Energy China Solar Industry - UBS Evidence Lab inside

Following our 2018 report on the size of China's addressable solar-power market, we have leveraged UBS Evidence Lab's solar-panel tracking analysis (SPTA) to better understand the industry's current development in cities across China. This series of addressable solar-market analysis incorporates city evidence in key regions of China, and is one of the earliest in-depth sequential pieces on the street, with solid evidence of solar-panel tracking areas by satellite imagery via remote sensing. We believe it could help remove market concerns over China's long-term solar installation potential. The key finding from the SPTA supports our view that China's addressable market for solar power could exceed 5,000GW. This indicates high growth potential from the country's current cumulative solar installation (190GW), which could be further accelerated by progress in grid parity and wider energy-storage application.

We believe our analysis in Beijing showcases substantial upside potential from the current nationwide solar installation, as we estimate 1) in the sample areas, current solar installation utilises less than 3% of the addressable level; 2) sample areas' implied land conversion rate was 1.2MW/sqkm, far below our estimated national addressable level of 45MW/sqkm. Meanwhile, we found regions such as Beijing—with better local solar-policy support and additional municipal subsidy payments—have incentivised higher levels of solar installation with attractive project IRRs over the past few years.

SPTA suggests that the tracked solar panels could supply 1-2% of local residential power demand, albeit with less than 0.01% land and rooftop occupation, and we believe our findings imply the market has overlooked the social benefits of solar power over the past few years, namely 1) better land/rooftop utilisation, and 2) greater potential to supply residential power demand, which could serve as a positive catalyst to further stimulate China's solar installation growth, especially for D/G projects.

Across the supply chain, we believe solar manufacturers could benefit most from any boost in long-term demand as they have the highest earnings sensitivity to solar demand.