Lehman Solar Incentives Handbook

Vishal Shah Solar Energy Analyst 212-526-4378 visshah@lehman.
com
Solar Incentives Handbook

September 11, 2008
Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2LEHMAN to request a copy of this research. Investors should consider this report as only a single factor in making their investment decision. PLEASE SEE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 28.
Overview of Major Solar Market Incentives
New Incentives in Emerging Markets

Emerging Market Demand Potential Scenario Analysis
We expect new incentive programs announced in markets in 2008 to act as a catalyst in 2009 We believe that Italy, U.S., Japan, South Korea, Greece and Canada have the potential to emerge as large markets with new incentive program announcements in 08/09 Expected 2009 Shipments Canada 270MW France 230MW Italy 500MW South Korea 340MW
S hipments (MW) S pain Increase/Decrease Italy S outh Korea Gree ce Canada France P ortugal Czech Republic B elgium A ustralia Israel India UAE B ulgaria Japan China A frica S outh America ROW E merging Market Dem and Increase/Decrease Ge rmany Increase/Decrease USA Increase/Decrease 2009 Supply/Demand Analysis Incremental Supply (MW) Incremental Demand (MW) Spai n Emerging Markets Germany USA E xce ss/Tight Supply 2008 1,150 2009 Base 300 -850 500 340 75 270 230 55 70 40 70 35 130 52 52 350 60 70 60 40 2,499 1,905 2,600 800 540 200
2009 Outlook
2009 Bull 300 -850 700 400 100 350 230 55 70 40 70 35 130 52 52 450 60 70 60 40 2 ,924 2,330 2 ,600 800 540 200
2009 Bear 300 -850 300 250 30 200 230 55 70 40 70 35 130 52 52 200 60 70 60 40 1,904 1,310 2,600 800 540 200
130 85 30 10 30 20 10 5 20 0 30 2 2 150 30 20 10 10 594
1,800
340
2,055 2,055 -850 1,905 800 200 Balance
2 ,055 2 ,480 -850 2 ,330 800 200 Ti ght
2,055 1,460 -850 1,310 800 200 Excess
Source: Lehman Brothers Research
Regional Demand
Europe
Annual Solar Installations (MW)
Germany y/y (%) Italy y/y (%) Spain y/y (%) France y/y (%) Greece y/y (%) Czech Republic y/y (%) Austria y/y (%) Portugal y/y (%) Switzerland y/y (%) The Netherlands y/y (%) Belgium y/y (%) Cyprus y/y (%) Israel y/y (%) Rest of Europe y/y (%) Total y/y (%)
2001
79 NM
0
2002
83 5%
0
2003
170 105%
0
2004
546 221%
0
2005
837 53%
6
2006
960 15%
60
2007
1,328 38%
87
2008E
1,793 35%
131
2009E
2,689 50%
500
2010E
4,034 50%
850
2011E
5,244 30%
1,275
2012E
6,293 20%
1,657
NM
0
NM
5
NM
15
NM
25
NM
35
900%
110
45%
428
50%
1,156
283%
300
70%
360
50%
432
30%
518
NM
3
NM
3
200%
4
67%
5
40%
7
214%
11
289%
16
170%
33
-74%
229
20%
458
20%
916
20%
1,831
NM
0
27%
0
18%
0
26%
1
43%
1
56%
1
50%
12
100%
30
600%
75
100%
188
100%
469
100%
1,172
NM
0
-10%
0
-10%
0
186%
0
-3%
0
20%
0
900%
4
150%
7
150%
70
150%
105
150%
158
150%
236
NM
1
NM
4
NM
7
NM
