Solar industry expected to become subsidy-free by 2021

Industry insiders believe China's solar industry will become subsidy-free in a few years as the country tries to revitalize its photovoltaic sector after the government announced a plan to scale back its central subsidy system last year.

China's solar industry is expected to transition toward a subsidy-free market as early as 2021, said a new analysis of China's solar industry published by Asia Europe Clean Energy (Solar) Advisory.

The Chinese government has outlined a series of policies this year, looking to remove the hurdles that have been preventing the escalation of subsidy-free photovoltaic projects in the world's biggest solar power market.

China's National Energy Administration announced plans in April to drive the development of new subsidy-free solar projects through policy support, hoping new projects will be developed without the need for governmental subsidies, which it is believed will steer the market in a new direction toward zero-subsidy renewables.

According to the NEA, subsidy-free pilot projects commissioned by 2020 can enjoy 20-year power purchase agreements with fixed prices and top dispatch priority, guaranteed by grid companies.

"Such projects would bear lower cash flow risks compared to the normal ones," said Liu Yujing, an analyst with Bloomberg New Energy Finance.

"With the subsidy-free pilots and the still pending subsidy program, China may have at least 40 gW of new photovoltaic installation per year during 2019 and 2020," Liu said.

With the production output figures of the world's biggest solar manufacturers booming on demand outside China, together with the technological innovations that have also been speeding up the cost reduction of renewable energy, the China Photovoltaic Industry Association has an optimistic outlook for this year.

The generation of solar power posted faster year-on-year growth, at 12.9 percent, in the first quarter of 2019, according to the National Bureau of Statistics, against the backdrop that China's power generation climbed 4.2 percent year-on-year.

After the Chinese government slashed its subsidies for solar power and also halted all subsidies for utility-scale solar projects last June, the European Commission announced last August that it was removing restrictions on the sale of solar panels from China, which had been in place for five years.

Chinese photovoltaic companies have been motivated to seek more overseas opportunities in recent years, especially in countries and regions participating in the Belt and Road Initiative, according to Lin Boqiang, director of the China center for energy economics research at Xiamen University.