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China: No Wind Or Solar If It Can’t Beat Coal On Price

Solar advocates often emphasize the fact that the cost of solar panels has fallen about 80 percent in the last ten years, and use this cost decline to project even steeper cost declines in the future. However, this is a problematic assumption because the recent decrease is only partially due to improvements in the solar panels. The other reason the cost of solar panels fell is because China became a major producer of solar panels, lowering the cost of production.

One reason why China became a major producer of solar panels is because it subsidizes many of its industries, including steel making (of interest to our friends on the Iron Range, and solar panels. According to an article in Renewable Energy World:

China consistently bails out its banking industry as well as its steel industry, its utilities, and its airlines, among others. China’s support of its mostly state-owned enterprises is both front and back loaded. Using the country’s solar industry as an example, China’s solar supply and demand was funded by government loans and grants, preferable tax and utility rates and other supports.

However, it appears China’s willingness to subsidize solar may be faltering. The following article originally appeared in Forbes.

China has said it will not approve wind and solar power projects unless they can compete with coal power prices.

Beijing pulled the plug on support for large solar projects, which had been receiving a per kWh payment, in late May. That news came immediately after the country’s largest solar industry event and caught everyone by surprise.

Officials are understood to have been frustrated at seeing Chinese suppliers and engineering firms building solar projects overseas that delivered electricity at prices far below what was available back home.

The country also has its own issues with grid logjams. These have caused power from wind and solar projects to be wasted due to a lack of capacity on the network to transmit and distribute it. In 2017 12% of wind generation and 6% of solar was curtailed.

In the plans announced on Thursday, the National Development and Reform Commission (NDRC), the top strategic planning authority, and the National Energy Administration (NEA) set out a series of conditions under which new solar and wind projects would be approved from now till the end of 2020.

Chief among these is that the price matches or undercuts the national coal benchmark, something that happened for the first time ever just last month.

Projects will also have to show that the grid can handle their output. Technical specifications will ensure that the highest standards are met on that front.

Local governments have been told they are free to offer their own subsidies to projects if they wish.

In the past, provincial authorities have spent heavily to bankroll uncompetitive solar manufacturers. Thursday’s announcement warned that any attempt to use project subsidies to invest in “local factories” or to make the use of locally made components a condition of the subsidy.

Also included in the wide-ranging changes is the introduction of a green certificate scheme. A small trial of such a scheme was undertaken in 2017. It would work in a similar way to renewable energy certificates schemes in the U.S. and elsewhere. A certificate is created for each unit of electricity generated. These are then traded among utilities who may have targets to meet as determined by regulators or purchased by an end user to demonstrate their use of “clean” power. Details on the mechanics of the certificate scheme have not yet been released.

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