4
NM
3
NM
2
NM
3
100%
6
900%
25
50%
38
50%
56
50%
84
NM
0
250%
0
55%
0
-35%
1
-29%
0
-47%
0
56%
12
150%
18
300%
54
50%
81
50%
122
50%
182
NM
2
100%
2
0%
2
25%
2
-20%
4
-100%
3
NM
3
50%
6
200%
36
50%
54
50%
81
50%
122
NM
8
-17%
6
-21%
20
40%
4
90%
2
-35%
2
15%
1
100%
2
500%
22
50%
33
50%
50
50%
74
NM
0
-25%
0
238%
0
-82%
0
-53%
0
-12%
0
-33%
2
100%
4
1000%
40
50%
60
50%
90
50%
135
NM
0
NM
0
NM
0
NM
0
NM
0
NM
0
NM
1
100%
2
900%
12
50%
18
50%
27
50%
41
NM
0
NM
0
NM
0
NM
0
NM
0
NM
0
NM
0
100%
0
500%
36
50%
55
50%
82
50%
123
NM 20 NM 113 NM
NM 16 -18% 120 6%
NM 34 107% 251 109%
NM 44 31% 631 152%
-75% 40 -9% 935 48%
200% 74 85% 1,222 31%
0% 107 45% 2,004 64%
50% 161 50% 3,348 67%
8000% 402 150% 4,454 33%
50% 723 80% 7,001 57%
50% 1,230 70% 10,147 45%
50% 1,844 50% 14,190 40%
Regional Demand
Asia
Japan y/y (%) China y/y (%) S outh Korea y/y (%)
2001
122 NM 0 NM 1 NM 0
2002
16 1 32% 0 NM 1 -25% 0
2003
218 35% 0 NM 1 0% 11
2004
256 17% 5 NM 3 317% 13
2005
292 14% 15 200% 5 100% 16
2006
292 0% 20 33% 21 324% 12
2007
230 -21% 24 20% 42 100% 17
2008E
150 -35% 29 20% 85 100% 31
2009E
299 100% 58 100% 339 300% 132
2010E
508 70% 104 80% 678 100% 250
2011E
661 30% 166 60% 1,255 85% 475
2012E
760 15% 232 40% 1,632 30% 807
India y/y (%) Australia y/y (%) Other y/y (%) Total y/y (%)
NM
4
NM
6
NM
7
18%
7
23%
8
-25%
10
45%
16
80%
20
320%
70
90%
98
90%
126
70%
154
NM 43 NM 170 NM
25% 50 21% 167 -2%
18% 49 -21% 236 41%
3% 55 32% 283 20%
24% 51 -3% 336 19%
17% 52 6% 355 6%
65% 104 54% 330 -7%
25% 216 80% 314 -5%
250% 640 150% 897 185%
40% 884 60% 1,638 83%
29% 1,395 60% 2,683 64%
22% 1,663 30% 3,585 34%
Regional Demand
Americas
California y/y (%) New Jersey y/y (%) Nevada y/y (%) Colorado y/y (%) New York y/y (%) Hawaii y/y (%) Connecticut y/y (%) Arizona y/y (%) Massachuesets y/y (%) Oregon y/y (%) Other States y/y (%) US Total y/y (%) Canada y/y (%) Other y/y (%) Total y/y (%)
2001
30 NM 3 NM
0
2002
35 NM 5 NM
0
2003
45 NM
5
2004
48 NM
5
2005
52
2006
70
2007
97
2008E
165
2009E
280
2010E
420
2011E
713
2012E
1,070
NM
6
34%
18
39%
18
70%
21
70%
30
50%
45
70%
68
50%
101
NM
0
NM
0
NM
0.5
224%
3
0%
15
20%
22
40%
44
50%
74
50%
127
50%
215
NM
0
NM
0
NM
0
NM
0
NM
0.2
548%
1
356%
13
50%
39
100%
59
70%
99
70%
169
70%
287
NM 0 NM 0 NM 0 NM 0 NM
0
0
0
0
NM
1
459%
3
1200%
4
200%
5
50%
8
70%
11
70%
15
70%
21
NM NM
0.2
105%
1
34%
3
40%
4
40%
5
40%
7
40%
10
40%
14
NM
1
225%
3
40%
4
40%
10
40%
20
40%
41
40%
81
NM
2
302%
2
257%
2
50%
3
170%
5
100%
10
100%
18
100%
35
NM
1
36%
2
0%
1
55%
2
55%
9
90%
17
90%
30
90%
54
NM
0
NM
0
NM
0
NM
0
NM
0
134%
1
-7%
1
65%
3
300%
5
80%
10
80%
21
80%
42
NM
4
NM
17
NM
16
NM
31
NM
43
42%
40
160%
64
100%
73
100%
84
100%
310
100%
734
100%
1,386
NM 37 NM
2
NM 57 54%
1
NM 66 16%
2
NM 84 27%
2
NM 105 25%
3
-6% 140 33%

