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China Slashes Renewable Subsidies

China will cut the total size of its renewable power subsidies to $806.5 million (5.67 billion yuan) next year, from $1.15 billion (8.1 billion yuan) for this year, Reuters reports, citing the Chinese Ministry of Finance.

The move is not unexpected. Beijing said earlier this year it will 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 subsidy bill began swelling to an unacceptable size as companies rushed to add solar and wind farms.

Because of this rush, in 2017, renewable subsidies hit US$14.21 billion (100 billion yuan) and the government had still not paid these in full at the beginning of 2019. At the rate of new solar capacity approvals from the last few years, subsidy costs would have reached US$39 billion by 2020, according to Wood Mac estimates. So far, according to Ministry of Finance figures, Beijing has a backlog of $17.06 billion (120 billion yuan) in yet to be disbursed subsidy payments.

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.

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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 totalled 16 GW.

The 2020 subsidies for new solar capacity have been set at $370 million (2.63 billion yuan) and those for new wind projects will total $420 million (2.97 billion yuan). Beijing will also stop subsidizing onshore wind capacity beginning in 2021.

By Irina Slav for Oilprice.com

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