2.0% m/m, up 10.9% y/y
3.6 3.6
4.75.1 5.1
5.9 6.0
6.67.0 6.9 7.0 7.1 7.1
6.8
7.5 7.6 7.5
5.9
5.24.8
5.6 5.4
6.67.1
-30%
-20%
-10%
0%
10%
20%
30%
-
1
2
3
4
5
6
7
8
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
2013 2014
m/m
cha
nge
%
Mon
thly
sal
es (
TW
D b
b)
Taiwan Cell players m/m Growth
2.8 2.93.2 3.3
3.4 3.53.7
4.1
3.6 3.7 3.73.9
3.74.1 4.1 4.2 4.3 4.3
4.1 4.24.5
4.64.4 4.3
-30%
-20%
-10%
0%
10%
20%
30%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
2013 2014
m/m
cha
nge
%
Mon
thly
sal
es (
TW
D b
b)
Taiwan Wafer players m/m Growth
Source: Company reports, Credit Suisse Estimates.
Note: Taiwan monthly sales tracker model available upon request.
Source: Company reports, Credit Suisse Estimates.
Other trade cases…
■ Canada solar module trade case: The Canada Border Services Agency (CBSA)
announced in December 2014 that it is investigating solar modules and laminates
originating in or exported from China. The Canadian International Trade Tribunal will
issue a decision by February 3, 2015, and the CBSA will issue a preliminary decision
by March 5, 2015.
■ Europe solar glass trade case: The European Commission announced in December
2014 that it is reopening its Chinese solar glass trade case upon a request from EU
ProSun that claimed to have sufficient evidence that the dumping margins were larger
than the investigation had previously found. In May 2014, the trade case closed with
anti-dumping duties of 42.1% on Chinese manufacturers (17.2-39.3% for those who
cooperated).
■ India glass trade case: The Indian government announced in December 2014 that it
is imposing anti-dumping duties on clear float glass imports from Saudi Arabia, the
UAE, and Pakistan. The duties vary from $58.22/ton to $165.07/ton. Clear float glass
is used for solar systems as well as in other industries.
■ China polysilicon import trade case: The China Ministry of Commerce announced
in August 2014 that they are effectively closing the prior loophole which allowed
polysilicon to be imported to China, used to create solar modules bound for export,
without paying any duties (called “process in trade” materials). The prior Chinese
import duties of 53-57% (US) and 2.4%+ (S. Korea) were circumvented by exporting
finished modules. US and Korea imports through processing trade could account for
~20-25% of consumption in China, by our estimate. In total, China imported 45,932
tons of polysilicon in 1H14 (74% was through processing trade). The import duties are
US - REC (57%), SunEdison (53.7%), Hemlock/Dow (53.3%); S. Korea – OCI (only
2.4% duties); Germany - Wacker already settled and is subject to an undisclosed
minimum price agreement.
13 January 2015
2015 Solar Outlook 37
PART III: Supply & Demand Update ■ Solar demand growth of 21% to 53 GWs: We expect the solar market to grow 21%
in 2015 to 53 GWs with continued geographic diversification. Europe's share declines
to 16%, Japan to 11% (from 18%) while the US outgrows the market to 16% due to
the anticipated ITC step-down in 2017 and growth in rooftop markets. China remains
~26% of demand with 33% growth to 14 GWs (from 10.6 GWs in 2014).
■ Oversupply gradually self-correcting, modest Cell capacity expansion warranted
for Tier I: Given announcements, we expect total cell capacity to increase by 3.5 GWs
in 2015 to 75 GWs (72 GWs excluding First Solar). Tier 1 capacity represents 41.4
GWs, suggesting the capacity expansion is warranted (part of tier II/III is obsolete).
With demand increasing ~9 GWs, the oversupply is gradually correcting.
■ Polysilicon price to remain in check with new Tier 1 capacity, no need to climb
the cost curve yet: With nearly 19% growth of Tier 1 poly capacity from announced
expansions, plus continued reduction in poly intensity (cell efficiency improvements),
we believe there is enough Tier 1 polysilicon of 58.7 GWs to keep poly below the next
step in the cost stack of ~$23/kg. Stable poly pricing is expected near term, with
downward pressure longer-term as new low-cost capacity is built.
Exhibit 81: Aggregate wafer and cell capacity today are enough to meet 2017 demand,
but we expect modest new capacity builds
25 28
35
42
50
59 61
48
54
61 64
65 65 65
58 63 63
69 72 74
74
39
51
58
66
80
89 95
-
10
20
30
40
50
60
70
80
90
100
110
2011 2012 2013 2014 2015 2016 2017
GW
Demand (ex thin film) Total wafer capacity (ex thin film)
Total cell capacity (ex thin film) Total poly capacity (ex thin film)
Source: Credit Suisse Clean Technology Equity Research.
Exhibit 82: Demand Forecasted to Grow 21% in 2015 Exhibit 83: Poly Cost Stack
1 3 4 11 11
14 16 18 20
1 2
3
5 6
8
13 7 9
1 1
2
6 8
6
4 4
5
0 1
1
1 1
2
3 5
7
17
18 15
8 8
8
9 9
9
2
3 5
5
11
14
17 21
24
21 GW
27 GW29 GW
36 GW
44 GW
53 GW
62 GW65 GW
74 GW
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
Dem
and
(GW
s)
Other markets
Europe
India
Japan
US
China
$17.0
$21.4
$0
$5
$10
$15
$20
$25
$30
$35
Po
ly c
ash
co
st $
/kg
2015 Poly Capacity
if 2
0% h
igh
er d
eman
d
2015
bas
e ca
se -
50 G
W
Source: Credit Suisse Clean Technology Equity Research. Source: Credit Suisse Clean Technology Equity Research.
13 January 2015
2015 Solar Outlook 38
Global Demand forecasted to grow 21% in 2015
We expect demand of 44 GW in 2014, increasing to 53 GW in 2015 and growing at CAGR
of 14.5% later this decade. We anticipate 2015 demand growth mainly from China, US,
India and emerging countries due to declining system costs, lower financing cost, policy
support, and increasing grid parity in many markets (yes, even with oil at current levels).
Exhibit 84: Global solar demand to grow at CAGR of 14.5%
21 27 29
36
44
53
62 65
74
86
99
-
20
40
60
80
100
120
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Other markets
Europe
India
Japan
US
China
CAGR of14.5%
Source: Credit Suisse estimates
Exhibit 85: Solar Demand by Country
Solar demand total, MW 2010 2011 2012 2013 2014E 2015E 2016E
China 530 2,900 4,200 11,300 10,590 14,000 16,100
US 949 1,750 3,313 4,751 5,735 8,342 12,733
Japan 960 1,200 1,864 6,026 7,834 6,000 4,000
India 22 590 790 1,020 1,000 2,000 3,000
Germany 7,400 7,500 7,634 3,304 3,500 3,500 3,500
UK 77 850 960 1,450 1,943 2,040 2,142
Rest of Europe 9,194 9,254 5,944 3,183 2,558 2,780 3,011
Saudi Arabia 25 25 25 500 1,300 1,690
Chile 2 6.7 400 800 840
Mexico 5 7 15 60 100 400 800
Brazil 5 17 200 250 300
Thailand 20 120 230 480 200 500 500
Canada 200 300 500 200 210 300 315
South Africa 300 300 300 300 300
Australia 385 700 700 610 847 932 1,025
Others 1,365 1,699 2,797 3,701 8,000 9,600 11,520
Global 21,107 26,900 29,291 36,417 43,916 53,044 61,775
growth rate 166.7% 27.4% 8.9% 24.3% 20.6% 20.8% 16.5% Source: Credit Suisse estimates
13 January 2015
2015 Solar Outlook 39
China – DG support and timely FiT payments are key
Growth driven by favorable FiT & policy support: We forecast solar demand in China
to increases to 14 GW in 2015 from 10.6 GW in 2014. While 2014 saw a modest decline
(from 11.3 GW in 2013) mainly due to a new policy/quota system that took effect in 2014,
which limited utility-scale solar. The policy was revamped in the fall and we expect that the
changes will enable growth into 2015. The country has a FiT in place for ground mount
and distributed generation (DG) installations.
The government targets 100 GW by 2020, implying annualized installation target of 12
GW/yr from 2015 to 2020. As is often the case, we believe the long-term target is
conservative. Policy support from a potential renewable portfolio standard could also help
drive utility scale solar demand. Solar today represents just 0.5% of total generation. A 5%
penetration would imply solar demand of ~190 GW.
