NEW YORK ( TheStreet) -- FBR Capital Markets analyst Mehdi Hosseini just returned from a tour of Asia, where he took a peek into China's much-anticipated national feed-in tariff scheme.

In a research note Tuesday, he indicated that his sources in China believe the feed-in tariff (or FIT) for ground-based projects will be announced by China within a month or two. What's more, there's a good chance the tariff will be split between crystalline module solar and a separate subsidy for thin-film solar.

Most Chinese companies are on the crystalline side of the market.

Hosseini said his conversations with China's National Development and Reform Commission (NDRC) and the China Energy Conservation Corporation (CECIC) suggest the feed-in tariff (industry jargon for subsidies) will be in the range of 15 cents to 18 cents per kilowatt hour. That would yield rates of return of 5% to 8%, according to Hosseini.

The feed-in tariff would apply to solar projects that are constructed and grid-connected within calendar year 2010, the analyst said, and China may review its scheme annually.

The increased pressure to break the FIT into distinct schemes for thin film versus crystalline silicon solar projects has specific implications for First Solar ( FSLR) and its rivalry with China's crystalline players.

First Solar is expected to construct the 30-megawatt Ordos project in China, with construction expected to start in mid-2010. There is pressure to set the tariff for thin-film solar projects below the 15 cent low-end estimate for crystalline module makers. "This may provide an advantage to crystalline module companies (almost all of the module manufacturers in China produce crystalline modules)," FBR's Hosseini wrote in his Tuesday note.

Hosseini believes First Solar may face additional challenges because, at present, there exists no secondary market within which to sell these ground-based solar projects. What's more, based on the current time line, the introduction of FITs in the next two months would leave solar companies with only half a year to construct projects and connect them to power grids.

Chinese crystalline solar players that compete with First Solar for ground-based projects include Trina Solar ( TSL), Yingli Green Energy ( YGE) and Suntech ( STP).

Suntech and the CECIC announced in 2009 a joint venture to develop larger-scale ground-based solar projects.

In terms of the overall size of the Chinese solar market, Hosseini believes it will reach 500 MW in 2010, with half of the market to be ground-mounted projects, and the rest a mix of rooftop and off-grid.

He also predicts that the most bullish scenarios for the growth of the Chinese market in 2011 remain overstated, and China will limit the overall solar capacity added in 2011 to 750 MW. Ground-mounted projects will come to represent more than 50% of China's solar investment, or approximately 400 MW in 2001.

Hosseini doesn't think China will break the one-gigawatt mark until 2012, with the portion of solar represented by ground-mounted projects reaching above 60% after 2012.

-Reported by Eric Rosenbaum in New York.

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