Lehman Solar Incentives Handbook

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Solar Incentives HandbookSeptember 11, 2008

Vishal ShahSolar Energy Analyst

212-526-4378

[email protected]

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 considerthis report as only a single factor in making their investment decision.

PLEASE SEE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 28.


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Overview of Major Solar Market Incentives


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New Incentives in Emerging Markets

Emerging Market Demand Potential Scenario Analysis

Source: Lehman Brothers Research

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 programannouncements in 08/09

Expected 2009 Shipments

Canada 270MW

France 230MW

Italy 500MW

South Korea 340MW

2009 Outlook

Shipments (MW) 2008 2009 Base 2009 Bull 2009 Bear

Spain 1,150 300 300 300

Increase/Decrease -850 -850 -850

Italy 130 500 700 300

South Korea 85 340 400 250

Greece 30 75 100 30

Canada 10 270 350 200

France 30 230 230 230

Portugal 20 55 55 55

Czech Republic 10 70 70 70

Belgium 5 40 40 40

Australia 20 70 70 70

Israel 0 35 35 35

India 30 130 130 130

UAE 2 52 52 52

Bulgaria 2 52 52 52

Japan 150 350 450 200

China 30 60 60 60

Africa 20 70 70 70

South America 10 60 60 60

ROW 10 40 40 40

Emerging Market Demand 594 2,499 2,924 1,904

Increase/Decrease 1,905 2,330 1,310

Germany 1,800 2,600 2,600 2,600

Increase/Decrease 800 800 800

USA 340 540 540 540

Increase/Decrease 200 200 200

2009 Supply/Demand Analysis

Incremental Supply (MW) 2,055 2,055 2,055

Incremental Demand (MW) 2,055 2,480 1,460

Spain -850 -850 -850

Emerging Markets 1,905 2,330 1,310

Germany 800 800 800

USA 200 200 200Excess/Tight Supply Balance Tight Excess

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Regional DemandOverview of Major Solar Market Incentives

EuropeAnnual Solar Installations (MW) 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E

Germany 79 83 170 546 837 960 1,328 1,793 2,689 4,034 5,244 6,293

y/y (%) NM 5% 105% 221% 53% 15% 38% 35% 50% 50% 30% 20%

Italy 0 0 0 0 6 60 87 131 500 850 1,275 1,657

y/y (%) NM NM NM NM NM 900% 45% 50% 283% 70% 50% 30%

Spain 0 5 15 25 35 110 428 1,156 300 360 432 518

y/y (%) NM NM 200% 67% 40% 214% 289% 170% -74% 20% 20% 20%

France 3 3 4 5 7 11 16 33 229 458 916 1,831y/y (%) NM 27% 18% 26% 43% 56% 50% 100% 600% 100% 100% 100%

Greece 0 0 0 1 1 1 12 30 75 188 469 1,172

y/y (%) NM -10% -10% 186% -3% 20% 900% 150% 150% 150% 150% 150%

Czech Republic 0 0 0 0 0 0 4 7 70 105 158 236

y/y (%) NM NM NM NM NM NM NM 100% 900% 50% 50% 50%

Austria 1 4 7 4 3 2 3 6 25 38 56 84

y/y (%) NM 250% 55% -35% -29% -47% 56% 150% 300% 50% 50% 50%

Portugal 0 0 0 1 0 0 12 18 54 81 122 182

y/y (%) NM 100% 0% 25% -20% -100% NM 50% 200% 50% 50% 50%

Switzerland 2 2 2 2 4 3 3 6 36 54 81 122

y/y (%) NM -17% -21% 40% 90% -35% 15% 100% 500% 50% 50% 50%

The Netherlands 8 6 20 4 2 2 1 2 22 33 50 74

y/y (%) NM -25% 238% -82% -53% -12% -33% 100% 1000% 50% 50% 50%

Belgium 0 0 0 0 0 0 2 4 40 60 90 135

y/y (%) NM NM NM NM NM NM NM 100% 900% 50% 50% 50%

Cyprus 0 0 0 0 0 0 1 2 12 18 27 41

y/y (%) NM NM NM NM NM NM NM 100% 500% 50% 50% 50% Israel 0 0 0 0 0 0 0 0 36 55 82 123

y/y (%) NM NM NM NM -75% 200% 0% 50% 8000% 50% 50% 50%

Rest of Europe 20 16 34 44 40 74 107 161 402 723 1,230 1,844

y/y (%) NM -18% 107% 31% -9% 85% 45% 50% 150% 80% 70% 50%

Total 113 120 251 631 935 1,222 2,004 3,348 4,454 7,001 10,147 14,190

y/y (%) NM 6% 109% 152% 48% 31% 64% 67% 33% 57% 45% 40%


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AsiaAnnual Solar Installations (MW) 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E