4
60% 220 57%

4
14% 341 55%

9
15% 539 58%

273
268% 1,024 90%

409
136% 1,945 90%

614
89% 3,306 70%

921
NM 40 NM 79 NM
-25% 50 21% 108 38%
50% 30 -21% 98 -10%
17% 50 32% 136 39%
33% 50 -3% 158 16%
36% 55 6% 199 26%
16% 60 54% 284 43%
100% 80 80% 430 51%
3000% 100 150% 912 112%
50% 300 60% 1,733 90%
50% 500 60% 3,059 77%
50% 800 30% 5,027 64%
Worldwide Polysilicon Supply

Tier I Firms
Annual S upply (MT) 2003 2004 2005 2006 2007 2008E 2009E 20 10E 2011E 2012E
TIER I POLY SUPPLIERS

Hemlock Semiconductor Tokuyama Mitsubishi Mate ri als S umitomo Titaniu m Mitsubishi P olysilicon REC Wacker MEMC
TIER I - Total
6,100 4,800 1,600 700 1,200 4,400 4,200 3,700 26,700
6,450 4,900 1,600 750 1,200 4,600 4,600 3,700 27,800
7,250 5,100 1,600 830 1,200 5,050 5,250 3,850 30,130
8,850 5,350 1,675 880 1,250 5,600 5,750 4,200 33,555
10,500 5,650 1,825 950 1,350 6,200 6,500 3,465 36,440
10,838 5,143 1,700 871 1,254 5,950 7,438 6,035 39,228
14,238 5,865 1,870 914 1,339 8,203 10,625 8,500 51,553
19,550 6,673 2,083 1,020 1,445 13,090 15,300 9,450 68,610
25,075 7,395 2,380 1,190 1,615 17,000 19,338 11,550 85,543
28,900 8,245 2,720 1,360 1,785 19,125 21,675 13,650 97,460

Tier II Firms
Annual S upply (MT) 2003 2004 2005 2006 2007 2008E 2009E 20 10E 2011E 2012E
TIER II POLY SUPPLIERS

NON - CHINA P OLY SUPP LY DC Chemical M.S ETEK Nitol Group HOKU Materials S olarworld Others (Russia, New entrants) Non - CHINA Total CHINA POLY S UPPLY A sia Silicon A E Polysi licon E mei Semiconductor Luoyang Semiconductor LDK Solar Jiangsu Zhongneng - GCL Wuxi Zhongcai S ichuan Xinguang S henzhen Nanbo S hunda Y unnan Aixin Ningxia Yangguang Others (China) China - Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 150 0 0 0 0 0 0 0 0 0 250 0 0 250 500 0 500 150 100 0 0 0 0 0 1,500 0 350 300 850 100 1,250 400 725 250 350 150 250 250 5,225 2,000 1,100 300 2,000 2,000 2,250 1,000 1,250 500 1,450 300 1,000 750 15,900 5,000 2,000 325 3,150 18,000 3,150 5,750 1,375 1,125 2,600 1,800 3,000 4,900 52,175 7,000 2,750 350 3,650 22 ,000 3,300 10 ,000 1,500 1,750 3,500 3,300 4,500 8,800 72 ,400 9,000 3,250 350 4,250 26,000 3,300 10,000 1,500 1,750 4,500 3,300 4,500 8,800 80,500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 750 0 0 50 250 1,050 2,125 4,680 250 0 150 600 7,805 5,313 5,313 1,063 298 404 935 13,324 7,438 10,350 2,500 1,350 850 2,400 24,888 9,563 15 ,600 3,500 2,500 1,025 3,650 35 ,838 11,688 18,500 4,500 3,500 1,175 4,250 43,613

Tier II Firms
Annual Supply (MT) 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E
TIER II POLY SUPPLIERS