Exhibit 86: China installation forecast Exhibit 87: China cumulative forecast
0.5
2.94.2
11.310.6
14.0
16.1
18.5
20.4
22.4 22.4
0.5%
0.7%
1.0%
1.3%
1.7%
2.0%
2.3%
2.6%
0.0
5.0
10.0
15.0
20.0
25.0
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Solar demand, GW Solar generation as % of total mix
411
1114
16
19
20
22
22
8
19
30
44
60
78
99
121
144
0.1%0.2%
0.5%
0.7%
1.0%
1.3%
1.7%
2.0%
2.3%
2.6%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
0
20
40
60
80
100
120
140
160
180
200
2010 2012 2014E 2016E 2018E 2020E
Sol
ar g
ener
atio
n as
% o
f tot
al m
ix
GW
New installed capacity Previous year installed capacitySolar generation as % of total mix
Source: EIA, Credit Suisse estimates Source: EIA, Credit Suisse estimates
Material Distributed Generation (DG) development: We see more material
development of DG in 2015 after a slow start in 2014. On a top-down note, we see the
government’s firm determination to develop DG as part of its long-term goal to improve its
energy mix. Given continued cost reductions, solar power generation costs should be
comparable with grid distribution prices. In particular, the State Council requests a step-by-
step development of utility-scale solar farms, but accelerating development of DG
demonstration areas, industrial parks, and public building. DG projects earn FiT of RMB
1.1-1.2 / kWh ($ 0.18-$0.19/kWh) implying unlevered IRRs of ~8.5% in eastern China.
Average residential electricity tariff is ~RMB 0.53/kWh ($0.09/kWh)
Project risks in China – curtailments and payment delays to be eased as market
matures: Installations in China face two important risks - (i) Curtailments in in western
provinces due to lack of strong demand in western China and due to limited grid
connections to transfer surplus generation from the less populated western provinces
which have higher solar insolation (~1500 hr/yr) and more suitable for ground mounted
utility scale projects to the heavily populated eastern provinces which have lower solar
insolation (~1300 hr/yr). We expect the interconnection issue to be solved by 2015/16 as
new power lines are built. (ii) FiT payment delay - all grid connected solar projects
immediately receive the normal electric energy payment of ~RMB 0.35/kWh from the
utilities, however the balance RMB 0.55-0.65/kWh subsidy part embedded in the FiT is
generally delayed by 6-12 months until the projects feature in NEA's list, post which they
immediately receive all payments.
13 January 2015
2015 Solar Outlook 40
The NEA’s supportive policy announced in Sep 2014 extends the definition of DG and
reduces counterparty risk by having the State Grid receive all extra power generated
(apart from self-consumed). This will unlock volume growth in our view. First, we may see
growing 20 MW-sized DG systems built on saline land, ponds and mudflats. Second, we
expect better funding support for DG projects. Some mid-small banks have already added
DG solar projects to their supported industry lists and it is likely that large banks and other
financial institutes will gradually follow in 2015.
Move to a Renewable Portfolio Standard (RPS): News sources reported in September
that China is working on an RPS structure which could be announced any month now. The
RPS would be made mandatory to provinces and power grids, surplus power would be
tradeable across obligated parties, and any deficit would be deducted from "energy saving
score" for the obligated parties. News sources expect a 2%-10% (5.5% on average) non-
hydro renewable mandate in 2015 increasing to 5%-13% by 2020 (8.5% on average). This
implies solar demand from RPS of 67 GW from 2015 to 2020 assuming 50% of RPS
energy is fulfilled by solar and energy consumption increases by ~3% per year. The
country generated 2.7% of its energy from non-hydro renewable sources in 2013.
Exhibit 88: China Solar Incentives
Source: Yingli Green Energy presentation.
Exhibit 89: China Solar FiT Payment Mechanism
Total 2014 FiT PPA Counterparty Electric PPA payment Subsidy Counterparty Subsidy Payment Guarantee Payment
Utilty ScaleRMB 0.90-
1.00/kWh
Secure land and sign PPA
with grid
RMB 0.35/kWh,
no delayNEA
RMB 0.55-0.65/kWh.
Delayed by 3-6 months
till projects show up on
NEA's approved list
DGRMB 1.1-
1.2/kWh
Sign PPA with roof
owner
RMB 0.70/kWh,
carries counterparty
default risk
NEA
RMB 0.42/kWh. Delayed
by 3-6 months till
projects show up on
NEA's approved list
RMB 1.00/kWh in case
PPA counterparty
defaults
Source: Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 41
China: UHV to support utility-scale solar in 2017
We estimate UHV transmission lines, upon large scale operation in 2017, could help utility-
scale solar power plant connection significantly. They would reach 144GW in
transmission/transformation capacity with 18 new lines in operation in 2017 (assuming
8GW transmission capacity for each line), well in position to alleviate wind/solar power
curtailment problem, as well as supporting China's plan of developing large-scale energy
bases in the North and Northwest. China has suffered from mismatch of power demand
and supply for so long, with supply concentrated in North and West and end-users in
South and East. UHV transmission lines, if successfully operated, can transmit excess
power (including wind, solar and coal-fired) from North and West to South and East. It
would encourage the grid to connect more renewables (esp. wind and solar) to alleviate
curtailment issue.
Figure 90: Power transmission source 2020 estimate
Energy base Major power type Chinese name Capacity (GW)
Three gorge Hydro 三峡 19.4
Jinsha River / Yarong River Hydro 金沙江/雅砻江 32.4
Other rivers in Sichuan Hydro 川电东送 22.2
Hydro total 74.0
Shanxi Coal 山西 42.2
North Shaanxi Coal 陕北 24.2
West Inner Mongolia Coal 蒙西 30.1
Xilin Gol Coal 锡盟 18.4
East Ningxia Coal 宁东 8.0
Hami Wind and solar 哈密 20.0
Zhundong (coal and wind) Coal 准东 18.0
Hulun Buir Wind 呼盟 8.0
Jiuquan Wind and solar 酒泉 15.0
Longbin Coal 陇彬 8.0
Shanghaimiao Coal 上海庙 8.0
Zhalute Wind and solar 扎鲁特 8.0
Baoqing Coal 宝清 16.0
Coal and wind total 256.1
Overseas 16.0
Total 346.1
Source: State Grid
13 January 2015
2015 Solar Outlook 42
Figure 91: UHV lines status (lines highlighted in grey to help solar curtailment in particular)
Name From To Status Operation
year
Technology Power source
type
Voltage Transmission
capacity (GW)
Zhebei-Fuzhou 浙北-
福州
Zhejiang Fujian Operation 2014 AC Connection line 1000 6.8
Hami South-
Zhengzhou哈密南-
郑州
Xinjiang Henan Operation 2014 DC Coal/solar/wind 800 8
Xiluodu-Jinhua溪落
渡-金华
Sichuan Zhejiang Operation 2014 DC Hydro 800 8
Xilin Gol-Nanjing锡
盟-南京
Inner Mongolia Jiangsu Construction 2016 AC Coal/solar/wind 1000 9
Huainan-Shanghai
淮南-上海
Anhui Shanghai Construction 2016 AC Coal 1000 12
Ningdong-Zhejiang
宁东-浙江
Ningxia Zhejiang Construction 2016 DC Coal/solar/wind 800 8
Jiuquan-Hunan 酒泉
-湖南
Gansu Hunan Preparation 2017 DC Wind 800 8
Shanghaimiao-
Shandong 上海庙-山
东
Inner Mongolia Shandong Preparation 2017 DC Coal/solar/wind 800 10
Shanxi-Jiangsu 山西
-江苏
Shanxi Jiangsu Preparation 2017 DC Coal 800 8
Mengxi-Hubei蒙西-
湖北
Inner Mongolia Hubei Preparation 2017 DC Coal/solar/wind 800 NA
Zhangbei-Nanchang
张北-南昌
Hebei Jiangxi Plan 2017 AC Wind 1000 NA
Mengxi-Changsha蒙
西-长沙
Inner Mongolia Hunan Preparation 2017 AC Coal/solar/wind 1000 NA
Yuheng-Weifang 榆
横-潍坊
Shaanxi Shandong Preparation 2017 AC Coal 1000 NA
Longbin-
Lianyungang陇彬-连
云港
Shaanxi Jiangsu Preparation 2017 AC Coal 1000 NA
Ya'an-Wannan 雅安-
皖南
Sichuan Anhui Plan 2017 AC Hydro 1000 NA
Mengxi-Tianjinnan蒙
西-天津南
Inner Mongolia Tianjin Preparation 2017 AC Connection line 1000 NA
Hami North-
Chongqing 哈密北-
重庆
Xinjiang Chongqing Preparation 2017 DC Coal/solar/wind 800 8
Zhudong-Sichuan准
东-四川
Xinjiang Sichuan Plan 2017 DC Coal 1100 NA
Hulun Buir-
Shandong 呼盟-山东
Inner Mongolia Shandong Plan 2017 DC Coal/wind 800 7.5
Xilin Gol-Henan 锡盟
-河南
Inner Mongolia Henan Plan 2017 DC Coal/solar/wind 800 NA
Shaanxi North-
Jiangxi陕西北-江西
Shaanxi Jiangxi Plan 2017 DC Coal 800 NA
Zhalute-Henan 扎鲁
特-河南
Inner Mongolia Henan Preparation 2018 DC Wind/solar 800 10
Source: State Grid, Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 43
US – Utility and DG markets to drive demand
US solar market demand is driven by an investment tax credit (ITC) which provide 30%
upfront subsidy and renewable portfolio standards or goals in 44 states. As a result
quarterly installation run rate has grown at CAGR of 61% since 1Q10. In the first three
quarters of 2014 the country has installed 3.9 GW of solar, up ~50% y/y. A similar
installation run rate in Q4 supports our demand estimate of 5.7 GW in 2014.