Japan 122 161 218 256 292 292 230 150 299 508 661 760

y/y (%) NM 32% 35% 17% 14% 0% -21% -35% 100% 70% 30% 15%

China 0 0 0 5 15 20 24 29 58 104 166 232

y/y (%) NM NM NM NM 200% 33% 20% 20% 100% 80% 60% 40%

South Korea 1 1 1 3 5 21 42 85 339 678 1,255 1,632

y/y (%) NM -25% 0% 317% 100% 324% 100% 100% 300% 100% 85% 30%

India 0 0 11 13 16 12 17 31 132 250 475 807y/y (%) NM NM NM 18% 23% -25% 45% 80% 320% 90% 90% 70%

Australia 4 6 7 7 8 10 16 20 70 98 126 154

y/y (%) NM 25% 18% 3% 24% 17% 65% 25% 250% 40% 29% 22%

Other 43 50 49 55 51 52 104 216 640 884 1,395 1,663

y/y (%) NM 21% -21% 32% -3% 6% 54% 80% 150% 60% 60% 30%

Total 170 167 236 283 336 355 330 314 897 1,638 2,683 3,585

y/y (%) NM -2% 41% 20% 19% 6% -7% -5% 185% 83% 64% 34%


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AmericasAnnual Solar Installations (MW) 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012ECalifornia 30 35 45 48 52 70 97 165 280 420 713 1,070

y/y (%) NM NM NM NM NM 34% 39% 70% 70% 50% 70% 50%

New Jersey 3 5 5 5 6 18 18 21 30 45 68 101

y/y (%) NM NM NM NM NM 224% 0% 20% 40% 50% 50% 50%

Nevada 0 0 0 0 0.5 3 15 22 44 74 127 215

y/y (%) NM NM NM NM NM 548% 356% 50% 100% 70% 70% 70%

Colorado 0 0 0 0 0.2 1 13 39 59 99 169 287

y/y (%) NM NM NM NM NM 459% 1200% 200% 50% 70% 70% 70%

New York 0 0 0 0 1 3 4 5 8 11 15 21

y/y (%) NM NM NM NM NM 105% 34% 40% 40% 40% 40% 40%

Hawaii 0 0 0 0 1 3 4 5 7 10 14

y/y (%) NM NM NM NM NM NM 225% 40% 40% 40% 40% 40%

Connecticut 0 0 0 0 0.2 1 3 4 10 20 41 81

y/y (%) NM NM NM NM NM 302% 257% 50% 170% 100% 100% 100%

Arizona 0 0 0 0 2 2 2 3 5 10 18 35

y/y (%) NM NM NM NM NM 36% 0% 55% 55% 90% 90% 90%

Massachuesets 0 0 0 0 1 2 1 2 9 17 30 54y/y (%) NM NM NM NM NM 134% -7% 65% 300% 80% 80% 80%

Oregon 0 0 0 0 0 1 1 3 5 10 21 42

y/y (%) NM NM NM NM NM 42% 160% 100% 100% 100% 100% 100%

Other States 4 17 16 31 43 40 64 73 84 310 734 1,386

y/y (%) NM NM NM NM NM -6% 60% 14% 15% 268% 136% 89%

US Total 37 57 66 84 105 140 220 341 539 1,024 1,945 3,306

y/y (%) NM 54% 16% 27% 25% 33% 57% 55% 58% 90% 90% 70%

Canada 2 1 2 2 3 4 4 9 273 409 614 921

y/y (%) NM -25% 50% 17% 33% 36% 16% 100% 3000% 50% 50% 50% Other 40 50 30 50 50 55 60 80 100 300 500 800

y/y (%) NM 21% -21% 32% -3% 6% 54% 80% 150% 60% 60% 30%

Total 79 108 98 136 158 199 284 430 912 1,733 3,059 5,027

y/y (%) NM 38% -10% 39% 16% 26% 43% 51% 112% 90% 77% 64%


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Worldwide Polysilicon SupplyOverview of Major Solar Market Incentives

Tier I FirmsAnnual Supply (MT) 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E

TIER I POLY SUPPLIERS

Hemlock Semiconductor 6,100 6,450 7,250 8,850 10,500 10,838 14,238 19,550 25,075 28,900

Tokuyama 4,800 4,900 5,100 5,350 5,650 5,143 5,865 6,673 7,395 8,245

Mitsubishi Materials 1,600 1,600 1,600 1,675 1,825 1,700 1,870 2,083 2,380 2,720

Sumitomo Titanium 700 750 830 880 950 871 914 1,020 1,190 1,360

Mitsubishi Polysilicon 1,200 1,200 1,200 1,250 1,350 1,254 1,339 1,445 1,615 1,785REC 4,400 4,600 5,050 5,600 6,200 5,950 8,203 13,090 17,000 19,125

