China will reap benefits from supporting solar power

By Lin Boqiang Source:Global Times Published: 2017/8/15 23:03:39

Illustration: Peter C. Espina/GT

In the past five years, China's solar photovoltaic (PV) power generation has seen extremely rapid development, and the country's installed capacity and solar power generation now ranks top in the world. China's large-scale PV development is inseparable from the government's subsidies and support. Like most countries in Europe, China has adopted a feed-in tariff subsidy policy for renewable energy. This policy can encourage industry pioneers when the costs and market change drastically, and it has been internationally proven as one of the most effective renewable energy support policies.

At present, China and Germany adopt similar feed-in tariff subsidy policies, so they are suitable counterparts. But we also need to consider certain differences. For instance, the PV sector has both centralized and distributed patterns and different installation sites and sizes affect the amount of the subsidy.

In 2013, when China PV subsidies were just introduced, China's PV subsidies were 35 percent higher than in Germany, but in 2017 the subsidy amount is basically the same.

With the PV industry becoming mature, China and Germany tend to be consistent with each other in terms of the actual subsidy money. However, the policy subsidy is only part of the PV subsidies. To comprehensively analyze the level of subsidies, national conditions and the market development stage should also be considered.

First, the current electricity price in Germany is the equivalent of three yuan ($45 cents) per kilowatt-hour. In China, the additional charge for renewable energy is usually less than 0.02 yuan per kilowatt-hour. German consumers pay a large amount to fund the PV subsidy, while the Chinese PV subsidies are mainly paid by the government.

Second, the impression that PV subsidies in China are very high is because of the comparison with the on-grid electricity price of thermal power. China is rich in coal resources, offering an advantage in terms of thermal power. Moreover, as the country's power generation facilities are very advanced, the price of thermal power is much lower than that from PV in China. Germany has less coal resources than China, so the generation costs for thermal power are higher and the price difference between various kinds of power generation is not as significant. Therefore, it is more appropriate to say China's thermal power prices are relatively low than to say that China's PV price is high.

Third, it is reasonable to give a higher subsidy at the initial stage for any new energy. China's PV industry started by producing the equipment for European markets, so development of the domestic market came relatively late and explosive growth only happened in the past five years. As well as getting national subsidies, China's PV industry also gets local subsidies and project subsidies, an inevitable requirement in the early stages of industrial development.

In the development of China's PV industry, there have been issues like emphasis on installation instead of power generation and excessively high subsidies in some regions. But to look at it from the perspective of development, these issues are generally inevitable at the starting point of any industry. China's PV subsidy level is generally reasonable and increasingly market-oriented.

To some extent, it is precisely the strong support and subsidies from all levels of government that has made the rapid technological development and cost reductions in China's PV industry possible. Due to the flexibility of PV, it will occupy an increasingly large share in renewable power generation, and will make an outstanding contribution to China's renewable energy development goals in the 13th Five-Year Plan and the overall strategic transformation of China's energy structure by 2030.

The author is dean of the China Institute for Studies in Energy Policy at Xiamen University.

Posted in: INSIDER'S EYE

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