Source: China Chemical Information Network

  Hou Shouli, head of the Electricity Price Division of the National Development and Reform Commission's Price Department, recently stated that China will improve the subsidy standards for photovoltaic power generation and establish a mechanism for gradually reducing subsidies. Considering practical factors such as price policy coordination and different project construction periods, preliminary considerations are being made to formulate differentiated photovoltaic power generation subsidy standards. These subsidies will be gradually reduced in line with industrial technological advancements until they are eventually phased out.

  Hou Shouli introduced at the recently held 2016 China Photovoltaic Leaders Summit that, driven by various favorable policies, the renewable energy industry, including photovoltaic power generation, has developed rapidly. However, significant issues such as severe curtailment of solar power and increasing subsidy funding gaps have emerged. As a type of new energy power generation, photovoltaic power generation requires continued government support and encouragement for development. On the other hand, in the long run, it must inevitably move towards market participation and engage in market bidding. Currently, the photovoltaic power generation subsidy mechanism, which subsidizes the difference between the benchmark feed-in tariff and the benchmark coal-fired power tariff, faces practical challenges in aligning with the market-oriented reform of the power sector.

  He said that it is necessary to reform the price formation mechanism for photovoltaic power generation. Research is being conducted to gradually shift from directly setting benchmark tariff levels by resource zones to establishing price formation rules. This means the benchmark feed-in tariff will consist of two parts: the local benchmark coal-fired power tariff (including desulfurization, denitrification, and dust removal) or market transaction price, and a fixed subsidy. The existing differential subsidy will be transformed into a fixed subsidy. At the same time, projects are encouraged to participate in market bidding, strengthening the important role of market competition in the formation of power generation prices.

  Hou Shouli said that research on the renewable energy quota trading mechanism should be conducted well. Currently, the National Energy Administration is leading the research and promotion of the renewable energy quota trading mechanism. The National Development and Reform Commission will actively cooperate to encourage photovoltaic and other renewable energy power generation companies to obtain corresponding benefits through market transactions. This will, on one hand, reduce the burden on central fiscal funds, and on the other hand, optimize energy resource allocation and promote balanced development across multiple industries through market mechanisms. Additionally, price policies to promote the local consumption of renewable energy and the development of energy storage should be studied to ensure the healthy and sustainable development of renewable energy.