China’s solar sector had a tumultuous year in the renewable energy industry. To counter this, the Central Government has laid out plans to drive the development of subsidy-free wind and solar projects across the country in an effort to push the technologies to grid parity. China’s National Development and Reform Commission and National Energy Agency announced these big plans recently thus providing the necessary political certainty that has been somewhat lacking since the Administration’s decision to undercut the solar industry in May of 2018.
The expectations for 2018 were high since 2017 went so well-being driven by 54GW worth of solar installed. But then, what had the potential to be yet another record-breaking year of solar and renewable energy development collapsed into dust, according to most analysts. The reason for this was that the new “2018 Solar PV Power Generation Notice” had imposed an effective cap on new solar projects for 2018 and a reduction in the country’s solar Feed-in Tariff (FiT) which stated that there was “no new general solar capacity planned” for 2018.
Now, in efforts to come back from the stall of 2018, the country will phase out power generation subsidies in an effort to reduce the massive financial burden being placed on the Central Government. The phase-out will be politically supported to drive down the costs of renewable energy technologies to grid parity. In other words, they aim to drive technology prices down to achieve grid parity and allow wind and solar to begin competing with coal, on their own, without government intervention and without being a burden to the government.
The Central Government is also seeking to optimize the investment environment for affordable grid projects – they encourage projects to obtain reasonable income compensation through green certificate transactions. Furthermore, the Government will cut “unreasonable” fee charges, reduce land prices, and encourage financial institutions to support the construction of these subsidy-free projects.
The agencies laid out a 12-point plan that accounts for numerous directives and provisions. For example, any new renewable energy projects will not be subjected to quotas or annual construction scale restrictions. The only restriction is that projects can only be built in regions where local authorities can guarantee the generated electricity will actually be used, and this is only to prevent further curtailment concerns.
This policy move was the necessary step to underline and signal China’s long-term plans to double-down on renewable energy technologies like wind and solar. Jonathan Luan, an analyst with Bloomberg New Energy Finance explained to Cleantechnica:
“This signals a permanent policy shift towards zero-subsidy renewables. Though the industry suspected it coming after the May 2018 announcement applying breaks to the subsidy flow, the new policy clearly steered the market to a new direction. The two-year policy window should stimulate new build. We are more inclined towards the optimistic scenario of our 34-44GW solar forecast for 2019.”
Chinese solar manufacturers and suppliers saw their stock soar in New York and Hong Kong since the breaking of this news. This is just a part of the global efforts underway to ensure that wind and solar can compete with coal.