We expect demand to increase to 8 GW in 2015 due to declining system costs, lower
financing costs, and an acceleration before the ITC is reduced from 20% to 10% in 2017.
We expect a 17% CAGR installation growth rate till 2020. We anticipate DG penetration to
increase to 5% by 2020, but expect utilities to implement rate reforms which might reduce
solar economics over time, a natural evolution for a rapidly growing space.
Tax equity constraints are emerging (used to capture 30% ITC), but we believe it shouldn't
be a challenge for big players and might lead to accelerated market consolidation. We do
not expect any further panel price increases in US due to the ongoing trade case against
China, but instead we do expect prices could decline in future as more non-China duty-
free cell/module capacity is built in coming years.
Exhibit 92: Historical solar installations in US – residential
has grown steadily
Exhibit 93: We forecast annual installations to grow at
17% CAGR in the next 6 years
142 180 179
349 278
366 477
794
545
819 689
1,313
744
939 962
2,108
1,351 1,260
1,354
-
500
1,000
1,500
2,000
2,500
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
US
Sol
ar in
stal
latio
ns, M
W
Residential installations Non-Residential Utility
0.2 0.3 0.5 0.8 1.1 1.7 3.7 3.0 3.7
4.9 6.8
0.7 1.4 2.8
4.0 4.7
6.7
9.0
4.4
5.6
7.1
8.1
0.9 1.8
3.3
4.8 5.7
8.3
12.7
7.4
9.3
12.0
15.0
0
5
10
15
20
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
US DG demand, GW US non-DG demand, GW
Source: SEIA/GTM, Credit Suisse estimates Source: Credit Suisse estimates
Utility Growth Driven by RPS & Project Economics: Utility scale projects grew at a
CAGR of 113% since 1Q10. A total of 8.1 GW of utility scale solar PV projects have been
installed through 3Q14, the majority of which were large-scale projects awarded in 2010
and 2011 during the initial RPS driven procurement cycle. We expect RPS alone could
drive an additional ~79 GW of demand through 2030. Project economics are also
attractive in many states due to declining system costs and the 30% ITC subsidy. Solar
PPAs have declined over years and are now as low as ~$0.05-$0.06/kWh, comparable to
gas CCGT power plants with low utilization factors (ie peakers) with a long-term
commodity price assumption of ~$4.5/mmbtu. We expect demand to pick up in 2015/16 as
developers and utilities might rush to capture the 30% ITC subsidy which declines to 10%
starting 2017.
DG: >5% Penetration Rate Is Not Out of the Question: We estimate DG demand to
continue to grow at a CAGR of 36% through the end of this decade (2014-2020) due to
increased awareness among customers, declining panel/system prices, lower financing
costs, in addition to strong growth in the next two years before the 30% tax credit sunsets
by end of 2016. Our projections imply that by 2020, 4.6m households in the U.S. will have
adopted solar, or 5.6% of total rooftops. We believe that 44%-46% of rooftop customers
13 January 2015
2015 Solar Outlook 44
are viable (physical, credit, and economic) implying a residential DG TAM of ~215-225
GW. We expect the industry to consolidate due to meaningful economies of scale, as
there are significant overhead expenses associated with residential solar deployments
including fleet operations and sales/G&A expenses, and due to challenges accessing
financing.
The Year of Utility Rate Reform Proposals – A Consequence of Success: To date,
there have been numerous rate proceedings to reduce the implicit subsidy of net metered
energy (Utilities typically argue that power sent back to the grid ought to get credited at
wholesale rates plus a small premium, and solar companies argue that the solar should
get credited at the full retail rate or even at a premium given it often coincides with peak
demand times and does not result in transmission and distribution losses). If we are
correct in our penetration rate forecasts, we would anticipate more utilities implement
regulatory rate changes to reduce the economic viability of rooftop solar by petitioning for
a reduction in net metering rates or by imposing minimum bill requirements/fixed
surcharges for having solar systems installed.
India
India has connected more than 2.7 GW of solar projects till date while the country has
targeted to reach 100 GW by 2022. We forecast the country will install 1 GW in 2014, flat
compared to 2013. The slowdown in installation activity is as a result of uncertainty due to
Commerce Ministry's recommended import duty on solar panels form China and US which
was later ruled out in early September 2014 by the Finance Ministry. We expect
installation activity to pick-up in Q4 and expect demand of ~2GW in 2015. We forecast
demand to grow by a CAGR of 57% till 2020.
Exhibit 94: Indian installations to grow to 5.8% of total
energy generated by 2020
0.0 0.6 0.81.0 1.0
2.03.0
5.0
6.8
10.1
15.2
0.4% 0.6%0.9%
1.3%
2.0%
2.9%
4.1%
5.9%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Solar demand, GW Solar generation as % of total mix
Source: Credit Suisse estimates
Growth supported by national and state initiatives: The targeted growth is supported
by the central government-driven National Solar Mission (22 GW by 2022), which was
announced on January 2, 2015, that the government has set an investment target of
$100b by 2022 for solar alone (the previous target was $100b by 2022 for all renewables).
Programs driven by state governments primarily were aimed at increasing renewables as
part of the energy mix, lowering pollution, and more importantly, to meet the energy deficit
in the country. The country has a peak power deficit of ~4.7% in 2014 summer (~7 GW).
Project bids announced by the central/state governments offer either FiT, upfront subsidy
based on reverse bids (also called viability gap funding), or PPAs providing 10%-12%
unlevered returns. The central government has also set up a tax on coal (~$0.80/MT of
13 January 2015
2015 Solar Outlook 45
coal produced or imported) which would help fund ~21GW under the National Solar
Mission through upfront subsidies till 2022. Given the higher cost of oil and natural gas
imports, we calculate that utility scale solar is more economic than peaker natural gas
plants in India at today's cost. India does have low-cost base generation from coal, nuclear
and hydro, but the relevant cost comparison has to be made on low-utilization peaker
assets.
Dedicated solar parks to lower capex: The government announced in December 2014
that it would set up solar parks in western India which would have the necessary
infrastructure for projects (land, transmission line, etc), 366 MW available in Gujarat and
~500 MW in Rajasthan. The government targets to achieve 20 GW from 25 similar 500
MW parks in the next 5 years. We believe that easily available land, lower or negligible
transmission cost, and lower O&M for scouting new projects will help these projects bid
PPAs at $0.06/kWh (comparable to industrial retail rates) on an unsubsidized basis to get
~7% unlevered project returns at today's cost structure (or 10% IRR for PPA of
~$0.08/kWh). Recent PPAs in other states were bid at ~$0.10-$0.11/kWh. Utility scale
projects are being built India for a capex of ~$1.30-$1.50/watt compared to ~$1.30/watt we
have seen in China and much lower than ~$1.75-$2/watt in developed economies. The
lower capex is as a result of no trade import duties, lower labor and land costs, and faster
project turnaround.
Domestic content encouraged through preferred funding: India recently announced in
December 2014 that it plans to allocate $158m to state run generation companies to build
1 GW of utility scale solar projects in the next three years. Though a $0.158/watt subsidy
increases unlevered project IRR by 100 bps. However, the support would be available for
domestically produced cell and modules.
Exhibit 95: India state-wise solar project tracker
National
policy
State
policy
PPA/RPO
or others Total
National
policy
State
policy
PPA/RPO
or others Total
Rajasthan 440 25 263 728 375 50 30 455
MP 175 139 314 250 120 3 373
Gujarat 860 48 908 40 5 10 55
Maharashtra 38 248 286 35 78 113
Karnataka 5 40 12 57 10 120 4 134
TN 5 98 103 10 9 19
AP 32 74 38 144 10 150 15 175
Telangana 15 21 36 130 52 182
Odisha 5 8 13 26 20 51 71
Chattisgarh 6 6 30 - 30
WB 7 7 - -
Jharkhand 32 32 - -
UP 5 26 31 110 15 125
Delhi 4 4 1 - 1
Uttarakhand 5 5 - -
Punjab 7 23 250 -
Haryana 5 8 1
Total 537 1,202 2,730 750 966 1,984
Operational Under construction
Source: Bridgetoindia, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 46
Europe
We expect Europe to install 8 GW of solar in 2014 and grow only modestly to 8.3 GW in
2015. Longer-term growth is limited given market saturation, limited solar irradiance – we
forecast ~4% CAGR.
No more one-time wonder: European countries have seen many markets pop-up in the
past due to strong FiTs resulting in higher IRRs, however we do not model any more
countries following this path due to higher subsidy burdens and grid impact. In the recent
past, Romania and Greece installed >1 GW in 2013 due to a higher FiT followed by
installations declining to negligible levels. Historically, we have seen similar rushes in the
Czech Republic (1.3 GW in 2010), Spain (2.6 GW in 2008), and Italy (6.2 GW in 2011).
