China’s solar industry has been facing mounting challenges since 2018. From the start of last year, the US has been levying tariffs at rates of up to 30% on imports of China-made PV products. The Chinese government then slashed subsidies and FiT rates for domestic solar projects under the 531 New Policy, which came into effect in the middle of 2018. China appears to be committed to the elimination of subsidies in the development of large-scale solar projects. According to a report from Reuters on November 20, China’s Ministry of Finance has announced that subsidies for local solar power stations will end at the conclusion of 2019. This move is part of the government’s efforts to cut the next year’s budget for renewable subsidies by 30%.
China currently has two top-tier grid operators: the State Grid and China Southern Power Grid. There are also 17 local grid operators supplying power in 11 provinces and autonomous regions. The Ministry of Finance’s latest policy targets solar power stations connected to the local grids. However, the agency will release a separate subsidy budget for the local grid operators and China Southern sometime in the future.
The announcement notice issued by the ministry includes some details on the various cuts made to the budget for renewable energy subsidies and FiT rates. The total amount is going to be lowered from CNY 8.1 billion this year to CNY 5.67 billion next year. Subsidies for solar will be reduced from CNY 3 billion this year to CNY 2.63 billion next year. On the other hand, the allocation of solar subsidies for 2020 will prioritize DG projects, the Solar Poverty Alleviation Plan, generation systems owned by independent public power producers, and some special projects for the civil sector.
Reuter’s report indicates that China will limit its subsidy support to small-scale solar projects and the Solar Poverty Alleviation Plan in the future. Therefore, government funding of local solar power stations is expected to end starting next year.
China plans to reduce subsidies for wind and biomass generation as well. Subsidies for wind projects will be cut from CNY 4.24 billion this year to CNY 2.94 billion next year. There are even rumors that subsidies for onshore wind projects will be completely phased out by the beginning of 2021. A budget of CNY 1 billion has been set aside for supporting the development of biomass generation this year. That amount will shrink to CNY 730 million for 2020.
The Chinese government justifies the ratcheting down of subsidies by pointing out that the cost of generation has been declining over the years for solar and wind. After the 531 New Policy had come into effect, the Chinese government in August last year released its plan for developing subsidy-free solar projects for demonstration purposes. This plan has been in implementation for over 10 months, and the related regulatory framework is also being built up.
A source within the solar industry told Bloomberg that China’s annual installed capacity for solar is projected to plunge from 41GW in 2018 to just 25GW in 2019 due to the steep subsidy cuts to large-scale solar projects.
By eliminating subsidies and transitioning to an auction system for funding solar projects, the Chinese government is also hoping to ease the growing shortfall of renewable subsidy payments. This issue came to light with the release of the 531 New Policy. Outstanding subsidy payments already reached around CNY 100 billion at the end of 2017. According to reporting from local media, the Energy Research Institute of China’s National Development and Reform Commission found that the payment shortfall had expanded to around CNY 200 billion as of the end of 2018.
(This article is an English translation of news content provided by EnergyTrend’s media partner TechNews. Photo credit: BlackRockSolar via Flickr CC BY 2.0.)