SHANGHAI (Reuters) - China will speed up efforts to ensure its wind and solar power sectors can compete without subsidies and achieve “grid price parity” with traditional energy sources like coal, according to new draft guidelines issued by the energy regulator.
As it tries to ease its dependence on polluting fossil fuels, China has encouraged renewable manufacturers and developers to drive down costs through technological innovations and economies of scale.
The country aims to phase out power generation subsidies, which have become an increasing burden on the state.
China’s regions will make an extra push to provide technological and policy support to the renewables sector in order to ensure they can operate subsidy-free, according to draft guidelines issued by the National Energy Administration (NEA) dated Sept. 13 to the industry and reviewed by Reuters.
The guidelines said some regions with cost and market advantages had already “basically achieved price parity” with clean coal-fired power and no longer required subsidies, and others should learn from their experiences.
They also urged local transmission grid companies to provide more support for subsidy-free projects and ensure they have the capacity to distribute all the power generated by wind and solar plants.
The draft guidelines were issued for feedback from the industry and it is unclear when they will come into effect.
Solar power generation costs fell 90 percent from 2007 to 2017, and GCL New Energy Holdings, one of China’s biggest clean energy developers, said in late August that grid price parity could happen within a year.
“Parity is here already for high price markets,” said Thomas Lapham, chief executive of Asia Clean Capital, which builds rooftop solar projects for major corporations in China.
“I don’t think there will be a specific magical date when (parity) is here for all locations,” he said. “It will gradually spread over time as efficiencies continue to improve and prices become more competitive.”
China’s solar sector is still reeling from a decision to cut subsidies and cap new capacity at 30 gigawatts (GW) this year, down from a record 53 GW in 2017, with the government concerned about overcapacity and a growing subsidy backlog.
According to the NEA, the government owed around 120 billion yuan ($17.46 billion) in subsidies to solar plants by the middle of this year.
Lapham said the cap on new projects has hurt the industry in the short term, but by making a component supply glut even worse, it has also reduced prices and brought China even closer to grid price parity.
“The silver lining may be that we are on more stable ground for 2019 and beyond, even without subsidies,” he said.
Reporting by David Stanway; editing by Christian Schmollinger