SolarCity Corp NASDAQ:SCTY may have a bright future in China, according to analysts at Deutsche Bank. They say the company’s business model could actually give the nation a huge boost in its attempts to meet the lofty rooftop solar targets it has set.
China struggles to meet solar quota
Analyst Vishal Shah said right now it looks questionable whether China will make its target of 14 gigawatts in new solar capacity by the end of this year. The nation is targeting 6 gigawatts in utility and 8 gigawatts in distributed generation. China’s National Energy Administration has now issued several changes in policy that aim to encourage local Chinese governments to offer incentives for distributed solar in transport facilities, commercial and agricultural applications.
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However, he adds that the new policy came out one or two months later than was previously expected. As a result, he thinks it will be hard for China to hit its targets for distributed generation.
The analyst notes that distributed generation of solar deployments will probably pick up in the fourth quarter of this year and said that it will probably “notably outperform” the approximately 800 megawatts of distributed generation that were installed in China last year.
SolarCity to see favorable setup for next year
As of the end of the first six months of the year, there was apparently confusion in China about how much distributed generation had been installed and whether it was even possible for the nation to even approach the target of 8 gigawatts. However, Shah thinks the result will be a better setup going into next year, especially as more details about financing are issued in additional federal and local policy announcements.
Depending on what China’s governments decide, he thinks that SolarCity and other solar power system installers with similar business models could see a benefit to doing business in China. As a result, he sees upside for SolarCity and possibly Trina Solar Limited (ADR) (NYSE:TSL) as well.