China Working On New Solar Policy

• Roth Capital Partners says Chinese media has reported about the NDRC of China to have released a draft version of its new solar power policy
• The draft details national FIT rates for distributed generation for both residential and commercial and industrial segment, as well as for utility scale solar plants
• Government may be looking at releasing the final policy by February 5, 2019

The National Development and Reform Commission (NDRC) in China has worked out a draft of what could be the country's official new solar policy that talks about feed-in-tariff (FIT) scheme for both utility scale and distributed generation projects. While these will considerably be lower than the rates offered in 2018, analysts at Roth Capital Partners see the possible reintroduction of national subsidies as driving demand in the country toward the high end or above current expectations of 35 GW to 45 GW in 2019.

After pulling back subsidies from new solar power projects in an announcement on May 31, 2018 (531 Policy), in January 2019 the country confirmed its decision to do away with FIT for large scale solar and wind power capacity. It will instead allow only those projects that can deliver power at grid parity and will enter construction before 2020. Subsidies will be provided at the discretion of provincial governments (see Beijing Announces Solar Support Measures).

Referring to Chinese media reports, Roth said the new draft scheme mentions RMB 0.18 ($0.027) per kWh subsidy for residential distributed generation projects, with subsidy amount reduced annually at a rate of RMB 0.02 ($0.0029) per kWh.

Commercial and industrial distributed generation projects may get a subsidy of RMB 0.1 ($0.015) per kWh, to be reduced quarterly by RMB 0.01 ($0.0015) per kWh, starting from Q2/2019.

Under the draft, utility scale solar power plants will get subsidies for three categorized regions as RMB 0.4 ($0.059) per kWh, RMB 0.45 ($0.066) per kWh and RMB 0.55 ($0.081) per kWh. This subsidy amount will be reduced by RMB 0.01 ($0.0015) per kWh quarterly.

Projects that fail to connect to the grid within a year's time, will be penalized with a 5% reduction in the subsidy received each quarter, according to Roth.

Roth analysts wonder how the government plans to fund this since its previous dues to developers are still pending. Final policy could be released by February 5, 2019.