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Subsidy-Free Solar Power? Study Shows Chinese Major Cities Enjoy Solar Power Cheaper Than Grid

published: 2019-08-21 18:00

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The PV levelized cost of electricity (LCOE) in China is declining year by year. A team led by Professor Jinyue Yang of KTH Royal Institute of Technology in Stockholm pointed out that the cost of a lot of unsubsidized solar installations is already lower than the general electricity tariffs. Even one-fifth of the solar energy plan has been able to compete with electricity generated solely from coal.

The annual PV installed capacity in China has reached 43 GW. The cumulative capacity totals more than 170 GW. According to the team's paper in Nature Energy, the team believes that technological advancement, cost reduction, and government support are the driving force of China's solar energy. Since the year 2000, the Chinese government has introduced more than 100 policies that are favorable to solar power development, which reduced the PV LCOE year after year. From 2008 to 2009, the solar LCOE has dropped from RMB 3 to RMB 1 per kWh.

Credit: Nature Energy

Professor Yan said that government subsidies have accelerated solar energy development, and on the other hand, this has also caused overcapacity.

As a large number of businesses have entered the solar energy industry, reaping the benefits of a booming industry with the help of increasing subsidies, this also caused overcapacity and a large subsidy gap. The renewable energy subsidy gap has reached RMB 100 billion (more than US$14 billion) by the end of 2017. Therefore, the Chinese government introduced the 531 New Deal in mid-2018, which significantly restricted the power plant constructions and subsidies. This move to slow down China's fast-growing solar industry is intended to increase the “quality” of the photovoltaic products with low or zero subsidies.

Regarding solar plants with low or zero subsidies, are they even feasible? The team led by Professor Yan studied 344 cities in China. They found that, by estimated calculations, the cost, profit, and transaction price of solar energy were lower than the grid supply. 22% of the city's solar power price was already on the same level as that of electricity generated by coal.

The cost of solar power generation is on the same level as that of coal, hydropower, and the likes, which is also called “grid parity”. The team believes that this is the key to expanding the installations of renewable energy. Whether China's solar power has achieved grid parity, there are many studies with different opinions regarding this issue. Many studies from the United States and Germany point out that solar energy in big cities in China is likely to achieve grid parity by 2020. However, it is considered by some that it will still take several decades to achieve such goals. Some have even voiced their doubts about their source, citing that the information collected by the team is older.

With all that being said, grid parity depends on how much soft costs and the manufacturing costs can be reduced. After all, the cost of China's CAPEX entails not only module and inverters, but also various costs such as land-related costs, taxes, and grid-connected costs, etc.

The Impact on the Taiwanese Solar Market

Given that China has introduced “531 new deal” and the costs of PV cells are slipping, how did this affect the Taiwanese solar market? The international market frequently experienced waves of sell-off since the introduction of the said new policy from China, which in turn affected the sales of Taiwan's PV cell exports. Such events caused Taiwanese factories to reduce PV cell productions. Some even have gone as far as abolishing their upstream departments such as wafers and PV cells.

(More Information: TechNews)

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