4 The Transition of China’s Power System
131
introduction of a plethora of PV-related policies. In addition, following the release of
policy documents on the absorption of wind power, China saw substantial reductions
in curtailment in 2018 and 2019.
Renewable energy-related policies in China can be summarized as below:
(1) Such means of financial support as loan discounts, subsidies and tax incentives are used to support the development of renewable energy. In 1999,
the Chinese government issued an official notice to further support renewable
energy, which included the arrangement that renewable energy projects would
be granted a 2% fiscal discount on lending rates by banks. A special fund for
renewable energy was set up in 2006. Funds would be provided as grants or
low interest loans, the repayment of which are accorded interest discounts up
to a maximum of 3%. In terms of subsidies, in 2009, the Finance Ministry
announced it would provide 20 yuan per watt peak (Wp) of subsidy for solar
projects attached to buildings that have capacity of more than 50 kW peak. The
conditions and amount of subsidies have been adjusted on an annual basis since.
In 2012, China reduced the subsidy for projects under the Golden Sun program,
geared towards end-users who generate the power for their own use, to 7 yuan
per Wp. Solar PV subsidies have been declining as the sector grew. According
to the Notice on Matters relating to PV Power Generation in 2018, jointly issued
by the National Development and Reform Commission, the Ministry of Finance
and the National Energy Administration, the subsidy for self-consumption DG
generation projects was to be reduced by ¥0.05–¥0.32 kWh (including tax).
DG projects that supply all generated power to the grid would be treated in
the same manner price-wise as PV plants in the same resource area. Electricity
generated for self-use from DG projects would be exempt from various fees
including a reserve capacity charge and other grid-related service fees. Tax
incentives are delivered primarily through Value-added Tax (VAT) policies. In
2013, China introduced a 50% VAT rebate for solar equipment manufacturers,
effective between October 1, 2013 and December 31, 2015. The policy was
renewed again in 2016.
(2) The grid-price of electricity generated from renewable sources will use
the benchmark grid-price of electricity as the starting point and transition toward more competitive prices in the long run, with the ultimate
aim of delivering affordable or low-cost clean electricity. The benchmark
on-grid electricity price is set by the government while a competitive price is
determined by competitive bidding under the upper limit of the government’s
suggested price. An affordable price generally refers to the benchmark grid-price
of electricity produced locally from coal-fired units (including desulphurisation,
denitrification and dust removal systems), and prices below this threshold are
characterized as low-cost. A review of policies on the grid-price of renewable energy in the past two decades reveals a familiar pattern. Whether in the
case of PV or wind power generation, including both onshore and offshore, the
government would set a benchmark grid-price at the initial stage of development, gradually lower the price as the sector grew in both scale and the amount
131
introduction of a plethora of PV-related policies. In addition, following the release of
policy documents on the absorption of wind power, China saw substantial reductions
in curtailment in 2018 and 2019.
Renewable energy-related policies in China can be summarized as below:
(1) Such means of financial support as loan discounts, subsidies and tax incentives are used to support the development of renewable energy. In 1999,
the Chinese government issued an official notice to further support renewable
energy, which included the arrangement that renewable energy projects would
be granted a 2% fiscal discount on lending rates by banks. A special fund for
renewable energy was set up in 2006. Funds would be provided as grants or
low interest loans, the repayment of which are accorded interest discounts up
to a maximum of 3%. In terms of subsidies, in 2009, the Finance Ministry
announced it would provide 20 yuan per watt peak (Wp) of subsidy for solar
projects attached to buildings that have capacity of more than 50 kW peak. The
conditions and amount of subsidies have been adjusted on an annual basis since.
In 2012, China reduced the subsidy for projects under the Golden Sun program,
geared towards end-users who generate the power for their own use, to 7 yuan
per Wp. Solar PV subsidies have been declining as the sector grew. According
to the Notice on Matters relating to PV Power Generation in 2018, jointly issued
by the National Development and Reform Commission, the Ministry of Finance
and the National Energy Administration, the subsidy for self-consumption DG
generation projects was to be reduced by ¥0.05–¥0.32 kWh (including tax).
DG projects that supply all generated power to the grid would be treated in
the same manner price-wise as PV plants in the same resource area. Electricity
generated for self-use from DG projects would be exempt from various fees
including a reserve capacity charge and other grid-related service fees. Tax
incentives are delivered primarily through Value-added Tax (VAT) policies. In
2013, China introduced a 50% VAT rebate for solar equipment manufacturers,
effective between October 1, 2013 and December 31, 2015. The policy was
renewed again in 2016.
(2) The grid-price of electricity generated from renewable sources will use
the benchmark grid-price of electricity as the starting point and transition toward more competitive prices in the long run, with the ultimate
aim of delivering affordable or low-cost clean electricity. The benchmark
on-grid electricity price is set by the government while a competitive price is
determined by competitive bidding under the upper limit of the government’s
suggested price. An affordable price generally refers to the benchmark grid-price
of electricity produced locally from coal-fired units (including desulphurisation,
denitrification and dust removal systems), and prices below this threshold are
characterized as low-cost. A review of policies on the grid-price of renewable energy in the past two decades reveals a familiar pattern. Whether in the
case of PV or wind power generation, including both onshore and offshore, the
government would set a benchmark grid-price at the initial stage of development, gradually lower the price as the sector grew in both scale and the amount