Key solar markets trimming subsidies: As solar demand has grown, many countries
have satisfied or will soon satisfy the European Commission's National Renewable Energy
Action Plan's (NREAP's) solar targets and several key countries have announced plans to
adjust their subsidy programs.
Germany: With the highest solar penetration in the world (8.0% of electricity
generated from solar in 2014), Germany plans to phase out the FiT by 2018 for
new installations. The FiT will be replaced with a market premium that is already
in effect for systems >500 kW and a self-consumption charge of €0.044/kWh will
be imposed for systems >10 kW.
Spain: In 2013 following four FiT cuts, Spain ended its FiT program for new
installations. In July 2014, Spain passed a policy guaranteeing a 7.4% IRR for
solar projects, in which the government will pay an incentive to projects that do
not meet this threshold. The details have not been finalized and FiT payments will
continue until the IRR policy goes into effect, at which time any FiT overpayments
since the IRR policy was passed will be withdrawn.
Italy: In June 2013, Italy also announced the end of its FiT program for new
installations because the program's budget cap of $8.9b was reached. An
alternative subsidy program has not been announced. In August 2014, Italy
passed a retroactive FiT cut to systems >200 kW. Operators must choose
between (1) a 6-8% cut to the FiT rate, or (2) cutting the FiT rate by 17-25% and
extending the FiT payment period from 20 to 24 years. On December 31, 2014,
Italy announced that installations >3 kW will be charged a solar fee of €30/year.
Installations between 20 and 500 kW will also be charged a fee of €1/kWh.
Markets still viable – shifting segment mix: Despite subsidy cuts in many markets, we
forecast that Europe will install 8.3 GW of solar in 2015 with the highest demand in
Germany (3.5 GW) and the UK (1.9 GW).
Germany: In Germany, FiT rates have declined from a peak of €0.62/kW in 2004
to €0.09-0.13 today. Falling FiT rates makes self-consumption more economically
attractive, encouraging the adoption of smaller-scale systems. Furthermore, the
FiT will be phased out by 2018 and replaced with a market premium starting with
large-scale systems (>500 kW). Though a self-consumption charge would
decrease the economic benefit of a residential system, the current charge is only
for systems >10 kW and the average size of a residential system in Germany is 7
kW. We expect these policy changes to drive residential solar installations in the
next few years, but we note that a self-consumption charge on systems <10 kW
would dampen residential demand.
UK: The UK originally planned to remove government incentives (the Renewables
Obligation Certificate, ROC) for solar projects >5MW in March 2015, but decided
to extend the ROC for another year until March 31, 2016. At the end of 3Q14,
31.5% of cumulative capacity was >5 MW, most of which was installed in 2014.
13 January 2015
2015 Solar Outlook 47
Of the 1.5 GW of capacity installed by the end of 3Q14, 64.5% was >5 MW
(82.7% of which was ROC-accredited).
Exhibit 96: FiT Rates in Major European Markets
Residential Utility-Scale Residential Utility-Scale Residential Utility-Scale Residential Utility-Scale Residential Utility-Scale
FiT (local
currency/kWh)€ 0.1269 €.0.0918-0.1274
BIPV: €0.2738
Simplified BIPV: €0.1395
Non-BIPV: €0.0698 Non-BIPV: €0.0698
£0.1132-
0.1249 £0.0638
FiT ($/kWh)
$ 0.1553 $0.1399-0.1559
BIPV: $0.3351
Simplified BIPV: $0.1707
Non-BIPV: $0.0854 BIPV: $0.0854
$0.1766-
0.1949 $0.0995
Utility Rate ($/kWh) $ 0.34 $ 0.23 $ 0.22 $ 0.13 $ 0.26 $ 0.25 $ 0.19 $ 0.15 $ 0.30 $ 0.22
Sunhours/yr (net of
AC/DC derate)
Comments
1,086 1,086
N/A N/A
Self-consumption charge of €0.044/kWh
(>10 kW systems). Phase out the FiT by
2018 for new installations and replace with
a market premium.
June 2013: FiT program closed to new
installations. Reached budget cap of
$8.9b.
July 2013: FiT program closed. Existing
systems will be paid under the FiT until the
incentive system is replaced.
1,365 1,086 1,474
Retroactive FiT changes (>200 kW
system): (1) either cut FiT rate by 6-
8% or (2) cut FiT rate by 17-25% and
extend FiT period from 20 to 24 yr.
Subsidies for projects >5 MW
will be cut in March 2015
(with a one-year grace period).
New policy guarantees a 7.4% IRR on
projects and will pay an incentive to
projects that don't meet this threshold.
Germany France Italy UK Spain
Source: Company data, Credit Suisse estimates
Chile
We forecast Chile will install 400 MW of solar projects in 2014, vs 8.8 MW total installed
capacity as of 2013. Going forward, we forecast demand to grow at a CAGR of 16.9%
through 2020 driven by economics and renewable targets.
Higher electricity cost and sunshine puts solar below grid parity: Utility scale solar
projects are economic in Chile with unlevered project IRRs of ~15% due to higher
electricity cost in the country (>$0.15/kWh), and higher sunshine (2200 hours/year, 9-10%
higher than in southwest US). Chile has a higher marginal electricity production cost due
to an increasing mix of imported fossil fuels over the last decade, and a declining
contribution from hydroelectric plants. The marginal cost of electricity production was
>$0.15/kWh for SIC, the major power grid in the country which generates/consumes 75%
of electricity. Solar projects can either sign long term PPA contracts with industrial
customers (many of them in the mining sector) or operate as merchant projects and sell at
spot market rates to the grid.
Growth opportunity from renewable mandates: The government mandates 20% of
renewable energy by 2025. Assuming 50% wind/50% solar we calculate potential solar
demand of ~4.6GW over the next 10 years, implying a CAGR of 22%. Our base case
growth assumption implies that Chile would be able to achieve ~11% of electricity
generation from Solar by 2020. The central regulator forecasts that total electricity demand
would increase at CAGR of 6%-7% till 2020 resulting in ~100,000 GWh demand by 2020.
3% of electricity generated comes from non-hydro renewable sources today (34% hydro
and 63% fossils).
Project pipeline: The country has 1,048 MW solar projects under construction as of
November 2014, of which 252 MW projects are expected to come online in 2014, 719 MW
in 2015, and 27/50 MW projects in 2016/17. Note that this excludes SunEdison's 350 MW
project win announced in Dec 2014 and which is expected to come online in 2016/17.
Exhibit 97: Chile Project Pipeline Chile project pipeline under construction as of Nov 21, 2014
Total 2014 2015 2016 2017 2018 2019 2020
Solar PV 1,048 252 719 27 50 - - -
Hydro 1,095 36 83 15 136 681 - 144
Coal 611 - 139 472 - - - -
GNL 517 - - 517 - - - -
Natural Gas 293 - 50 - 243 - - -
Diesel 132 - 132 - - - - -
Solar Thermal 110 - - 110 - - - -
Wind 61 - 61 - - - - -
Total 3,867 288 1,184 1,141 429 681 - 144
Solar PV as % of total 27.1% 87.6% 60.7% 2.4% 11.7% 0.0% 0.0% Source: Company data, Credit Suisse estimates Note, this excludes SunEdison's 350 MW 20106/2017 project bid wins announced in Dec 2014
13 January 2015
2015 Solar Outlook 48
Emerging Markets
We highlight a few of the important emerging markets which have great solar potential due
to higher sunshine and growth in the medium-term due to government targets for solar
installations.
Mexico – energy reform may provide upside
Mexico's energy ministry (SENER) targets 6 GW of solar by 2020, vs 112 MW of total
installed capacity as of 2013 which represents less than 0.1% of electricity generated in
the country. We forecast demand to grow from 60 MW in 2013 to 100 MW in 2014 and
400 MW in 2015. As of Sep 30, 2014, Mexico had ~504 MW under construction (mostly
due in 2015), and 1.2 GW of projects in the pipeline. Demand in the country is mainly
driven by the 6 GW national targets, and a 2012 law mandating 35% of electricity
generation from renewable energy sources (includes hydro) by 2024 (vs ~14% today). We
forecast demand to grow at CAGR of 70% till 2020. We expect incremental solar demand
of 14 GW if solar contributes 50% of renewables needed to meet the 35% by 2024. We
expect upside to out demand estimates from the anticipated power market reforms which
would open electricity generation and sales to private companies thereby spurring more
solar installation in the sunny pockets.
Mexico's higher sunshine (average ~6 hours/day - comparable to higher sunshine regions
in southwest US) and higher residential electricity prices of ~$0.20-0.22/kWh for higher
consumption users (>150 kWh/month) makes it an attractive market for DG residential
installations offering IRRs of low-mid teens assuming system cost structure seen in US
today. However, the country doesn't allow private PPAs yet (or solar leasing) making the
upfront solar capex a deterrent DG growth. The country allows projects to sell energy
under a PPA to the energy grid, or projects can be used for self-supply either through net
metering at premises, or virtual net metering for generation assets not located on-site.
Some customers and generators form JV structures in order to strike a PPA but qualify
under the self-supply clause as well.
