China will stop subsidizing new solar farm projects, distributed solar projects for commercial users, and onshore wind farms as soon as this year, Reuters reported, citing the central planning authority of the country.
The change will enter into effect on August 1 and is a departure from the course set late last year. The country’s finance ministry had previously committed to granting 57 percent more subsidies to solar power projects this year, although it did slash subsidies for wind power.
China is a lesson in progress on using subsidies to support the more extensive deployment of renewable power capacity. For years, Beijing has been pretty generous with these installations, spurring a renewables push that turned it into the country with the greatest solar and wind capacity. Then, in 2018, China dropped a bomb on renewables investors.
“A joint statement put out on Friday by the National Development and Reform Commission, Ministry of Finance and National Energy Administration said the allocation of quotas for new projects had been halted until further notice, and tariffs on electricity generated from clean energy will be lowered by 0.05 yuan per kilowatt hour, a cut of 6.7 to 9 per cent depending on the region, effective June 1,” the South China Morning Post wrote in 2018.
The news sent solar stocks reeling and the industry in a frenzy. The motivation behind the cut was that Beijing wanted to ensure the local solar industry was sustainable in the original sense of the word over the long term.
Yet the reasons for the cut—and this year’s end of subsidies—were not exactly altruistic. China has amassed a massive debt pile in subsidies owed to wind and solar companies as a result of its previously generous support for new projects. The pile, according to a Bloomberg report from July last year, is worth about $42 billion.
By Irina Slav for Oilprice.com
More Top Reads from Oilprice.com:
- Oil Could Reach $80 This Summer, But There’s A Catch
- Russia Expands Its Influence In Major Iraqi Oil Fields
- China’s Oil Imports To Drop After Refinery Margins Near $0
If this is the case, then solar farm projects and wind farms don’t need subsidies. After all we are supposed to be in an era of energy diversification where alternative sources to fossil fuels, notably renewables, are growing alongside—not at the expense of—the incumbents.
Therefore, China is absolutely right to stop the subsidies and ensure that the same applies also to EVs.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London