On August 30, China’s National Development and Reform Commission (NDRC) published a notice introducing a national government subsidy for distributed solar power – power generated in decentralized locations, close to areas of high demand.
The NDRC Notice on Making Full Use of Price Levers to Promote the Healthy Development of Photovoltaic Production sets subsidies for power generated by solar power stations, and separate subsidies for distributed solar power. For the latter, the subsidy is set at RMB0.42 per kilowatt hour, which will be paid via the grid companies from a renewable energy development fund.
Significantly, the Notice also stipulates that the grid companies must buy all surplus electricity from distributed generators at the local benchmark feed-in tariff for coal-generated power. In practice, securing a firm commitment from grid companies to purchase surplus electricity has been the biggest challenge to off-grid distributed solar providers.
The incentives in the Notice are available to all power generators without prior application or approval. It is hoped that this will encourage the development of distributed solar power. However, alongside offering incentives for solar and distributed generation China must also act to upgrade its grid infrastructure. The present grid may struggle to cope with the strains imposed upon it by the growing proportion of power sourced from renewable sources (which fluctuate according to solar, wind and other conditions) and distributed sources (which feed power into the grid from multiple locations).
Photovoltaic power stations that sell all their power to the grid are granted a choice of a subsidy or a feed-in tariff guaranteed for 20 years. However, the second option is flawed so long as grid companies are only prepared to enter into power purchase agreements with a duration of one year.