The new regulations will take effect from August. The reason is the reduction in the cost of equipment for wind and solar energy that occurred due to the boom of renewables in China.
For many years, Chinese regulators have provided significant funds to support renewable energy projects. This has seriously sped up the industry’s evolution. China has become the world leader in terms of solar and wind energy capacity, having also established its own production of renewable energy equipment. In China, over the past five years, electricity generation from renewable sources has grown faster (by 20% per year) than total electricity production (by 6% per year).
However, along with electricity generation, the need for subsidies grew. The fund, set up to process applications for subsidies, could not keep up with their number, while the approved subsidies were not funded on time: to date, subsidy arrears have reached $40 billion.
From now on, the authorities claim that solar and wind energy have reached parity with grid electricity prices. Prior to this, the Chinese Ministry of Finance promised that in 2021 solar energy subsidies will grow by almost 60% compared with last year. However, new projects under development will be subject to new regulations: electricity from these renewable energy plants will be sold either at benchmark prices set for coal power or at market prices. Bidding for the sale of electricity will become voluntary, and regional authorities will have the right to set prices for new offshore wind and solar power plants.
Earlier, the Chinese authorities proposed to change the regulation of renewables. The government’s plan was to cut subsidies to producers of solar and wind energy, or to quota their bidding for guaranteed connection to the grid.
To date, in China, the unit cost of coal-fired electricity ranges from $50 to $66 per MWh, while for offshore wind farm it ranges from $41 to $62 per MWh, and for solar – from $29 to $59 per MWh. By the end of 2021, the capacity in solar and wind energy in the country will have to increase by at least 90 GW.