Wacker 4,200 4,600 5,250 5,750 6,500 7,438 10,625 15,300 19,338 21,675

MEMC 3,700 3,700 3,850 4,200 3,465 6,035 8,500 9,450 11,550 13,650

TIER I - Total 26,700 27,800 30,130 33,555 36,440 39,228 51,553 68,610 85,543 97,460


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Tier II FirmsAnnual Supply (MT) 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E

TIER II POLY SUPPLIERS

NON - CHINA POLY SUPPLY

DC Chemical 0 0 0 0 0 2,125 5,313 7,438 9,563 11,688

M.SETEK 0 0 0 0 750 4,680 5,313 10,350 15,600 18,500

Nitol Group 0 0 0 0 0 250 1,063 2,500 3,500 4,500

HOKU Materials 0 0 0 0 0 0 298 1,350 2,500 3,500Solarworld 0 0 0 0 50 150 404 850 1,025 1,175

Others (Russia, New entrants) 0 0 0 0 250 600 935 2,400 3,650 4,250

Non - CHINA Total 0 0 0 0 1,050 7,805 13,324 24,888 35,838 43,613

CHINA POLY SUPPLY

Asia Silicon 0 0 0 0 0 0 2,000 5,000 7,000 9,000

AE Polysi licon 0 0 0 0 0 350 1,100 2,000 2,750 3,250

Emei Semiconductor 0 0 0 100 250 300 300 325 350 350

Luoyang Semiconductor 0 0 0 150 500 850 2,000 3,150 3,650 4,250

LDK Solar 0 0 0 0 0 100 2,000 18,000 22,000 26,000

Jiangsu Zhongneng - GCL 0 0 0 0 500 1,250 2,250 3,150 3,300 3,300

Wuxi Zhongcai 0 0 0 0 150 400 1,000 5,750 10,000 10,000

Sichuan Xinguang 0 0 0 0 100 725 1,250 1,375 1,500 1,500

Shenzhen Nanbo 0 0 0 0 0 250 500 1,125 1,750 1,750

Shunda 0 0 0 0 0 350 1,450 2,600 3,500 4,500

Yunnan Aixin 0 0 0 0 0 150 300 1,800 3,300 3,300Ningxia Yangguang 0 0 0 0 0 250 1,000 3,000 4,500 4,500

Others (China) 0 0 0 0 0 250 750 4,900 8,800 8,800

China - Total 0 0 0 250 1,500 5,225 15,900 52,175 72,400 80,500


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Tier II FirmsAnnual Supply (MT) 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E

TIER II POLY SUPPLIERS

Metallurgical Silicon

Elkem Solar 0 0 0 0 0 800 2,800 7,438 9,563 11,688

Timminco 0 0 0 0 0 1,930 9,000 12,240 17,000 19,500

Dow Corning 0 0 0 500 2,000 4,000 6,000 8,500 12,500 16,500

Globe Speciality 0 0 0 0 180 680 1,500 3,500 6,500 10,000JACO Solarsi 0 0 0 0 500 1,500 2,500 4,000 6,500 10,000

JFE 0 0 0 0 250 750 1,500 2,500 4,000 6,500

Others 0 0 0 0 0 250 750 1,500 3,500 6,500

Metallurgical Silicon - Total 0 0 0 500 2,930 9,910 24,050 39,678 59,563 80,688

Tier II - Total 0 0 0 750 5,480 22,940 53,274 116,740 167,800 204,800

Total (excl. Met Poly) 26,700 27,800 30,130 33,805 38,990 52,258 80,776 145,673 193,780 221,573

Total (incl. Met Poly) 26,700 27,800 30,130 34,305 41,920 62,168 104,826 185,350 253,343 302,260


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Germany

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



Despite the recent change to the EEG, Germany should remain the worlds largest market

Source: IEA, Lehman Brothers Research

Annual Solar Installations (MW)Solar Project IRR Summary

-

1,500

3,000

4,500

6,000

7,500

2007 2008 2009E 2010E 2011E 2012E

7.8% 7.8%

2008 2009

20 year incentive program; IRR assumes 15% ASP decline in 2009

Annual solar insolation: 1,250 kWh/sq. mtr


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Spain

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.

The new draft proposal could limit the growth in the Spanish market



14.3%

12.0%

2008 2009


Annual solar insolation: 1,950 kWh/sq. mt r

-

300

600

900

1,200

1,500

2007 2008 2009E 2010E 2011E 2012E


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United States

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 thenext 15 years, with California, New Jersey, Arizona, Maryland, and Pennsylvania leading the charge.

