China Can’t Afford Renewable Subsidies Either!
By Paul Homewood
h/t Joe Public
China is struggling to pay billions of yuan in subsidies to renewable power generators following a rapid expansion of capacity, a planning agency official said this week.
Wind and solar power capacity has grown faster than expected in the last five years because of preferential policies that include higher tariffs paid for cleaner electricity, as the world’s biggest coal consumer tries to encourage alternative forms of energy.
But Zhi Yuqiang, deputy director responsible for price regulation at the National Development and Reform Commission (NDRC), said developers face a possible shortfall of 60 billion yuan ($9 billion) in subsidy payments this year owed to them by the government.
The subsidy gap had already reached around 55 billion yuan by mid-year, he told an industrial conference in Beijing on Tuesday, according to a transcript of his remarks obtained by Reuters.
"As the scale of new capacity continues to expand, it is very possible that it will exceed 60 billion yuan by the end of the year."
China’s renewable power suppliers enjoy benchmark prices ranging from 0.8-0.98 yuan per kilowatt-hour (kWh) for solar and 0.47-0.6 yuan for wind. Thermal power producers are paid significantly less at 0.3-0.5 yuan per kWh.
The additional outlay for the higher tariffs has been financed in part from surcharges paid by thermal power generators, but Zhi said the amount collected has fallen below expectations.
Besides the higher tariffs, a fall in the price of solar photovoltaic modules to 3 yuan per watt compared to 5 yuan a year ago has driven solar expansion, Zhi said, expanding the subsidies owed.
But after rapid first-half growth, solar firms are bracing for a slowdown in the third quarter, citing a June 30 cut in tariffs for new projects, the subsidy delays, as well as a shortage of grid capacity that kept 21 percent of wind power and 12 percent of solar power offline from January to June.
"Construction costs have definitely fallen because of the fall in module prices, but who can afford to build if you never get the subsidy payments?" said Maggie Ma, chief financial officer of Renesola, a solar manufacturer and project developer.
“ but who can afford to build if you never get the subsidy payments?”
Rather says it all!