China aims to halve subsidy budget for new solar plants in 2020

China proposed to halve its subsidy budget for new solar power projects this year to 1.5 billion yuan ($216 million) as the government steers its renewable energy sector away from a reliance on financial support.

A total of 1 billion yuan will be allocated to large solar projects through a competitive auction process, and the remainder will be for residential solar systems, the National Energy Administration said in a statement Thursday. The overall amount compares with 3 billion yuan planned in 2019.

The industry has braced for a cut in subsidies as manufacturing costs decline and China pushes for renewable energy to compete economically with conventional power sources such as coal and natural gas. It seeks to end national subsidies for new onshore wind farms from 2021 and offshore projects a year later.

The NEA is seeking feedback on the proposal, which is part of its clean energy policy for this year. Regional authorities are also asked to submit by mid-March their plans for subsidy-free solar and wind power projects, which can be approved and begin construction.

A government researcher forecast in December that 1.75 billion yuan of solar subsidies will be allocated in 2020. Finalizing the policy this early in the year could help capacity additions recover in the world’s biggest market to more than 40 gigawatts, according to the China Photovoltaic Industry Association.

The 2019 policy wasn’t announced until July last year, creating uncertainty for developers and caused installations to slump almost 37 per cent to 28 gigawatts from a year ago, BloombergNEF estimated.

© 2020 Bloomberg L.P.