Metallurgical Silicon Elkem Solar Timminco Dow Corning Globe Speciality JACO Solarsi JFE Others Metallurgical Silicon - Total Tier II - Total Total (excl. Met Poly) Total (incl. Met Poly) 0 0 0 0 0 0 0 0 0 26,700 26,700 0 0 0 0 0 0 0 0 0 27,800 27,800 0 0 0 0 0 0 0 0 0 30,130 30,130 0 0 500 0 0 0 0 500 750 33,805 34,305 0 0 2,000 180 500 250 0 2,930 5,480 38,990 41,920 800 1,930 4,000 680 1,500 750 250 9,910 22,940 52,258 62,168 2,800 9,000 6,000 1,500 2,500 1,500 750 24,050 53,274 80,776 104,826 7,438 12,240 8,500 3,500 4,000 2,500 1,500 39,678 116,740 145,673 185,350 9,563 17,000 12,500 6,500 6,500 4,000 3,500 59,563 167,800 193,780 253,343 11,688 19,500 16,500 10,000 10,000 6,500 6,500 80,688 204,800 221,573 302,260
Germany
Despite the recent change to the EEG, Germany should remain the worlds largest market Germany recently amended its Renewable Energy Law and has decided to accelerate the decrease of tariffs to 8% in 2009 and 2010 and 9% thereafter. The government has decided to increase/decrease incentives in the following year depending upon the level of installations in the previous year. The change in tariffs would be 1% depending on the following levels: 2009: 1.1GW 1.5GW annual installations 2010: 1.2GW 1.7GW annual installations 2011: 1.3GW 1.9GW annual installations
Solar Project IRR Summary
20 year incentive program; IRR assumes 15% ASP decline in 2009 Annual solar insolation: 1,250 kWh/sq. mtr 7.8% 7.8%
7,500 6,000 4,500 3,000 1,500 -
2008
Source: IEA, Lehman Brothers Research
2009
2007
2008
2009E
2010E
2011E
2012E
Spain
The new draft proposal could limit the growth in the Spanish market The government provides a feed-in tariff of 0.44/kWh for systems smaller than 100kW, 0.418 for system greater than 100kW, fixed for 25 years with 20% decrease thereafter. Current proposal expires in Sept. The current proposal approved by the CNE calls for a cap of 300MW on installations (100MW ground mounted, 200MW roof-top) and a feed-in tariff of 0.33/kWh (roof-top)/ 0.29/kWh (ground mounted). Additionally, government has proposed incentives for up to 200MW of installations that do not meet the September 2008 deadline.
1,500 1,200 900 600 300 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
United States
United States could emerge as a large market in 2H09 PV Demand in the US has been driven by the 30% federal tax credit which expires in 2008. Although there is no national feed-in tariff law, a number of state and municipal governments have provided incentives for PV. Seventeen states have committed to fund the installation of more than 10GWp of solar power in the next 15 years, with California, New Jersey, Arizona, Maryland, and Pennsylvania leading the charge.
Solar Electricity versus Retail Electricity Price

2009 Prices; Solar Electricity Price assumes$8.3/W cost, 25 year life and Annual solar insolation: 2,000 kWh/sq. mtr; Retail price for high cost markets such as NY, NJ, CT and CA $0.24 $0.18
2000 1000 0
4000 3000
Retail Electricity
Solar Electricity Price Unsubsidized
2007
2008
2009E
2010E
2011E
2012E
10
Japan
Japan plans to halve the cost of solar generation in 3-5 years through renewed subsidies The government in Japan plans to increase solar installed capacity to 4.8GW by 2010. Growth in the solar industry in Japan has stagnated since 2005 when the subsidies provided by the government lapsed. Despite this, solar electricity costs in Japan are near retail electricity costs. The government plans to reintroduce subsidies for installing solar panels in order to stimulate its industry.

2009 Prices; Solar Electricity Price assumes$5.7/W cost, 25 year life and Annual solar insolation: 1,500 kWh/sq. mtr $0.22 $0.20
900
600
300
Retail Electricity
2007
2008
2009E
2010E
2011E
2012E
11
South Korea
South Korea plans to raise solar PV cap from 100MW to 500MW in October 2008 Government has set a PV capacity target of 1.3GW by 2011. From October 2008, the government will provide tariffs for 15 years of 64c/kWh for 30kW-200kW, 61c/kWh for 200kW-1MW, 58c/kWh for 1MW-3MW and 49c/kWh for 3MW and above. The government plans to raise the cap from 100MW to 500MW. The government also provides support to the industry through joint R&D projects coordinated by the Korean Development Organization (KPVDO) since 2004.

2,000 1,600 1,200 800 400 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
12
France
France could emerge as a major market for BIPV due to its favorable tariff system The government plans to increase installed capacity of PV to 3GW by 2020. The French PV tariff program favors BIPV systems. It provides a basic tariff of 0.30/kWh in the mainland and 0.40/kWh in the overseas territories. A 0.50/kWh is provided for BIPV throughout France. Small private system market receives a 50% income tax credit, which at times represents approximately 50% of the solar module investments.

