Solar Power:Solar power installations up 41.5%YoY in Q12016,stronger than expectations

　　According to the latest figures from the NEA, newly installed solar power capacity in Chinajumped 41.5% YoY to 7.13GW in Q12016, which we believe was attributable to rush installationsin order to receive the higher tariff before the June 30cut-off date. Solar powergeneration increased 48% YoY to 11.8bn kWh in Q1. We expect the strong installationnumbers to continue in Q22016. Xinyi Solar [0968HK; BUY] will be a beneficiary.

　　DG grew faster than ground-mounted installations. The new installation of7.13GW was 86.4% ground-mounted projects and 13.6% distributive generation (DG)projects. Ground-mounted installations increased 40.6% YoY to 6.16GW, while DGinstallations increased 47% YoY to 970MW. The new installations in Q12016accountedfor 36% of our full-year estimate of 20GW.

　　More diversified regions in Q1. In 2015, the installations were located mainly in thenorthern region and Jiangsu. In Q1, however, the top five provinces in terms of newinstallations were Yunnan (940MW), Shandong (880MW), Xinjiang (710MW), Shaanxi(600MW) and Anhui (580MW). This is a good sign, in our view, as it will help easegrid-curtailment pressure in the medium term.

　　Rising grid curtailment but we expect more policy support to help. In Q12016,solar power grid curtailment reached 1.9bn kWh of electricity (grid curtailment rate:13.9%), mainly from Gansu (0.84bn kWh, or 39% curtailment rate), Xinjiang (0.76bnkWh, or 52%) and Ningxia (0.21bn kWh, or 20%). That said, we expect to see improvementin the next two years after the launch of the “protective power dispatch”policy. We also noticed that the NEA released several documents recently calling forcurbs on the installation of coal-fired power plants. We believe all these factors willhelp improve grid curtailment and drive solar installation growth.