China Unveils First Batch of Solar, Wind Farms That Won’t Be Supported by Subsidies

(Bloomberg) -- China announced the first batch of clean energy projects that will be built without financial support from the government, putting renewable power on a path to compete with existing coal and gas-fired generation.

The country will develop 20.8 gigawatts of renewable projects this year that can only profit from selling electricity into grids at prices equal to or less than coal power, according to a joint statement from the National Development & Reform Commission and National Energy Administration. That includes 14.8 gigawatts of solar and 4.5 gigawatts of wind capacity.

The announcement is set to trigger a wave of new solar projects in the second half of this year because now that a list of subsidy-free plants has been drawn up, provinces are allowed to organize the bidding process required for projects seeking government aid, according to Shen Zhifeng, an analyst at UOB-Kay Hian Holdings Ltd. in Shanghai.

“China solar panel demand in the second half of the year will accelerate,” said Shen.

China has turned to renewables to cut its reliance on coal and fight against pollution. The nation has subsidized clean power plants for years, but is shifting toward a more market-driven approach to rein in its large subsidy bills that resulted from a green investment boom. It has also announced policies to boost clean energy use, including setting mandatory consumption targets and giving priority grid access to subsidy-free plants.

The country’s solar industry is poised for long-term growth, analysts at Fitch Solutions Inc. said in a research note this month. They estimate that China will add 37 gigawatts of capacity in 2019, which is slower than the 44 gigawatts in 2018 and 53 gigawatts in 2017.

Other details from the statement:

• Projects will be built across 16 provinces such as Guangdong, Shaanxi, Henan and Heilongjiang.
• Most developments are expected to start commercial operation in 2019 and 2020.
• Grid companies are asked to sign power purchase agreements of at least 20 years with project operators.

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng, Aaron Clark

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With assistance from Bloomberg