NEW YORK (TheStreet) -- A surge in Chinese solar market demand could give a jolt to inert solar stocks.
Two new reports suggests that a national feed-in tariff, long delayed in China, is finally set to debut in the second half of 2011.
If the reports are true, and China finally steps up and stimulates domestic solar demand, it will be a welcome change. The emerging giant's primary role in the solar sector has been to dole out capital to Chinese solar companies through state-owned banks, and that's only served to stimulate industry overcapacity.
Yet the details about the Chinese national feed-in tariff system were lacking, and two reports that spurred hopes were contradictory.Reuters reported that China would soon introduce a national feed-in tariff, though its source was a Chinese state news agency. Goldman Sachs reported a different version of the same story, and a version that filled in some important details. Goldman Sachs analyst Amy Song wrote that a "temporary" FIT would be introduced only for 2011, and only for projects that had been endorsed by the government prior to July 1, and these projects had to be grid-connected by the end of the year. The FIT rate in China would also be much lower than FITs in Europe based on the Goldman numbers. Goldman quoted Li Junfeng of the National Development and Reform Committee of China in its report, and the NRDC is a major energy policy maker in China. If it's only a temporary FIT, then the Chinese plans are no panacea for the solar sector. It would merely make the economics better for projects already approved by the government as opposed to stimulating incremental demand. Notably, Goldman Sachs updated its 2015 and 2020 demand numbers in China based on the reports, not its short-term outlook. Chinese policymakers made negative comments earlier this year about the European FIT model, so a temporary FIT would make sense in light of the hesitation to embrace the concept. Some of the most beaten up Chinese solar stocks were up on Friday, too, led by Suntech Power's (STP) gain of nearly 6% on notable trading action of almost twice its daily volume. LDK Solar (LDK) and Yingli Green Energy (YGE) were also up by more than 2%. A bounce is not necessarily bullishness, though, for stocks that have seen their market values reduced to near book value this year.
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