China NEA Drafts Proposed Cuts To 2017 Solar FiTs

The National Energy Administration of China has published its draft version of proposed 2017 feed-in tariff (FiT) levels for ground mount and distributed generation PV power plants. The lowered tariffs represent significant cuts to both sectors and overall curtailment of installations.  According to PVTech, the Asia Europe Clean Energy (Solar) Advisory (AECEA) has estimated the potential severity in the FiT cuts came as a surprise in the distributed generation sector as this was recently considered to be favored by the NEA in light of the utility-scale ground-mounted PV sector suffering from grid curtailment issues in several regions.

The NEA stated the FiT levels remained ‘unofficial’ and were only in ‘draft’ form as they were distributed to various Chinese media outlets. Regarding energy policy in China, the NEA is responsible for formulating and implementing energy development plans and industrial policies; promoting institutional reform in the energy sector; administering energy sectors including coal, oil, natural gas, power (including nuclear power), new and renewable energy. Other charges include overseeing energy conservation, R&D, organizing and coordinating key energy-related demonstration projects and promoting the deployment of new products, new technologies and new equipments; approving, reviewing, or examining fixed asset investment projects of the energy sector.

NEA initial draft recommendations

Ground-mounted solar PV Power plants:

• Region 1: RMB 0.80 to 0.55 = minus 37%
• 
Region 2: RMB 0.88 to 0.65 = minus 25%
• 
Region 3: RMB 0.98 to 0.75 = minus 23%

Distributed Solar PV:

• Region 1: RMB 0.42 to 0.20 = minus 52%
• Region 2: RMB 0.42 to 0.25 = minus 40%
• 
Region 3: RMB 0.42 to 0.30 = minus 28%

Without a major change to these FiT cuts, renewable energy insiders expect the reduced rate-of-return will significantly lower return on investment (ROI) calculations for PV project developers, negatively impacting installations and demand throughout the supply chain. AECEA also noted that the potential severity in the FiT cuts came as a surprise in the distributed generation sector as this was recently considered to be favored by the NEA in light of the utility-scale ground-mounted PV sector suffering from grid curtailment issues in several regions.

According to pv magazine, solar farms located in the drier, hotter and less populated western regions of China are set to face the higher cuts, but even at this higher rate, experts believe that the cuts are not severe enough to harm the bottom lines of many Chinese solar companies. “Rosie Pidcock, senior business development manager at UGE International, told Reuters that the cuts are actually positive for China’s rooftop solar sector, adding that utility-scale developers that have built large solar farms in the west are likely to be hardest hit.” Response and proposed modifications to these draft FiT reductions will be reported here.