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China will only approve new solar and wind power capacity if it matches the country’s coal benchmark on price, Forbes’ John Parnell reports, adding a project approved last month became the first to produce solar at a cost as low as coal-fired power plants.
The requirement for price matching with coal is part of a new set of conditions drafted by China’s National Development and Reform Commission, which will be in effect until 2020 in a bid to handle all the problems resulting from the fast growth in solar and wind capacity installation in recent years, such as energy waste because of grid logjams.
In 2017, Parnell notes, 6 percent of solar power output and 12 percent of wind power produced in China was wasted, and although in 2018 the waste was reduced, it still remains problematic.
The quick growth in solar in particular also put a strain on Beijing’s wallet because of the generous feed-in subsidies for new installations. In 2017, these hit US$15.6 billion (100 billion yuan) and the government has still not paid these in full. 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.
The government solved this problem inelegantly but efficiently last year when it announced in June that no more solar power project construction permits will be issued until the end of the year, prompting analysts to cut their capacity addition forecasts by between 5 GW and 17 GW.
But there is also another reason for the new project approval conditions, according to Forbes’ Parnell: Beijing is reportedly annoyed by the fact that Chinese companies are building solar projects abroad that produce electricity much more cheaply than the installations at home. So, now the authorities will require that solar and wind companies not only guarantee they will produce electricity cheaply but also that it will not overburden the grid.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.