Exhibit 98: Mexico solar installation growth Exhibit 99: Brazil solar installation growth
0.0 0.0 0.0 0.1 0.10.4
0.8
1.5
2.0
2.2
2.4
0.1% 0.1%0.4%
0.9%
1.8%
2.8%
3.9%
5.0%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Solar demand, GW Solar generation as % of total mix
0.0 0.0 0.0 0.0 0.2
0.3
0.3
0.4
0.4
0.5
0.6
0.0%
0.1%
0.2%
0.2%
0.3%
0.4%
0.6%
0.7%
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Solar demand, GW Solar generation as % of total mix
Source: Credit Suisse estimates Source: Credit Suisse estimates
13 January 2015
2015 Solar Outlook 49
Brazil
The country targets 3.5 GW of solar installations by 2023 as part of its energy expansion
plan announced in 2014. Recently the country announced auctions of We expect 200 MW
of installations in 2014 and growing at CAGR of 21% thereafter. Brazil's national
development bank (BNDES) also announced funding for projects which qualify domestic
content requirements.
As part of its solar installation target, the country announced auctions for 1048 MW of
projects which would be built over the next 2-3 years. SunEdison and other companies
won bids with PPA rates as low as $0.09/kWh which provides unlevered returns of high
single digits, we estimate.
South Africa
We expect solar installations to grow in South Africa due to the government's national
targets for renewable generation capacity and the need to diversify from coal generation
assets. The country is dependent on coal for 92% of its energy today. We expect the
country to install ~300 MW projects per year as per its 2010-2030 PV integrated plan to
achieve 15% generation from solar PV by 2030.
The country announced bids for ~3.9 GW of renewables till 2013 of which ~1.48 GW were
awarded to solar PV. Projects were bid in the last round for ~$0.10/kWh which can provide
IRRs of ~11%-12%. The initial bids required local content of ~38%-53% which spurred
companies like JKS, JASO among others to open up PV module manufacturing plants.
South Africa also plans to award ~3.6 GW of renewable capacity through competitive bids
in 2015.
Exhibit 100: South Africa's solar demand is expected to
remain stable this decade
Exhibit 101: Thailand solar installations
0.0 0.0
0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
0.5%
0.8%
1.0%
1.2%
1.4%
1.6%
1.7%
1.9%
0.0
0.1
0.1
0.2
0.2
0.3
0.3
0.4
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Solar demand, GW Solar generation as % of total mix
0.0
0.1
0.2
0.5
0.2
0.5 0.5 0.5 0.5 0.5 0.5
1.0%1.2%
1.6%
2.1%
2.4%
2.8%
3.1%
3.3%
0.0
0.1
0.2
0.3
0.4
0.5
0.6
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E
GW
Solar demand, GW Solar generation as % of total mix
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Thailand
The country installed 480 MW in 2013 and installed ~91 MW in 1Q14. Installation slowed
down in rest of 2014 due to political unrest but have resumed in Q4 due a stable regime in
power. We expect total 2014 installations of ~200 MW. Going forward we expect the
country to install ~500 MW per year. The country's new Alternative Energy Development
Plan (AEDP) will increase targeted solar capacity by at least 2 GW and install ~5GW by
2030. Prior to 2011, most PV applications in Thailand were off-grid applications for remote
and rural electrification, such as the Solar Home System (SHS) scheme. The government
then introduced FiT in 2013 ranging THB 6.16-6.96/kWh ($0.19/kWh for large projects and
$0.21/kWh for small <10kW projects). Given higher sunshine in the country (~5.23
hours/day on average) ground mount projects imply project returns of mid-teens, higher
13 January 2015
2015 Solar Outlook 50
than the 9%-12% returns seen by gas-fired & wind arm power producers. We see upside
in installations if the country increases the amount of solar capacity required to meet its
long term target of 25% energy consumption from alternative energy sources. All
alternative energy sources accounted for just ~11.3% of total energy consumption as of
1Q14 and we estimate solar accounted for ~1%.
Middle East
Markets in the Middle East are highly lucrative for solar projects due to one of the highest
sunshine globally, and a high reliance on fossil fuels (mostly crude oil & some natural gas)
which makes renewable expansion imperative to lower emissions, diversifying energy
sources for power, and to allow for oil to be exported for sale. Saudi Arabia has
announced solar target of 16 GW of solar PV by 2032 (and 25 GW of solar thermal) to
meet the growing power needs. However, do note that electricity production from crude
below $60/bbl is economical against solar in the Middle East, especially since the region
has the ability to directly burn crude oil for power generation.
13 January 2015
2015 Solar Outlook 51
Supply: Polysilicon, Wafer/Cell Capacity Outlook
Capacity expansions were limited in 2014 due to construction delays for major polysilicon
expansions, over-supplied wafer, cell, and module segments globally, and uncertainty
around trade tariffs between different countries. We expect modest expansions to resume
in 2015.
Polysilicon
Exhibit 102: Tier-1 poly capacity is enough to meet global solar demand
Supply/Demand Summary 2011 2012 2013 2014 2015 2016 2017
Total poly capacity 288,143 320,560 333,260 368,210 430,070 470,210 491,060
(-) semi demand (from msi data, assuming 3gm/sq ini) 27,109 27,073 27,182 29,356 31,705 34,241 36,980
Total poly capacity available for solar 261,035 293,487 306,078 338,854 398,365 435,969 454,080
polysilicon usage per watt, gm/watt 6.7 5.8 5.3 5.1 5.0 4.9 4.8
Total solar poly capacity (ex semi) MW 39,245 50,539 57,751 66,442 79,673 88,973 94,600
Thin Film supply, FSLR MW 1,980 1,591 1,900 2,300 2,700 3,100 4,100
Total solar capacity (poly + thin film), MWs 41,225 52,130 59,651 68,742 82,373 92,073 98,700
Tier-1 capacity (poly + thin film), MW 30,166 37,396 41,998 48,044 58,661 65,837 71,917
Demand MW 26,900 29,291 36,417 43,916 53,044 61,775 65,302
Demand (ex thin film) MW 24,920 27,700 34,517 41,616 50,344 58,675 61,202
Total wafer capacity MW (ex thin film) 47,535 54,174 61,211 64,077 66,992 68,821 70,877
Total cell capacity MW (ex thin film) 57,628 62,646 63,342 69,056 72,176 73,676 74,476 Source: Company data, Credit Suisse estimates
Exhibit 103: Poly capacity is expected to increase to meet
demand
Exhibit 104: Aggregate wafer and cell capacity today are
enough to meet 2017 demand, but we expect modest new
capacity builds
25 28
35
42
50
59 61
28
36 40
46
56
63
68
-
10
20
30
40
50
60
70
80
2011 2012 2013 2014 2015 2016 2017
GW
Demand (ex thin film) MW
Tier I solar poly capacity (ex semi) MW
25 28
35
42
50
59 61
-
10
20
30
40
50
60
70
80
90
100
110
2011 2012 2013 2014 2015 2016 2017
GW
Demand (ex thin film) Total wafer capacity (ex thin film)
Total cell capacity (ex thin film) Total poly capacity (ex thin film)
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Major polysilicon capacity additions: We expect polysilicon capacity to expand by ~38k
MT in 2015 and ~40k MT in 2016 as companies build new greenfield and complete
previously announced expansions which were delayed due to an unfavorable pricing
environment. SunEdison is expected to ramp-up production at its 13.5k MT FBR facility in
South Korea. GCL's new FBR facility will add ~7k MT in 2015 and additional 18k MT in
2016. OCI is expected to add 10k MT as it debottlenecks existing facilities. Tokuyama's
new facility in Malaysia will add ~7k MT in 2015 and additional 4kMT in 2016. Wacker will
add 4k MT in 2015 due to debottlenecking and additional 4k MT in 2016. Wacker's new
plant in Tennessee will also add 20k MT in 2016 ramping up to full capacity by 2017.
13 January 2015
2015 Solar Outlook 52
China based Daqo is expected to double its capacity to ~12k MT in 2015 and plans to
build additional facilities to increase capacity to 25k MT in the medium term (though the
company has not given a time line). Note that this does not include large-sized polysilicon
plants under discussion - SunEdison in China (20-30 k MT) and Middle-East, REC silicon
in Saudi Arabia (20k MT) - due to lack of firm decisions. Note that our polysilicon supply
forecast for Hemlock declines vs prior est due to the company’s decision to permanently
shut down the 10k MT plant in Clarksville, Tennessee in December 2014, after indefinitely
delaying plant opening in January 2013. We now forecast the company’s annual capacity
to remain stable at ~32k MT.
