China issues slight FIT cut for solar in 2016

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As solar production and construction costs are set to continue to fall in 2016, China’s National Development and Reform Commission (NDRC) has announced that it will cut the feed-in tariff (FIT) offered to solar power and wind developers next year to reflect the new market conditions.

A statement posted on the NDRC website confirmed that FIT reductions for new solar power projects could be as much as 11%, falling by between 0.02 to 0.10 yuan/kWh for on-grid solar farms.

Solar farms located in the drier, hotter and less populated western regions of China are set to face the higher cuts, but even at this higher rate, experts believe that the cuts are not severe enough to harm the bottom lines of many Chinese solar companies.

Rosie Pidcock, senior business development manager at UGE International, told Reuters that the cuts are actually positive for China’s rooftop solar sector, adding that utility-scale developers that have built large solar farms in the west are likely to be hardest hit.

Having fallen short of hitting its solar installation target for 2014, China’s National Energy Administration (NEA) set a bold goal of adding more than 17 GW of new solar PV capacity in 2015, although by the end of Q3 the country was still off the pace somewhat.

An overreliance of coal – which powers more than 70% of China – and worsening smog and pollution in China’s largest cities has prompted the government to step up its clean energy efforts, with a November power sector reform now giving renewable energy producers preferential treatment in proposed electricity tenders.