China is planning to increase efforts to ensure that the country’s wind and solar sectors can quickly compete without subsidies and achieve “grid price parity” alongside traditional energy sources like coal, according to new draft guidelines published earlier this month.
According to new draft guidelines issued by China’s National Energy Administration (NEA) dated September 13, provided to certain industry and news outlets, China is looking to phase out power generation subsidies by providing the country’s renewable energy sector with further technological and policy support so that they can compete against other technologies.
Specifically, the draft guidelines seek to incentivize renewable energy technologies in regions where they can operate without help from government subsidies which, so far, have put a tremendous drain on Chinese financial resources. This will build on work done in regions which the draft guidelines state have “basically achieved price parity” with coal. According to reports, China’s feed-in tariff — which was capped in May, much to the surprise of the global solar industry — would be set aside in these regions and local governments would be given freedom and encouraged to provide the necessary technical and regulatory support to spur development, and to even introduce their own feed-in tariffs if they wish.
Developers would be responsible for finding their own off-takers, while a regional trading program for solar and wind power has been dismissed. Meanwhile, grid distribution companies in these favorable locations will find themselves under increased scrutiny to host the additional capacity
“[The]provincial market makes sense. Without subsidy, renewables will be more involved in and impacted by power markets, which are mostly operated at the provincial level,” BNEF analyst Yvonne Yujing Liu told PV Tech. “Under the current power mechanism, grids are unlikely to be very friendly and supportive to renewables, until they become significantly cheaper than operating conventional power. That may only happen around 2025, according to our long-term economics forecasts.
“The major problem is that the NEA has not clearly define a business model for subsidy-free projects. This definition is subject to change under the ongoing power market reforms. So there are lots of uncertainties on generation hours and prices for these projects.”
It all follows on from China’s June decision to put a cap on its solar feed-in tariff (FiT) and a cap on new solar projects for 2018, essentially halting the country’s solar installation figures (with only a small increase expected).