Exhibit 105: Polysilicon Capacity Forecasted to Grow 17% in 2015
Polysilicon Capacity (MT) 2011 2012 2013 2014 2015 2016 2017
Tier 1 Suppliers
Hemlock Semiconductor 36,000 36,000 32,000 32,000 32,000 32,000 32,000
Wacker Polysilicon 32,000 52,000 52,000 52,000 56,000 75,000 80,000
REC Silicon 17,500 17,500 17,500 20,000 20,000 20,000 23,000
Tokuyama 9,200 9,200 17,200 19,500 26,860 31,000 31,000
Daqo 4,300 4,300 5,000 6,150 12,150 12,150 25,000
SunEdison 15,000 9,000 9,000 19,000 22,500 22,500 22,500
OCI 35,583 42,000 42,000 42,000 52,000 52,000 52,000
GCL Silicon 65,000 65,000 65,000 72,000 90,000 97,000 97,000
Tier 1 Capacity 214,583 235,000 239,700 262,650 311,510 341,650 362,500
Tier 1 Growth 46.3% 9.5% 2.0% 9.6% 18.6% 9.7% 6.1%
Tier 2 Capacity 38,300 44,300 52,300 62,300 75,300 85,300 85,300
Tier 3 Capacity 37,260 43,260 43,260 43,260 43,260 43,260 43,260
Total Capacity 290,143 322,560 335,260 368,210 430,070 470,210 491,060
% growth y/y 39.2% 11.2% 3.9% 9.8% 16.8% 9.3% 4.4% Source: Company data, Credit Suisse estimates
Rise of the FBR: Low cost polysilicon FBR technology will see significant capacity
additions in 2015/16 (due to REC silicon, SunEdison and GCL as mentioned above) at
lower production costs. SunEdison plans to reduce silicon cost by 50% to $0.05/watt in
2016 vs today's average polysilicon cost of ~$0.11/watt. As a reminder other companies in
the industry use the Siemens process.
Exhibit 106: Tier-1 poly capacity expected to grow in line
with demand
Exhibit 107: Growth seen across major Tier-1 polysilicon
manufacturers
-
10
20
30
40
50
60
70
80
2011 2012 2013 2014 2015 2016 2017
GW
Demand (ex thin film) MW
Tier I solar poly capacity (ex semi) MW
CAGR of 14%
323 335 368
430
470 491
-
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017
Pol
ysili
con
capa
city
, kM
T
Tier 3 Capacity
Tier 2 Capacity
GCL Silicon
OCI
SunEdison
Daqo
Tokuyama
REC Silicon
Wacker Polysilicon
Hemlock Semiconductor
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 53
Exhibit 108: Low price FBR leads to lower cleared cost of polysilicon
$17.0
$21.4
$0
$5
$10
$15
$20
$25
$30
$35
Po
ly c
ash
co
st $
/kg
2015 Poly Capacity
if 2
0% h
igh
er d
eman
d
2015
bas
e ca
se -
50 G
W
Source: Credit Suisse Clean Technology Equity Research.
Solar Cell/Module Supply
Cell & Wafer are oversupplied on aggregate, but trade wars will warrant new builds:
We forecast that cell and wafer capacities remain oversupplied (69 GW and 64 GW
respectively in 2014) and enough to meet demand through 2017. We tabulate 7.5 GW of
new cell capacity builds that were announced in 2014, most of which is expected to come
online after 2015. Cell capacity growth in China is limited to expansion at current facilities;
while new entrants like SCTY, Qatar Solar Energy are building new manufacturing plants.
Capacity growth in China limited by government control and trade wars: Cell/wafer
capacity growth in China is limited due to the country's effective restriction on new builds
(policy has restricted credit for new builds and encouraged consolidation instead).
Capacity growth in China was also limited by the US import duty which penalized module
imports from China using cells made in or outside China. We anticipate major
manufactures to announce cell expansion plans outside China to circumvent the import
duty, but will wait till the US ITC's final determination on import duty expected in January
2015 (scheduled for Jan 29th) and the potential changes that could be made to the 2012
trade case (finalized April/May 2015).
Domestic content requirements are here to stay: Domestic content requirements led to
companies build module capacity in Canada (CSIQ) and South Africa (JKS, JASO).
Though WTO ruled against FiT in Canada which discriminates based on domestic content,
many countries are now providing access to low-cost financing for products made
domestically. For example, India plans to gift-fund 1 GW of projects with an indirect
subsidy of $0.158/watt available only for domestic cell/module manufacturers, Brazil's
state solar auctions can avail favorable lending rated from Brazil's national development
bank (BNDES) only if domestic content requirement is satisfied.
13 January 2015
2015 Solar Outlook 54
Exhibit 109: Wafer and cell capacity to remain
oversupplied, but improving
Exhibit 110: Cell capacity expansion in China, new builds
in Southeast Asia and emerging markets
25 28
35
42
50
59 61
48
54
61 64
67 69 71
58 63 63
69 72 74 74
-
10
20
30
40
50
60
70
80
2011 2012 2013 2014 2015 2016 2017
GW
Demand (ex thin film)
Total wafer capacity (ex thin film)
Total cell capacity (ex thin film)
64 65
71 75 77
-
10
20
30
40
50
60
70
80
90
2012 2013 2014 2015 2016
Cel
l cap
acity
, GW
Others
Southeast Asia
Korea
Japan
Taiwan
China
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Exhibit 111: 7.5 GW of Cell Capacity Expansion Announced in 2014
Company
Country (majority
of production)
Cell expansion
announced
Expansion Announcment
Date 2014E 2015E 2016E
TSL China 1000 Aug-14 2,500 3,000 3,000
SolarCity USA 1000 Sep-14 - - 1,000
SPWR Philippines 2310 Nov-14 1,200 1,500 2,000
JKS China 500 Jun-14 2,000 2,000 2,000
FSLR Malaysia 460 Nov-14 2,300 2,700 2,700
Qatar Solar Energy Qatar 300 Jun-14 300 300 300
JASO China 300 Aug-14 2,800 2,800 2,800
Indosolar India 250 Jun-14 450 450 450
Suniva USA 200 Jul-14 370 370 370
Mission Solar Energy USA 100 Jul-14 100 200 200
SolarWorld USA/Germany 100 Oct-14 1,430 1,530 1,530
Vikram Solar India 250 Nov-14 - - 250
ERDM Solar Mexico 110 Dec-14 60 170 170
CSIQ China 400 Nov-14 1,580 1,900 1,900
Other China 200 May-14 1,500 1,500 1,500
Other Tier-1 (no expansion announcements) 18,885 18,885 18,885
Total Tier-1 and new players, MW 7,480 35,475 37,305 39,055
Others, MW 35,881 37,571 37,721
Total capacity, MW 71,356 74,876 76,776
Capacity added, MW 1,830 1,750
Cell capacity (2014 + any expansion)
Source: Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 55
Appendix
Geographic Exposures
Exhibit 112: 3Q14 Geographic Exposure of Solar Manufacturers
Geographic exposure as % of MW
China Japan Rest of Asia Americas Europe Other Notes
JASO 34.8% 36.0% 10.4% 4.7% 9.2% 4.9%
JKS 55.0% See Rest of Asia 8.0% 16.0% 14.0% 7.0% Americas includes South Africa
SOL 10.0% 7.0% See other 31.0% 39.0% 13.0%
TSL 34.5% 23.3% 7.2% 23.9% 3.1% 7.9% Americas includes US only
Geographic exposure as % of Revenues
China Japan Rest of Asia Americas Europe Other Notes
SPWR See Rest of Asia See Rest of Asia 15.1% 78.1% 6.7% See Europe Europe includes EMEA region
YGE 27.0% 22.0% See other 17.0% 15.0% 19.0% Americas includes US only Source: Company data, Credit Suisse estimates
Material Changes
Below we summarize material changes.
Trina Solar (TSL): We mark to market external sourcing cost, slight reduction in opex and
a more stable view on operating leverage into 2015-16 given the low profit margin the EPS
change is more visible. Even though our profit margins increase by 174/178 bps in
2015/16 respectively, our EPS increases to $0.85/$0.95 from $0.32/$0.42 in 2015/16.
We reduce our Target Prices for ReneSola (SOL) and Yingli Green Energy (YGE) to
reflect valuation changes; our estimates remain unchanged.
Price Price Rating* Target Price Year EPS EPS FY1E EPS FY2E EPS FY3E
Company ccy 12 Jan 15 Prev. Cur. Prev. Cur. End Ccy Prev. Cur. Prev. Cur. Prev. Cur.
ReneSola Ltd (SOL) US$ 1.28 — U 3.25 1.75 Dec 13 US$ — (0.37) — 0.05 — 0.34
SunPower Corp. (SPWR) US$ 25.51 N O — 35.00 Dec 13 US$ — 1.27 — 1.29 — 1.73
Trina Solar Ltd (TSL) US$ 8.68 — N — 16.00 Dec 13 US$ — 0.72 0.32 0.85 0.42 0.95
Yingli Green Energy Holding (YGE)
US$ 1.99 — U 3.50 2.00 Dec 13 US$ — (0.88) — (0.30) — (0.35)
*O – Outperform, N – Neutral, U – Underperform, R – Restricted [V] = Stock considered volatile (see Disclosure Appendix).
Source: Company data, Credit Suisse estimates.
