China seeks 17.8GW in 2015F

What are the implications of the target?

China’s National Energy Administration (NEA) recently announced a construction target of 17.8GW for 2015F which is 20% higher than 15GW discussed in January and 69.5% higher than 2014 installations.

According to a research note from Nomura, it believes the target is reminiscent of the 14GW target set by the NEA at the start of last year which China eventually missed.

Nomura noted that there are three key downside risks to the targets.

Here's more from Nomura:

1. Provinces need to come up with local development plans by end-April 2015 which implies demand remains 2H loaded. Thus, limited demand visibility in 1H will hurt ASPs and margins across the value chain;

2. Provinces are “encouraged” to allocate construction quota in a “competitive way” to reduce solar on-grid tariffs. In our view, this implies some sort of bidding process which in turn will reduce the attractiveness of such projects and likely slow installations.

3. No quota for distributed rooftop or 20MW large-scale projects but is priority. However, rooftop availability and counter-party risks are likely continuing to hamper stronger growth in distributed segment.

We remain comfortable with our forecast of 15GW demand in China for 2015F.