2,000 1,600 1,200 800 400 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
13
Italy
Attractive IRRs in Italy could make it one of the most promising markets in Europe Italy plans to install 3GW of PV capacity by 2016. The government set up a PV tariff program in 2007 which is aimed to provide tariffs until a cap of 1.2GW is reached. The tariffs range from 0.40/kWh for 1-3kW, 0.38/kWh for 3-20kW and 0.36/kWh for >20kW non-integrated installations. Additional incentives of 0.04 - 0.05/kWh each are provided for partly integrated and fully integrated projects.

20 year incentive program; IRR assumes 15% ASP decline in 2009 Annual solar insolation: 1,650 kWh/sq. mtr
1800
12.1%
13.3%
1200
600
2008
2009
2007
2008
2009E
2010E
2011E
2012E
14
Greece
The government will likely have to simplify its procedures in order to meet market expectations The government has set a target of 840MW of solar PV installations by 2020 with 640MW on the mainland and 200Mw on the islands. The current process is complicated due to annual caps by region and by market segment. Tariffs are provided for 20 years for the mainland grid of 0.45/kWh for systems less than 100kW and 0.40/kWh for other systems. A 0.05/kWh additional incentive for the autonomous grid. These are annually adjusted for inflation and retail price increase.
1,250 1,000 750 500 250 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
15
China
Chinas focus has been more towards increasing solar hot water The government has set a target of 1.8GW of installed solar capacity by 2010. China has also set national goals for solar hot water, with a target of 150 million square miles by 2010 and 300 million square miles by 2020. China provides tariffs at preapproved rates. The rates depend on the region and are calculated on a cost plus reasonable margin basis.

2009 Prices; Solar Electricity Price assumes$8.3/W cost, 25 year life and Annual solar insolation: 1,450 kWh/sq. mtr $0.33
500 400 300 200
$0.07
100 -
Retail Electricity
2007
2008
2009E
2010E
2011E
2012E
16
India
Despite low IRRs, India could emerge as an attractive market due to sheer size India announced a feed-in tariff structure in Jan 2008, of Rs. 12/kWh ($0.30) for solar PV and Rs. 10/kWh ($0.25) for solar thermal power fed to the grid. The government has set a cap of 10MW per state and a cap of 5MW per developer under this initiative. A number of states are also planning to generate solar power such as West Bengal which expects to generate 50MW by 2015 and Punjab which plans to offer 100MW of solar PV power projects.

1,000 800 600 400 200 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
17
Australia
Several state government feed-in tariff incentives could result in 50MW demand in 2009 State of South Australia provides A$0.44/kWh feed-in tariff for 20 years from July 08 for 10MW cap. Electricity supplier asked to increase solar tariff to $0.52/kWh from $0.07/kWh currently. Solar Cities Program for 3,400 solar panels or 6MW. Cash rebates A$8,000 with 6,000 households cap. Finally some state programs and a national program that integrates all state targets is expected by end of 08. 2008 shipments: 20MW, 2009 shipments: 50MW
120 90 60 30 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
18
Austria
Austria can potentially replicate its success in solar thermal power with solar PV power Feed-in tariffs between 0.30 and 0.46 per kWh are to be paid over 10 years in 2008. 75% will be paid in the 11th year and 50% in the 12th year. Funding volume for renewable energy systems is to be increased to 21 million annually with the share of PV to increase to 12%. The government has created an additional 10,000 roofs program from April 2008 which provides a subsidy to private investors of 2.7/W - 2.8/W for rooftop and 3.5/W for faade installations for systems up to 5kW.
Solar Project IRR Summary Annual Solar Installations (MW)
100 80 60 40 20 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
19
Canada
With over 1GW of applications, the Canadian market appears set to take off in 2009 Ottawa has a fixed feed-in tariff of C$0.42/kWh for 20 years for all types of PV systems with no cap, although there is a 10MW cap on individual project size. It has also set a target of 100,000 solar roofs and retail sales tax rebate on solar equipment by Jan 1, 2010. The PV industry is seeking an increase in tariffs with graduated levels in order to increase residential installations with tariffs of C$0.82/kWh for systems <10kW, C$0.65/kWh for 1MW 2.5MW and C$0.42/kWh for systems up to 10MW.
1,000 800 600 400 200 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
20
Israel
The adoption of a new tariff for smaller PV systems may provide fresh impetus Israel provides feed-in tariffs for 20 years of 87.6Agorot/kWh ($0.242) for installations between 100kW - 20MW and 70.25Agorot/kWh ($0.194) for installations over 20MW. These are annually updated. It is expected to adopt a tariff for smaller PV systems in 2008 with the Public Utilities Association considering a tariff structure of ILS2.04/kWh ($0.564) for up to 15kW installations for residential and 50kW for commercial. These would be paid for 20 years and reduced by 4% per annum from 2010 with a cap of 50MW or 7 years.

