Local solar PV subsidies pave way for China’s national policy

Three Chinese provincial governments are offering subsidised feed-in tariffs (FiT) to local solar photovoltaic (PV) power producers with hopes of reviving the Chinese PV market. The global PV market is in malaise due to policy changes in several European countries and this has also hit the PV sector in China, which heavily depends on the export market.

A recent news report said the Qinghai provincial government would invest 13 billion yuan (US$197 million) in PV projects totaling 800 MW. On May 9th, the Qinghai Provincial Development and Reform Commission announced a FiT of 1.15 yuan/kWh for PV stations established before September 30th – the project is dubbed the “930 plan”. Shandong’s provincial government is even more generous.  FiT for PV solar power producers is 1.7 yuan/kWh for those who started operations in 2010, 1.4 yuan/kWh for those starting this year and 1.2 yuan/kWh for those starting in 2012. Jiangsu, which pioneered fixed pricing for grid-connected PV power in China, set the following: 2.15 yuan/kWh for installations that began operations in 2009, 1.7 yuan/kWh (for those starting in 2010) and 1.4 yuan /kWh (2011). 

Despite these initiatives, there is no national policy for grid-connected PV power generation, says Xiao Han, a new energy industry researcher at CIConsulting. Xiao says local policies are limited in focus and reach, and a national plan is needed. Nonetheless, the provincial initiatives may be an impetus for a national plan.

It remains unclear whether the Chinese PV market is benefiting from the local initiatives. There has been overcapacity in the polysilicon and PV equipment manufacturing industry over the last two years. Topped with market shrinkage and oversupply, prices fell badly despite assurances that the situation is temporary.

The current difficulties are due to several European countries removing their PV subsidies. However, as traditional markets shrink, Chinese PV enterprises turn to emerging markets, including those in Asia. Xiao says while American, Japanese and Chinese PV markets are growing fast, they cannot offset the drop in demand across the European Union.

Interested players need to consider, among others, power generation cost, energy demand from local economies, and governmental subsidies, when entering the PV market, says Xiao. Compared with traditional energy and wind power generation, large-scale PV power generation is still cost-prohibitive, and while local government subsidies are promising, they cannot drive the PV market across China. 

The initiatives by Jiangsu, Qinghai and Shandong governments could serve as models to revive the Chinese PV market. Each is unique. For instance, the price support offered by Shandong is higher than Qinghai’s 1.15 yuan/kWh, and is more attractive to investors. Nonetheless, given that Qinghai is on a high plateau with plenty of sunshine and a level of irradiation second only to Tibet, PV stations at Qinghai can generate more power, says Xiao. The central government can learn from these provincial governments when drafting a national policy.  – Nanjing Shanglong Communications

View all contents of October 2011 issue
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