Page 200 - 2023 White Paper on the Business Environment in China
P. 200
3 White Paper on the Business Environment in China
to grid parity status, the policy landscape in projects expired at the end of 2021, while central
China is changing accordingly, moving away subsidies for new solar power stations and
from generous subsidies and towards putting onshore wind projects were halted in August
renewable energy to use. Feed-in tariffs are a 2021. Simply put, 2022 is set to be a year of
policy mechanism used to boost adoption of transition. China’s winding down of subsidies
renewable energy by reducing risk for producers should have mixed effects in the short-term, but
of energy. With an FIT in place, producers of in the long-term it appears a more sustainable
renewable energy are typically given a long-term choice than continuing to pay out subsidies
contract of around 20 years that guarantees and allowing the deficit to build up despite
compensation above the market rate for units of increasingly competitive costs for renewables.
electricity produced and fed into the grid. While In the short-term, inefficient companies that
the boom in renewables capacity is good for the depended too heavily on subsidies may face
environment, for the private sector companies difficult adjustments, moving the industry in a
that formed long-term plans based around the more market-oriented direction (Jaghory).
assumption of 20-year FIT payments, overdue
payments are a real burden. In many cases these Wind Power
companies started projects and incurred costs,
but are still waiting for the subsidy payout. At Since the mid-2000's, generous subsidies by the
the same time, the once prohibitively high cost of Chinese government enabled the rapid expansion
solar and wind energy is now significantly lower of capacity in solar and wind power. Today, solar
and edging closer and closer to the coveted and wind are in a new phase in terms of cost
grid-parity line. It is estimated that the cost of effectiveness. The government is phased out
renewables will fall below the cost of coal power subsidies both to reduce its accumulated subsidy
around 2026, which eliminates the urgent need deficit and to incentivize growth for Chinese
for an FIT system. Under these new conditions, companies in the space. China installed a record-
Chinese policymakers deemed a new approach breaking 17GW of wind power as companies
to renewable energy policy is in order. Subsidies scrambled to meet a December 31, 2021 deadline
enabled rapid capacity expansion but problems for wind power subsidy eligibility. In August 2021,
with integration needed to be resolved. To that the government announced the end of central
end, the government started shifting more subsidies for new solar power stations and offshore
focus towards making sure renewable energy wind projects. Both of these changes made 2022
capacity is actually put to use. Over the last few a key turning point for these industries in China.
years, rising demand for solar and wind energy Recent policy changes are indicative of how the
along with a shift in policy focus contributed focus is shifting towards solidifying consumption
to a reduction in curtailment risk. Recent of clean energy and signify how much the costs of
government policies include the introduction of clean energy declined in the last decade. China's
the Green Electricity Certificate (GEC) system in commitment to peak emission levels by 2030 and
2017 and the Renewable Portfolio Standard (RPS) net-zero emissions by 2060 means that policy
system in 2019. Under the RPS system, provinces support for renewables will continue, albeit with a
are required to make sure a certain percentage new approach. As China tries to achieve a balance
of their electricity consumption comes from between the often-conflicting needs of energy
renewable sources. With the GEC system in place, security and environmental sustainability, policy
market entities (not individuals) that are given will continue to play a crucial role (Global X).
renewable energy consumption quotas by the
local government can make up for falling short Global wind turbine order intake reached 43 GW
of the quota by buying “green certificates” from in the second quarter of 2022, 36 per cent higher
companies that exceeded their quota. Currently than in the same period in 2021. The main driver
underway, the next step involves phasing out the of this new record is the strong activity in China,
renewable energy subsidies, with a good portion both in onshore and offshore wind, according
of deadlines and cuts already occurring in 2021 to the latest report from Wood Mackenzie. The
or coming up in 2022. The FIT for offshore wind
200
to grid parity status, the policy landscape in projects expired at the end of 2021, while central
China is changing accordingly, moving away subsidies for new solar power stations and
from generous subsidies and towards putting onshore wind projects were halted in August
renewable energy to use. Feed-in tariffs are a 2021. Simply put, 2022 is set to be a year of
policy mechanism used to boost adoption of transition. China’s winding down of subsidies
renewable energy by reducing risk for producers should have mixed effects in the short-term, but
of energy. With an FIT in place, producers of in the long-term it appears a more sustainable
renewable energy are typically given a long-term choice than continuing to pay out subsidies
contract of around 20 years that guarantees and allowing the deficit to build up despite
compensation above the market rate for units of increasingly competitive costs for renewables.
electricity produced and fed into the grid. While In the short-term, inefficient companies that
the boom in renewables capacity is good for the depended too heavily on subsidies may face
environment, for the private sector companies difficult adjustments, moving the industry in a
that formed long-term plans based around the more market-oriented direction (Jaghory).
assumption of 20-year FIT payments, overdue
payments are a real burden. In many cases these Wind Power
companies started projects and incurred costs,
but are still waiting for the subsidy payout. At Since the mid-2000's, generous subsidies by the
the same time, the once prohibitively high cost of Chinese government enabled the rapid expansion
solar and wind energy is now significantly lower of capacity in solar and wind power. Today, solar
and edging closer and closer to the coveted and wind are in a new phase in terms of cost
grid-parity line. It is estimated that the cost of effectiveness. The government is phased out
renewables will fall below the cost of coal power subsidies both to reduce its accumulated subsidy
around 2026, which eliminates the urgent need deficit and to incentivize growth for Chinese
for an FIT system. Under these new conditions, companies in the space. China installed a record-
Chinese policymakers deemed a new approach breaking 17GW of wind power as companies
to renewable energy policy is in order. Subsidies scrambled to meet a December 31, 2021 deadline
enabled rapid capacity expansion but problems for wind power subsidy eligibility. In August 2021,
with integration needed to be resolved. To that the government announced the end of central
end, the government started shifting more subsidies for new solar power stations and offshore
focus towards making sure renewable energy wind projects. Both of these changes made 2022
capacity is actually put to use. Over the last few a key turning point for these industries in China.
years, rising demand for solar and wind energy Recent policy changes are indicative of how the
along with a shift in policy focus contributed focus is shifting towards solidifying consumption
to a reduction in curtailment risk. Recent of clean energy and signify how much the costs of
government policies include the introduction of clean energy declined in the last decade. China's
the Green Electricity Certificate (GEC) system in commitment to peak emission levels by 2030 and
2017 and the Renewable Portfolio Standard (RPS) net-zero emissions by 2060 means that policy
system in 2019. Under the RPS system, provinces support for renewables will continue, albeit with a
are required to make sure a certain percentage new approach. As China tries to achieve a balance
of their electricity consumption comes from between the often-conflicting needs of energy
renewable sources. With the GEC system in place, security and environmental sustainability, policy
market entities (not individuals) that are given will continue to play a crucial role (Global X).
renewable energy consumption quotas by the
local government can make up for falling short Global wind turbine order intake reached 43 GW
of the quota by buying “green certificates” from in the second quarter of 2022, 36 per cent higher
companies that exceeded their quota. Currently than in the same period in 2021. The main driver
underway, the next step involves phasing out the of this new record is the strong activity in China,
renewable energy subsidies, with a good portion both in onshore and offshore wind, according
of deadlines and cuts already occurring in 2021 to the latest report from Wood Mackenzie. The
or coming up in 2022. The FIT for offshore wind
200
