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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Rumors Of Chinese Subsidy Cuts Send Shockwaves Through Solar Markets

Last year, China sent a shockwave through the global solar market after it cut subsidies and stopped approving new solar installations in the middle of 2018, aiming to curb a huge renewable subsidy payment backlog and push for subsidy-free solar power amid continuously declining costs.  

This year, China has yet to announce its policies for subsidizing solar photovoltaic (PV) installations and purchases of electric vehicles (EVs).

While the Chinese policymakers and industry are busy hammering out the details of this year’s approach to solar and EV incentives, reports have started to emerge about the direction of the 2019 policies.

The U.S.-China trade war has been delaying the Chinese announcement of the feed-in tariff (FiT) subsidies for solar-generated electricity and incentives for EV buyers, Taiwan-based DigiTimes reported this week, citing industry sources.

China will be aiming to push solar power generation toward grid parity and ease the burden on subsidy payments, so it would be slashing the total amount of solar FiT subsidies by 80 percent to US$448 million (3 billion Chinese yuan), according to the publication’s sources.

EV purchases incentives are likely to be further reduced by 30-50 percent this year, after they were cut by around 50 percent on the year in 2018, DigiTimes’ sources say.

Last June, China surprised everyone by announcing that it would not issue any more approvals for any new solar power installations in 2018 and would also cut subsidies.

The quick growth in solar in particular has put a strain on Beijing’s wallet because of the generous feed-in subsidies for new installations. In 2017, these hit US$15 billion (100 billion yuan) and the government has yet to pay these in full. Related: U.S. And China Hold Key To Higher Oil Prices

This year, Chinese policymakers have resumed approving utility-scale solar projects, but developers will have to bid to receive subsidies, Bloomberg quoted the China Photovoltaic Industry Association (CPIA) as saying last month. According to the association, Chinese regulators have proposed to ease some of the policies that had curbed solar installations last year.  

In 2018, China’s solar capacity additions dropped to 43 gigawatts (GW), down by 18 percent from the record-breaking 53 GW in 2017, according to CPIA figures carried by Reuters.

Although clean energy investments globally exceeded US$300 billion for the fifth consecutive year in 2018 and China was once again the undisputed leader with US$100.1 billion, total Chinese investments in clean energy plunged by 32 percent from 2017, also because of the slump in solar power commitments, BloombergNEF (BNEF) said in a report earlier this year.

Chinese solar power investment last year plummeted by 53 percent to US$40.4 billion, due to the lower unit costs and the policy to restrict access to the FiT for new projects, BNEF noted.

“2018 was certainly a difficult year for many solar manufacturers, and for developers in China. However, we estimate that global PV installations increased from 99GW in 2017 to approximately 109GW in 2018, as other countries took advantage of the technology’s fiercely improved competitiveness,” Jenny Chase, head of solar analysis at BNEF, said.

According to Jon Moore, chief executive of BNEF:

“Once again, the actions of China are playing a major role in the dynamics of the energy transition, helping to drive down solar costs, grow the offshore wind and EV markets and lift venture capital and private equity investment.”

Related: One Last Warning For The U.S. Shale Patch

The major shift in Chinese solar policies in 2018 led to local manufacturers flooding the global solar panel market, creating a glut and pushing prices down.

As a result of this, solar panel prices plunged by 30 percent last year. While this jeopardized smaller Chinese manufacturers, the ultra-cheap solar panels created a windfall for solar developers and investors in solar PV installations around the world.

The market, however, has already started to adapt to these disruptions and prices of China-made solar panels are expected to rebound by 10-15 percent over the next year or two, because the Chinese solar manufacturing market is heading to consolidation as small producers suffered the most from China’s solar policies, Eric Luo, president of China’s GCL System Integration Technology, told Reuters earlier this year.  

By Tsvetana Paraskova for Oilprice.com

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  • Alert Citizen on March 22 2019 said:
    Why does any country cut subsidies for wind and solar? Because without subsidies by taxpayers, the wind and solar installations would not exist. They don't produce enough electrical energy to pay for themselves.

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