200 160 120 80 40 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
21
Portugal
Portugal plans to install 150MW solar by 2010 Portugal has a 150MW cap for solar PV until 2010. IPPs receive 0.445/kWh for systems below 5kW and 0.315/kWh for systems above 5kW for 15 years or a production of 21GWh/MW (for larger systems). Consumers can also sell 50% of their electricity to utilities which must purchase it at 100% of the tariffs for 10 years. From April 2008, it will provide 0.65 /kWh for up to 3.68kW systems for 5 years with a soft annual cap of 10MW, after which tariffs will be reduced by 5%.
Solar Project IRR Summary Annual Solar Installations (MW)
200 160 120 80 40 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
22
Switzerland
Switzerland provides additional incentives for Building Attached and Building Integrated A draft was issued in Nov 2007 for an incentive structure for 25 years, which is expected to become effective from January 1, 2009 but be applicable to all operations after January 1, 2006. Tariffs of 0.39/kWh for the first 10kW, 0.33/kWh for 10kW - 30kW, 0.31/kWh for 30kW 100kW, and 0.30/kWh for systems over 100 kW with additional incentives for Building Attached and Building Integrated PV.

100 75 50 25 125
2008
2009
2007
2008
2009E
2010E
2011E
2012E
23
The Netherlands
The Netherlands has the potential to become a large solar market in 2010 The Dutch PV industry peaked in 2003 with installations of 20MW due to favorable support under subsidy schemes such as the Energy Premium Incentive. A feed-in tariff of 0.33/kWh is to be paid for 15 years for systems between 0.6kW and 3kW from April 2008. A net-metering tariff of 0.234/kWh is also provided.

75 60 45
1.9%
1.1%
30 15 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
24
Belgium
Measures taken by several states could result in strong growth in the Belgian market Taxpayers are refunded 40% of investment costs of up to 2,440 in 2008. Net Metering is at the normal retail price of 0.15/kWh. Flanders provides green certificates which place a 0.45/kWh value on solar electricity for 20 years from the date of installation. A net metering compensation is also provided. Wallonie provides subsidies for 20% of the investment up to a limit of 3,500 per system.

125
8.1% 7.3%
100 75 50 25 0
2008
2009
2007
2008
2009E
2010E
2011E
2012E
25
Cyprus
Cyprus has the worlds highest per capita solar thermal power Households are provided a grant of 55% of total system costs of up to 64,927 with the option to sell the electricity to the Electricity Authority of Cyprus at 0.205/kWh or receive a tariff of 0.383/kWh. Companies can sell generated electricity at 0.333/kWh in tariffs but are not eligible for PV grants. Standalone systems receive a grant of 55% of costs.

50 40 30 20 10 -
2008
2009
2007
2008
2009E
2010E
2011E
2012E
26
Czech Republic
Attractive IRRS in the Czech Republic could result in it becoming a major market The Czech Republic has set up two incentive options for system operators 0.49/kWh incentive in 2008 which is paid for 15 years and is 2.5% lower than the incentives paid in 2006 and 2007. A green bonus system which provides incentives of 0.48/kWh in 2008 for 15 years. The remuneration is adjusted to electricity prices annually.

200 150 100 50 0
250
2008
2009
2007
2008
2009E
2010E
2011E
2012E
27
Analyst Certification and Important Disclosures

