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China wants its renewable power producers to start making money and boost their revenues with a new proposal to have local energy administrations take into account “fair returns” for clean energy generation when they make power purchases.
According to a draft rule from China’s National Energy Administration (NEA), as carried by Reuters, energy produced from solar, wind, ocean, geothermal, and biomass should have “fair returns” for the power generation company.
China will also aim to ensure that buyers of electricity purchase power generated from renewable sources, by increasing the oversight of firms trading in electricity and of companies generating renewable energy power.
China has pushed grid operators to prioritize purchases of electricity from renewable power providers as it looks to increase consumption of renewable energy. Despite its drive to promote renewable energy use, China has just said that it would cut the total size of its renewable power subsidies to US$806.5 million (5.67 billion yuan) next year, from US$1.15 billion (8.1 billion yuan) for this year.
The subsidy cut was not unexpected. Beijing said earlier this year it would only approve new solar and wind power installations if their developers can prove the energy they generate is as cheap as that generated in coal-fired power plants.
The departure from generous state support for renewable energy came after the government subsidy bill began swelling to an unacceptable size as companies rushed to add solar and wind farms.
When it was made in January, the initial subsidy cut announcement caused a dive in the price of PV panels and forced analysts to urgently revise down their global forecasts for new solar and wind additions because of China’s leading role in the expansion of the world’s renewable energy capacity.
The effect of the change is already being felt. This year, China will add 25 GW of solar power generation capacity, which although a sizeable amount, is a lot less than the 41 GW added to the energy mix in 2018. As of the end of September, newly installed solar capacity totaled 16 GW.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.