1
3 J
an
ua
ry 2
01
5
20
15
So
lar O
utlo
ok
5
6
Exhibit 113: Global Solar Comps Table Valuation Growth
Price Currency Mkt. Cap P/E EV/EBITDA EV/Revenues 2012-2015 CAGR
1/12/2015 (USD$m) 2013 2014 2015 2013 2014 2015 2013 2014 2015 Rev EBITDA EPS P/B Lev Rating, Target, Analyst
Poly/Wafer
OCI (10060) 72,600.00 KRW $1,579 nm nm 18.3x 10.2x 7.2x 5.3x 1.4x 1.3x 1.3x 2% 5% nm 0.6x - O $ 145,000.00 A-Hyung Cho
REC Silicon (REC) 1.82 NOK $576 -3.7x -18.2x 60.7x 11.0x 4.0x 5.2x nm nm nm (20)% 35% (134)% 0.5x -
Renesola (SOL) 1.32 USD $737 nm nm 26.7x 10.1x 9.3x 6.9x 0.6x 0.6x 0.6x 18% nm nm 0.5x - U $ 1.75 Patrick Jobin
SAS (5483) 53.20 TWD $965 64.9x 19.2x 15.9x 8.0x 7.0x 6.1x nm nm nm 19% 156% (204)% 0.8x -
Shin-etsu Chemical (4063) 7,758.00 JPY $28,012 29.6x 25.0x 20.8x 10.5x 9.5x 8.4x 2.4x 2.2x 2.1x 7% 11% 15% 1.2x - O $ 9,000.00 Masami Saw ato
Sumco (3436) 1,789.00 JPY $3,853 644.0x 28.8x 15.9x 17.2x 14.8x 10.8x 3.8x 3.2x 2.9x 5% 11% 104% 1.4x - U $ 1,400.00 Masami Saw ato
Tokuyama Corporation (4043) 245.00 JPY $716 nm nm nm 7.9x 7.0x 6.4x 1.0x 0.9x 0.9x 6% 10% nm 0.5x - N $ 260.00 Masami Saw ato
Wacker Chemie (WCH) 85.36 EUR $5,349 nm 312.1x 20.3x 8.0x 5.2x 5.6x 1.2x 1.1x 1.0x 4% 7% 143% 0.8x - N $ 95.00 Mathew Waugh
GCL poly (3800) 1.83 HKD $3,655 nm 13.7x 9.1x 12.0x 6.6x 5.3x 2.5x 1.9x 1.7x 19% 90% nm 0.8x - O $ 2.50 Baiding Rong / Edmond Huang
Daqo (DQ) 23.89 USD $214 -3.3x 8.1x 4.2x 13.2x 8.3x 4.8x nm nm nm 36% 69% (193)% 0.7x -
Group Average 122.0x 49.8x 21.3x 10.4x 7.7x 6.5x 1.9x 1.6x 1.5x 10% 44% (45)% 0.8x
Wafer/Cell/Module
Comtec Solar (712) 1.06 HKD $190 35.3x 26.5x 13.3x 12.3x 8.9x 6.4x - - - 10% 34% (200)% 0.6x -
Jinko Solar (JKS) 18.59 USD $574 8.7x 5.6x 4.6x 10.4x 6.8x 4.8x 1.4x 1.0x 0.9x 36% nm nm 0.6x - O $ 45.00 Patrick Jobin
Trina Solar (TSL) 8.77 USD $808 nm 12.2x 10.4x 16.5x 6.4x 5.2x 0.9x 0.7x 0.6x 26% nm nm 0.5x - N $ 16.00 Patrick Jobin
Yingli Green Energy (YGE) 2.12 USD $385 nm nm nm 25.6x 12.2x 8.3x 1.3x 1.4x 1.1x 12% nm nm 0.6x - U $ 2.00 Patrick Jobin
Group Average 8.7x 8.9x 7.5x 17.5x 8.5x 6.1x 1.2x 1.0x 0.9x 25% 0.6x
Upstream
ReneSola (SOL) 1.32 USD $737 nm nm 26.7x 10.1x 9.3x 6.9x 0.6x 0.6x 0.6x 18% nm nm 0.5x - U $ 1.75 Patrick Jobin
Gintech Energy Corp (3514) 22.40 TWD $285 -14.0x -280.0x 373.3x 13.0x 8.7x 10.1x - - - 5% 36% (128)% 0.6x -
Motech Industries (6244) 43.05 TWD $592 74.2x -28.9x -84.4x 8.8x 24.1x 16.5x - - - 10% (187)% (64)% 0.8x -
Centrosolar (C3OA) 0.20 EUR $0 -0.1x -0.2x -1.2x -4.1x -16.1x 16.4x - - - (21)% (31)% (161)% na -
China Sunergy (CSUN) 1.28 USD $19 -0.3x -0.4x -0.7x 15.8x - - - 21% - (43)% 0.8x -
E-Ton Solar Tech. (3452) 16.15 TWD $394 - -89.7x - - - - - - - 1.4x -
Group Average 11.9x -56.2x 45.3x 27.5x 7.5x 10.5x 0.6x 0.5x 0.5x 10% (61)% (85)% 0.9x
Downstream
Canadian Solar (CSIQ) 22.90 USD $1,257 36.9x 5.6x 5.4x 10.7x 4.4x 4.1x - - - 38% (282)% (214)% 0.8x -
Singyes Solar (750) 11.92 HKD $1,069 16.5x 12.0x 9.8x 12.4x 8.3x 6.8x 2.3x 1.4x 1.2x 39% 37% 33% 1.1x - O $ 12.99 Baiding Rong / Edmond Huang
First Solar (FSLR) 43.63 USD $4,372 10.0x 15.4x 9.2x 5.0x 6.1x 4.1x 1.1x 1.0x 0.9x 6% 5% (0)% 0.5x - N $ 70.00 Patrick Jobin
SunEdison (SUNE) 19.09 USD $5,173 nm nm 270.4x nm nm 29.9x 4.5x 4.9x 3.0x 11% 21% nm 1.1x na O $ 34.00 Patrick Jobin
SolarCity (SCTY) 50.91 USD $4,887 nm nm nm nm nm nm 36.7x 23.7x 13.1x 54% nm nm 1.4x na O $ 97.00 Patrick Jobin
SunPow er (SPWR) 25.67 USD $3,371 16.1x 20.3x 19.9x 11.1x 12.7x 11.8x 1.4x 1.4x 1.5x (2)% 14% 99% 0.8x - O $ 35.00 Patrick Jobin
Vivint Solar (VSLR) 8.30 USD $874 110.7x nm nm nm nm nm 188.8x 48.9x 20.1x 405% nm nm 1.6x na O $ 21.00 Patrick Jobin
Group Average 38.1x 13.3x 62.9x 9.8x 7.9x 11.3x 39.1x 13.6x 6.6x 79% (41)% (20)% 1.1x
Solar Equipment 15.1x 10.4x 8.7x 10.5x 8.1x 7.8x 3.3x 2.5x 2.1x
Inverters 14.9x 3.4x -9.4x -7.9x -10.0x 6.6x na na na
S&P 500 19.3x 17.9x 11.2x 10.6x 2.6x 2.5x
Source: Company data, Credit Suisse estimates
13 January 2015
2015 Solar Outlook 57
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Companies Mentioned (Price as of 12-Jan-2015)
BYD Co Ltd (1211.HK, HK$29.65) Canadian Solar Inc (CSIQ.OQ, $21.92) China Singyes Solar Technologies Holdings Limited (0750.HK, HK$12.02) China Sunergy (CSUN.OQ, $1.105) Chubu Electric Power (9502.T, ¥1,376) Chugoku Electric Power (9504.T, ¥1,552) Comtec Solar (0712.HK, HK$1.04) E-Ton Solar Tech (3452.TWO, NT$15.7) First Solar (FSLR.OQ, $42.83) GCL-Poly Energy Holdings Limited (3800.HK, HK$1.82) General Electric (GE.N, $23.98) Gintech Energy Corporation (3514.TW, NT$22.35) Google, Inc. (GOOGL.OQ, $497.06) Hokkaido Electric Power (9509.T, ¥905) Hokuriku Electric Power (9505.T, ¥1,497) JA Solar Holdings (JASO.OQ, $7.91) Jinko Solar (JKS.N, $18.45) Kansai Electric Power (9503.T, ¥1,098) Kyushu Electric Power (9508.T, ¥1,157) Motech Industries (6244.TWO, NT$42.75) NRG Yield, Inc (NYLD.N, $52.67) NV Energy Inc (NVE.N^L13, $23.74) NV Energy Inc (NVE.N^L13, $23.74) NV Energy Inc (NVE.N^L13, $23.74) New Energy (NENE.PK, $1.51) NextEra Energy Partners, LP (NEP.N, $39.08) OCI Company Ltd (010060.KS, W73,500) Okiden (9511.T, ¥3,685) PG&E Corporation (PCG.N, $55.43) ReneSola Ltd (SOL.N, $1.28, UNDERPERFORM[V], TP $1.75) Renewable Energy (REC.OL, Nkr1.717) SUMCO (3436.T, ¥1,789) SUNOWE (300111.SZ, Rmb4.15) Shikoku Electric Power (9507.T, ¥1,383) Shin-Etsu Chemical (4063.T, ¥7,758) Sino-American Silicon Products (5483.TWO, NT$52.5) SolarCity (SCTY.OQ, $49.32) Solargiga Energy (0757.HK, HK$0.27) SunEdison Inc. (SUNE.N, $19.92) SunPower Corp. (SPWR.OQ, $25.51, OUTPERFORM[V], TP $35.0) TerraForm Power (TERP.OQ, $29.96) Tesla Motors Inc. (TSLA.OQ, $202.21) Tohoku Electric Power (9506.T, ¥1,368) Tokuyama (4043.T, ¥245) Tokyo Electric Power (9501.T, ¥489) Topraysolar (002218.SZ, Rmb9.22) Trina Solar Ltd (TSL.N, $8.68, NEUTRAL[V], TP $16.0) Vivint Solar, Inc. (VSLR.N, $8.34) Wacker Chemie (WCHG.DE, €84.88) Wisconsin Energy Corporation (WEC.N, $53.46) Xcel Energy (XEL.N, $35.86) Yingli Green Energy Holding (YGE.N, $1.99, UNDERPERFORM[V], TP $2.0)
Disclosure Appendix
Important Global Disclosures
I, Patrick Jobin, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
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3-Year Price and Rating History for ReneSola Ltd (SOL.N)
SOL.N Closing Price Target Price
Date (US$) (US$) Rating
21-Mar-12 2.63 2.50 N
15-May-12 1.70 2.00
29-Aug-12 1.52 1.50
03-Dec-12 1.35 1.25
14-Mar-13 2.14 2.25
22-May-13 2.42 1.50 U
25-Jul-13 4.33 *
08-Aug-13 3.96 2.50 U
30-Aug-13 4.77 3.00
17-Oct-13 5.43 5.00
05-Dec-13 3.58 3.00
25-Mar-14 3.92 3.25
19-Jun-14 2.99 *
11-Aug-14 2.84 3.25 U
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
U N D ERPERFO RM
3-Year Price and Rating History for SunPower Corp. (SPWR.OQ)
SPWR.OQ Closing Price Target Price
Date (US$) (US$) Rating
17-Feb-12 8.13 8.00 N
04-May-12 5.64 6.00
09-Aug-12 4.20 5.00
11-Feb-13 9.44 8.25
16-May-13 19.95 16.00
14-Jun-13 19.00 19.00
25-Jul-13 25.89 *
31-Jul-13 27.65 28.00 N
30-Oct-13 31.85 29.00