Analyst Certification: I, Vishal Shah, hereby certify (1) that the views expressed in this research email accurately reflect my personal views about any or all of the subject securities or issuers referred to in this email and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this email. Important Disclosures Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this email communication. Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2-LEHMAN to request a copy of this research. Investors should consider this communication as only a single factor in making their investment decision. The analysts responsible for preparing this report have received compensation based upon various factors including the Firm's total revenues, a portion of which is generated by investment banking activities. With the exception of analysts who publish for either LBI or a branch of LBI, research analysts may not be associated persons of the member and therefore may not be subject to Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Lehman Brothers Control Room, 1271 Avenue of the Americas, 42nd Floor, New York, NY 10020 or refer to the firm's disclosure website at www.lehman.com/disclosures. Mentioned Stocks Canadian Solar Inc. (CSIQ - USD23.01) 2-Equal weight / Positive Energy Conversion Devices (ENER - USD57.62) 2-Equal weight / Positive Evergreen Solar Inc. (ESLR - USD5.90) 2-Equal weight / Positive First Solar Inc. (FSLR - USD211.25) 1-Overweight / Positive JA Solar Holdings Co., Ltd. (JASO - USD12.12) 1-Overweight / Positive SunPower Corp. (SPWR - USD79.01) 1-Overweight / Positive Suntech Power Holdings (STP - USD39.91) 1-Overweight / Positive MEMC Electronic Materials (WFR - USD34.05) 1-Overweight / Positive
28
Important Disclosures (contd)

Other Material Conflicts Guide to Lehman Brothers Equity Research Rating System Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2- Equal weight or 3-Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (the sector coverage universe). To see a list of companies that comprise a particular sector coverage universe, please go to www.lehman.com/disclosures. In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone. Stock Rating 1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. 2-Equal weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. 3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. RS-Rating Suspended - The rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Lehman Brothers is acting in an advisory capacity on a merger or strategic transaction involving the company. Sector View 1-Positive - sector coverage universe fundamentals are improving. 2-Neutral - sector coverage universe fundamentals are steady, neither improving nor deteriorating. 3-Negative - sector coverage universe fundamentals are deteriorating. Distribution of Ratings: Lehman Brothers Equity Research has 2076 companies under coverage. 44% have been assigned a 1-Overweight rating which, for purposes of mandatory disclosures, is classified as a Buy rating, 32% of companies with this rating are investment banking clients of the Firm. 39% have been assigned a 2-Equal weight rating which, for purposes of mandatory disclosures, is classified as a Hold rating, 31% of companies with this rating are investment banking clients of the Firm. 14% have been assigned a 3-Underweight rating which, for purposes of mandatory disclosures, is classified as a Sell rating, 22% of companies with this rating are investment banking clients of the Firm.
29
Important Disclosures (contd)

This material has been prepared and/or issued by Lehman Brothers Inc., member SIPC, and/or one of its affiliates ("Lehman Brothers") and has been approved by Lehman Brothers International (Europe), authorized and regulated by the Financial Services Authority, in connection with its distribution in the European Economic Area. This material is distributed in Japan by Lehman Brothers Japan Inc., and in Hong Kong by Lehman Brothers Asia Limited. This material is distributed in Australia by Lehman Brothers Australia Limited, and in Singapore by Lehman Brothers Singapore Pte Ltd. Where this material is distributed by Lehman Brothers Singapore Pte Ltd, please note that it is intended for general circulation only and the recommendations contained herein does not take into account the specific investment objectives, financial situation or particular needs of any particular person. An investor should consult his Lehman Brothers' representative regarding the suitability of the product and take into account his specific investment objectives, financial situation or particular needs before he makes a commitment to purchase the investment product. This material is distributed in Korea by Lehman Brothers International (Europe) Seoul Branch, and in Taiwan by Lehman Brothers Securities Taiwan Limited. Where this material is distributed by Lehman Brothers Securities Taiwan Limited, please note that recommendations expressed herein are for reference only. Investors should carefully evaluate the investment risks and are reminded that they are solely responsible for their investment decisions. This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other instruments mentioned in it. No part of this document may be reproduced in any manner without the written permission of Lehman Brothers. With the exception of disclosures relating to Lehman Brothers, this research report is based on current public information that Lehman Brothers considers reliable, but we make no representation that it is accurate or complete, and it should not be relied on as such. In the case of any disclosure to the effect that Lehman Brothers Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company, the computation of beneficial ownership of securities is based upon the methodology used to compute ownership under Section 13(d) of the United States' Securities Exchange Act of 1934. In the case of any disclosure to the effect that Lehman Brothers Inc. and/or its affiliates hold a short position of at least 1% of the outstanding share capital of a particular company, such disclosure relates solely to the ordinary share capital of the company. Accordingly, while such calculation represents Lehman Brothers' holdings net of any long position in the ordinary share capital of the company, such calculation excludes any rights or obligations that Lehman Brothers may otherwise have, or which may accrue in the future, with respect to such ordinary share capital. Similarly such calculation does not include any shares held or owned by Lehman Brothers where such shares are held under a wider agreement or arrangement (be it with a client or a counterparty) concerning the shares of such company (e.g. prime broking and/or stock lending activity). Any such disclosure represents the position of Lehman Brothers as of the last business day of the calendar month preceding the date of this report. This material is provided with the understanding that Lehman Brothers is not acting in a fiduciary capacity. Opinions expressed herein reflect the opinion of Lehman Brothers and are subject to change without notice. The products mentioned in this document may not be eligible for sale in some states or countries, and they may not be suitable for all types of investors. If an investor has any doubts about product suitability, he should consult his Lehman Brothers representative. The value of and the income produced by products may fluctuate, so that an investor may get back less than he invested. Value and income may be adversely affected by exchange rates, interest rates, or other factors. Past performance is not necessarily indicative of future results. If a product is income producing, part of the capital invested may be used to pay that income. 2008 Lehman Brothers. All rights reserved. Additional information is available on request. Please contact a Lehman Brothers entity in your home jurisdiction. Lehman Brothers policy for managing conflicts of interest in connection with investment research is available at www.lehman.com/researchconflictspolicy. Complete disclosure information regarding companies covered by Lehman Brothers Equity Research, including ratings, earnings per share forecasts and price targets contained in reports covering U.S. companies is available at www.lehman.com/disclosures.
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Lehman Solar Incentives Handbook

