Published on January 16th, 2019 | by Joshua S Hill0
Chinese Government Plans Large-Scale Subsidy-Free Wind & Solar
January 16th, 2019 by Joshua S Hill
China’s National Development and Reform Commission and National Energy Agency announced big plans last week intended to drive the development of new subsidy-free wind and solar projects, providing the necessary political certainty that has been somewhat lacking since the Administration’s decision to undercut the solar industry in May of 2018.
Announced last week, it has taken some time to get all the ducks in a row to properly understand the policies put forward by the National Development and Reform Commission (NDRC) and National Energy Agency (NEA) as well as secure the commentary of China energy experts. Further, considering the size of the policy announcements, it was worth waiting around for a little bit.
Specifically, the NDRC and NEA both published the same press release on January 9 which was addressed to, essentially, the entire country of China — referencing everyone from “all provinces, autonomous regions, municipalities directly under the Central Government,” to a plethora of state-run corporations and power companies. The directive comes after just over half a year of policy uncertainty caused by the Chinese Government’s decision in May 2018 to put a cap on its solar Feed-in Tariff (FiT) and a cap on new solar projects for 2018.
Several months later, the NEA told certain news outlets that it was looking to phase out power generation subsidies — a necessary move so as to reduce the financial drain on the Government — but to replace that with significant political support so as to help renewable energy technologies compete on their own.
That political support has appeared, at least in part, in the form of these new policy directives from the NDRC and NEA. The aim of the policies is essentially a directive to begin building wind and solar projects which will not receive any subsidies from the Central Government, in an effort to make the most of the renewable energy resources across the country and to bring down the price of these projects so they can compete with coal.
The agencies laid out a 12-point plan which, when translated into English, account for numerous directives and provisions. For example, projects laid out under this new direction will not be subject to annual construction scale restrictions, but can only be built in regions where local authorities can ensure that the power will actually be used. No new solar PV will be permitted in the autonomous region of Xinjiang or in the province of Gansu — both of which already suffer from significant curtailment issues, and more solar will only exacerbate this situation. The Central Government will also impose some measure of controls on new solar capacity across a further 12 provinces and parts of 7 others.
The Central Government is also seeking to optimize the investment environment for affordable grid projects and encourage projects to obtain reasonable income compensation through green certificate transactions.
The policy move is what the Chinese renewable energy industry — and, by extension, the global renewable energy industry, specifically that of the solar sector — has been waiting for. After China undercut its own solar industry (and, therefore, the global solar supply industry) there has been a lot of speculation about the specific future of renewable energy capacity additions in China. No one has suggested they would plummet, but exactly what shape they would take has been up in the air. This new policy directive serves to underline and signal China’s long-term plans to double-down on renewable energy technologies like wind and solar.
“This signals a permanent policy shift towards zero-subsidy renewables,” explained Jonathan Luan, an analyst with Bloomberg New Energy Finance who spoke to me via email. “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.”