Advertisement
As China moves to reduce subsidy load, uncertainties mount for country’s wind and solar energy sector
- The subsidies in arrears Beijing owes wind and solar developers amounted to 300 billion yuan last year, and could rise to as much as 550 billion yuan between 2027 and 2030, before falling rapidly
- NEA proposal on handout cuts surprises investors, who have dumped shares of wind and solar farm developers and equipment producers
Reading Time:3 minutes
Why you can trust SCMP
0
Beijing has proposed a new regulatory regime that will reduce its subsidy load, which has been mounting for years, but will also make wind and solar less profitable for developers.
According to a circular issued by the National Energy Administration (NEA) dated February 26, to ensure new projects will be connected to power grids, companies developing wind and solar farms must either accept a haircut on subsidies owed to them on projects that are in operation, or enter into competitive bidding for newly-created “guaranteed grid connection quotas” for new projects. The companies have until Monday to submit their comments.
The subsidies in arrears Beijing owes these companies amounted to 300 billion yuan (US$46.4 billion) last year, and are likely to reach a peak of 450 billion yuan to 550 billion yuan between 2027 and 2030, before falling rapidly, said Lucas Zhang Liutong, director of Hong Kong-based consultancy WaterRock Energy Economics. These arrears are the result of a record number of projects and Beijing’s reluctance to pass on cost to consumers through surcharges on power bills amid an economic slowdown in recent years.
The proposed system will create huge uncertainties for developers, as project terms and bidding rules are unknown and will vary by province, said an investor relations manager at a Hong Kong-listed company, who asked not to be named.
Beijing has previously said no subsidies will be granted for new onshore projects from this year onwards, as generating costs have fallen to levels close to those of coal-fired power plants.
03:26
Two sessions: How China's environmental policies are giving a boost to green industries
Two sessions: How China's environmental policies are giving a boost to green industries
The proposal came as a surprise to investors, who have dumped shares of wind and solar farm developers and equipment producers. China Longyuan Power Group, the country’s largest wind farms developer, fell 14.6 per cent to HK$9.07 on Thursday, after plunging 13.7 per cent on Wednesday. Xinjiang Goldwind Science & Technology, China’s largest wind turbine producer, tumbled 12.1 per cent to HK$14.9 on Thursday.
Advertisement