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Lehman Solar Incentives Handbook

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Vishal Shah Solar Energy Analyst 212-526-4378 visshah@lehman.

Solar Incentives Handbook

Overview of Major Solar Market Incentives

New Incentives in Emerging Markets

130 85 30 10 30 20 10 5 20 0 30 2 2 150 30 20 10 10 594

2,055 2,055 -850 1,905 800 200 Balance

2 ,055 2 ,480 -850 2 ,330 800 200 Ti ght

2,055 1,460 -850 1,310 800 200 Excess

Source: Lehman Brothers Research

NM 34 107% 251 109%

NM 44 31% 631 152%

-75% 40 -9% 935 48%

200% 74 85% 1,222 31%

0% 107 45% 2,004 64%

50% 161 50% 3,348 67%

8000% 402 150% 4,454 33%

50% 723 80% 7,001 57%

50% 1,230 70% 10,147 45%

50% 1,844 50% 14,190 40%

Source: Lehman Brothers Research

25% 50 21% 167 -2%

18% 49 -21% 236 41%

3% 55 32% 283 20%

24% 51 -3% 336 19%

65% 104 54% 330 -7%

25% 216 80% 314 -5%

250% 640 150% 897 185%

40% 884 60% 1,638 83%

29% 1,395 60% 2,683 64%

22% 1,663 30% 3,585 34%

Source: Lehman Brothers Research

-6% 140 33%

60% 220 57%

14% 341 55%

15% 539 58%

268% 1,024 90%

136% 1,945 90%

89% 3,306 70%

-25% 50 21% 108 38%

50% 30 -21% 98 -10%

17% 50 32% 136 39%

33% 50 -3% 158 16%

36% 55 6% 199 26%

16% 60 54% 284 43%

100% 80 80% 430 51%

3000% 100 150% 912 112%

50% 300 60% 1,733 90%

50% 500 60% 3,059 77%

50% 800 30% 5,027 64%

Source: Lehman Brothers Research

Worldwide Polysilicon Supply

TIER I POLY SUPPLIERS

6,100 4,800 1,600 700 1,200 4,400 4,200 3,700 26,700

6,450 4,900 1,600 750 1,200 4,600 4,600 3,700 27,800

7,250 5,100 1,600 830 1,200 5,050 5,250 3,850 30,130

8,850 5,350 1,675 880 1,250 5,600 5,750 4,200 33,555

10,500 5,650 1,825 950 1,350 6,200 6,500 3,465 36,440

10,838 5,143 1,700 871 1,254 5,950 7,438 6,035 39,228

14,238 5,865 1,870 914 1,339 8,203 10,625 8,500 51,553

19,550 6,673 2,083 1,020 1,445 13,090 15,300 9,450 68,610

25,075 7,395 2,380 1,190 1,615 17,000 19,338 11,550 85,543

28,900 8,245 2,720 1,360 1,785 19,125 21,675 13,650 97,460

Source: Lehman Brothers Research