China has proposed to slash state subsidies for wind and solar PV power projects for the year 2020 which it believes will promote the sustainable and healthy development of the new energy industry, according to a draft consultation note published by the country's National Energy Administration (NEA).
For solar PV, the subsidy for 2020 has been limited to RMB 1.5 billion ($216 million), to be divided into RMB 1 billion ($144 million) for large scale solar power projects that win in competitive state auctions along with commercial and industrial distributed PV plants, and RMB 500 million ($72 million) for residential solar. Subsidies will be granted provided the project enters construction before the end of 2020.
Provincial state authorities have also been asked to assess and report their requirements for subsidized projects to secure approvals for construction to be launched.
The news of this subsidy cut should not be surprising for the Chinese solar industry, or even the global market as it was expected, ever since China first announced pulling back state subsidies for large scale solar PV project development on May 31, 2018. The government has been preparing the industry to move towards a subsidy-free era as technological improvements help cut costs for solar PV production pitting it against conventional power sources on grid parity basis.
However, the RMB 1.5 billion amount set aside for solar is way less than the RMB 3 billion NEA announced for 2019, as per an April 2019 Reuters report. This was followed by NEA shortlisting 22.79 GW of large-scale and distributed generation PV capacity being eligible for RMB 1.7 billion of subsidies during the entire 2019 (see Subsidy For 22.79 GW Chinese Solar Projects In 2019).
The NEA will be accepting stakeholder feedback on the proposed consultation draft titled Notice On Relevant Matters Concerning the Construction of Wind and Photovoltaic Power Projects In 2020 latest by February 6, 2020. The consultation draft is available in Chinese language on NEA's website.
Impact on annual installations
The good thing is this announcement has come rather early on in the year – and just before the Chinese New Year holidays. Last year, the announcement wasn't made until April 2019 leading to a slump in installations in the first three quarters. As against 2018 when China reported total solar PV installations of 44.38 GW, PV InfoLink guided for 33.6 GW of new installations in 2019. Official numbers from the NEA are not yet out.
Earlier this year, the Asia Europe Clean Energy (Solar) Advisory Co. Ltd. (AECEA) provided in its annual 2019 solar installation forecast for China a range between 20 GW to 24 GW. This decline, AECEA explained, will be due to a delayed release of policy, problems with availability of land, challenges to mobilize financing and grid connection issues. The annual budget of RMB 1.5 billion as announced by NEA for 2020 falls short of expectations of RMB 1.75 billion that AECEA expected for the year.
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