United States could emerge as a large market in 2H09


Annual Solar Installations (MW)Solar Electricity versus Retail Electricity Price

$0.18

$0.24

Retail Electricity Solar Electricity Price -

Unsubsidized

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

1000

2000

3000

4000

2007 2008 2009E 2010E 2011E 2012E

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Japan

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.

Japan plans to halve the cost of solar generation in 3-5 years through renewed subsidies



$0.20$0.22


Unsubsidized




0

300

600

900

2007 2008 2009E 2010E 2011E 2012E

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South Korea

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.

South Korea plans to raise solar PV cap from 100MW to 500MW in October 2008



13.8%14.7%

2008 2009


Annual solar insolation: 1 ,850 kWh/sq. mt r

-

400

800

1,200

1,600

2,000

2007 2008 2009E 2010E 2011E 2012E


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France

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.

France could emerge as a major market for BIPV due to its favorable tariff system



16.3%17.6%

2008 2009



-

400

800

1,200

1,600

2,000

2007 2008 2009E 2010E 2011E 2012E


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Italy

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 >20kWnon-integrated installations. Additional incentives of 0.04 - 0.05/kWh each are provided for partly

integrated and fully integrated projects.

Attractive IRRs in Italy could make it one of the most promising markets in Europe



12.1%13.3%

2008 2009




0

600

1200

1800

2007 2008 2009E 2010E 2011E 2012E

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Greece

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.

The government will likely have to simplify its procedures in order to meet marketexpectations



15.8%16.8%

2008 2009

20 year incent ive program; IRR assumes 15% ASP decline in 2009


-

250

500

750

1,000

1,250

2007 2008 2009E 2010E 2011E 2012E


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China

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 acost plus reasonable margin basis.

Chinas focus has been more towards increasing solar hot water



$0.07

$0.33


Unsubsidized



-

100

200

300

400

500

2007 2008 2009E 2010E 2011E 2012E


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India

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.

Despite low IRRs, India could emerge as an attractive market due to sheer size



-

200

400

600

800

1,000

2007 2008 2009E 2010E 2011E 2012E

6.8%

7.8%

2008 2009




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Australia

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

Several state government feed-in tariff incentives could result in 50MW demand in 2009



-

30

60

90

120

2007 2008 2009E 2010E 2011E 2012E

9.2%10.0%

2008 2009




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Austria

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.

Austria can potentially replicate its success in solar thermal power with solar PV power



4.3%

5.9%

2008 2009



-

20

40

60

80

100

2007 2008 2009E 2010E 2011E 2012E


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Canada

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


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Israel

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.

The adoption of a new tariff for smaller PV systems may provide fresh impetus



15.2%16.8%

2008 2009



-

40

80

120

160

200

2007 2008 2009E 2010E 2011E 2012E


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Portugal

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 thetariffs 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%.

Portugal plans to install 150MW solar by 2010



6.3%

8.5%

2008 2009



-

40

80

120

160

200

2007 2008 2009E 2010E 2011E 2012E


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Switzerland

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.

Switzerland provides additional incentives for Building Attached and Building Integrated



8.7% 9.1%

2008 2009



-

25

50

75

100

125

2007 2008 2009E 2010E 2011E 2012E


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The Netherlands

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.

The Netherlands has the potential to become a large solar market in 2010



1.1%

1.9%

2008 2009



-

15

30

45

60

75

2007 2008 2009E 2010E 2011E 2012E


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Cyprus

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.

Cyprus has the worlds highest per capita solar thermal power



14.2%15.7%

2008 2009



-

10

20

30

40

50

2007 2008 2009E 2010E 2011E 2012E


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Czech Republic

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. Theremuneration is adjusted to electricity prices annually.

Attractive IRRS in the Czech Republic could result in it becoming a major market



7.8%8.7%

2008 2009




0

50

100

150

200

250

2007 2008 2009E 2010E 2011E 2012E

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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 orissuers 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 expressedin this email.

Important DisclosuresLehman 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 aconflict 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 tothem, 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 ofthis 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 isgenerated 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 notbe 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 / PositiveEnergy Conversion Devices (ENER - USD57.62) 2-Equal weight / PositiveEvergreen Solar Inc. (ESLR - USD5.90) 2-Equal weight / PositiveFirst Solar Inc. (FSLR - USD211.25) 1-Overweight / Positive

JA Solar Holdings Co., Ltd. (JASO - USD12.12) 1-Overweight / PositiveSunPower Corp. (SPWR - USD79.01) 1-Overweight / PositiveSuntech Power Holdings (STP - USD39.91) 1-Overweight / PositiveMEMC Electronic Materials (WFR - USD34.05) 1-Overweight / Positive

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Documents

Lehman Solar Incentives Handbook