China considering solar subsidy cut

The National Development and Reform Commission (NDRC) of China, the nation’s most powerful strategic planning department, may be considering reducing the solar power tariff by 5.6% from its current level in 2016, and by a further 15% by the end of 2020. This move would directly reduce the subsidy received by solar power stations in China, and reduce the potential ROI of PV projects.

Mr. Liang Zhipeng, deputy Director General of the department of new and renewable energy at the NEA (National Energy Administration) delivered a clear message at a PV forum two weeks ago in Beijing that China will insist on a subsidy policy for the PV industry over the next 8-10 years, but that does not mean that the subsidy will remain unchanged over that time.

This message was taken by many at the show to mean that the government was preparing the ground for a subsidy cut because the current level is not sustainable.

China’s grandiose plan for its PV industry is to achieve 20 GW of new installations annually until 2020. Cumulatively, should China maintain that installation pace then by 2020 the country will have more than 150 GW of solar PV installed.

The current subsidy for each kWh of solar power installed is RMB 1.00 for ground-mounted installations and RMB 0.42 ($0.07/kWh) for distributed PV systems. This is issued from the central government, and does not include subsidies from provincial or even city level. With just the central government subsidy taken into account, the total subsidy required to reach China’s PV aims will reach dozens of billions of RMB, growing each year – a rate that is beyond the financial capacity of the government.

Another are of the central government, the Ministry of Industry and Information Technology (MIIT), has begun formulating policies for the PV industry. Mr. Jin Lei, a MIIT representative, said at the forum that the new policies will concentrate more on industrial standards, technical processes and quality control, rather than the previous approach of direct subsidy support.

Though there are not many further details pertaining to the planned subsidy cuts, the move will likely lead to a definitive reduction of PV support in China. The government does wish to support further growth in its domestic PV industry, but is also mindful of its duties of care for other industrial goals, such as developing core technology, industrial upgrading, and achieving wider emission reduction commitments made on an international scale.