27-Apr-14 34.18 35.00
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
3-Year Price and Rating History for Trina Solar Ltd (TSL.N)
TSL.N Closing Price Target Price
Date (US$) (US$) Rating
24-Feb-12 7.80 8.00 N
23-May-12 5.55 6.50
29-Aug-12 4.75 5.00
21-Nov-12 2.35 2.00
26-Feb-13 4.24 4.00
30-May-13 6.18 6.00
25-Jul-13 7.36 *
08-Aug-13 7.22 7.00 N
17-Oct-13 16.47 20.00
12-Jun-14 11.42 19.00
19-Jun-14 12.68 *
11-Aug-14 11.89 19.00 N
29-Sep-14 13.20 R
01-Oct-14 11.40 19.00 N
24-Nov-14 10.36 16.00
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
REST RICT ED
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2015 Solar Outlook 60
3-Year Price and Rating History for Yingli Green Energy Holding (YGE.N)
YGE.N Closing Price Target Price
Date (US$) (US$) Rating
01-Mar-12 3.78 5.00 N
30-May-12 2.73 3.00
29-Aug-12 1.85 1.50
01-Oct-12 1.67 1.50 U
02-Dec-12 1.80 1.25
04-Mar-13 2.40 2.25
30-May-13 3.13 1.80
25-Jul-13 4.07 *
08-Aug-13 3.87 1.80 U
30-Aug-13 4.30 2.75
17-Oct-13 7.94 5.00
28-Apr-14 3.50 4.00
27-Aug-14 3.38 3.50
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
U N D ERPERFO RM
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities
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*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the ave rage total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10 -15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.
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*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
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Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 46% (54% banking clients)
Neutral/Hold* 38% (50% banking clients)
Underperform/Sell* 14% (43% banking clients)
Restricted 2%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a securi ty should be based on investment objectives, current holdings, and other individual factors.
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Price Target: (12 months) for Yingli Green Energy Holding (YGE.N)
Method: We are using enterprise value to the replacement value of capacity for valuation of YGE. Our PT of $2.0 represents ~0.88x enterprise value to replacement value of capacity due to liquidity concerns
Risk: Risks to the $2.0 price target for YGE are (i) increase in polysilicon prices, (ii) volatility in foreign exchange rates, (iii) decline in government subsidy changes, (iii) adverse macroeconomic conditions, (iv) industry-wide supply and demand mismatches, and (v) tariffs against China solar products.
Price Target: (12 months) for SunPower Corp. (SPWR.OQ)
Method: Our $35 Target Price reflects a 3% yield on CAFD from downstream solar assets nearing completion and 8x multiple on our estimated 2016 adjusted Earnings Before Interest Depreciation and Amortization. We believe an 8x multiple and 3% yield is warranted given the company's higher exposure to the distributed generation segment and 10 gigawatt pipeline providing visibility to growth.
Risk: The key risks for our $35 price target for Sunpower include (i) overall decline in solar panel demand (ii) policy changes that adversely impact support for solar industry (iii) technology risk and (iv) currency risk.
Price Target: (12 months) for ReneSola Ltd (SOL.N)
Method: We are using enterprise value to the replacement value of capacity for valuation of SOL. Our price target of $1.75 represents 5x 2016 EPS
Risk: Risks to our $1.75 target price for SOL are (1) Market Subsidy Risk. (2) Customer risk. (3) Financing risk. SOL customers may require external funds for executing solar projects. Given tight financial markets, SOL customers may not be able to honor existing contracts if they are unable to sell through to final markets. (4) Margin Risk. (5) foreign exchange rate risk.
Price Target: (12 months) for Trina Solar Ltd (TSL.N)
Method: We are using a sum of the parts valuation for Trina Solar. Our price target of $16 represents 1.2x replacement value of capacity including incremental value from 2014 - 2016 projects.
Risk: Risks to our $16 target price for TSL are (1) silicon prices; (2) falling module prices; (3) end demand weakness and oversupply; (4) solar financing environment does not improve, resulting in reduced growth rates; (5) foreign exchange rates; and (6) policy risks.
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.
See the Companies Mentioned section for full company names
The subject company (YGE.N, SPWR.OQ, SOL.N, TSL.N, VSLR.N, GOOGL.OQ, SCTY.OQ, FSLR.OQ, 3800.HK, NYLD.N, CSIQ.OQ, 3436.T, 4063.T, JKS.N, 010060.KS, SUNE.N, WCHG.DE, 1211.HK, GE.N, NEP.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.
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2015 Solar Outlook 62
Credit Suisse provided investment banking services to the subject company (YGE.N, SPWR.OQ, TSL.N, VSLR.N, GOOGL.OQ, SCTY.OQ, FSLR.OQ, NYLD.N, CSIQ.OQ, JKS.N, GE.N, NEP.N) within the past 12 months.
Credit Suisse provided non-investment banking services to the subject company (GE.N) within the past 12 months
Credit Suisse has managed or co-managed a public offering of securities for the subject company (SPWR.OQ, TSL.N, VSLR.N, GOOGL.OQ, SCTY.OQ, NYLD.N, CSIQ.OQ, JKS.N, GE.N, NEP.N) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (YGE.N, SPWR.OQ, TSL.N, VSLR.N, GOOGL.OQ, SCTY.OQ, FSLR.OQ, NYLD.N, CSIQ.OQ, JKS.N, GE.N, NEP.N) within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (YGE.N, SPWR.OQ, SOL.N, TSL.N, TSLA.OQ, VSLR.N, GOOGL.OQ, SCTY.OQ, FSLR.OQ, 3800.HK, NYLD.N, CSIQ.OQ, 3436.T, 4063.T, 4043.T, JKS.N, 010060.KS, WCHG.DE, GE.N, NEP.N, PCG.N) within the next 3 months.
Credit Suisse has received compensation for products and services other than investment banking services from the subject company (GE.N) within the past 12 months
As of the date of this report, Credit Suisse makes a market in the following subject companies (YGE.N, SPWR.OQ, SOL.N, TSL.N, TSLA.OQ, VSLR.N, GOOGL.OQ, SCTY.OQ, FSLR.OQ, NYLD.N, CSIQ.OQ, WEC.N, JASO.OQ, JKS.N, SUNE.N, GE.N, NEP.N, PCG.N).
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SOL.N, TSL.N, 4043.T, JKS.N, 1211.HK).
Credit Suisse has a material conflict of interest with the subject company (GE.N) . Credit Suisse is acting as financial advisor to General Electric Company (GE) in connection with the announced proposed acquisition of certain assets from Alstom S.A.
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Credit Suisse (Hong Kong) Limited ..................................................................................................................................................... Baiding Rong
Credit Suisse Securities (Europe) Limited ....................................................................................................................................... Mathew Waugh
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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.
2015 Solar Outlook - vFinal.doc
