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Will China’s lower solar power feed in tariffs affect the industry growth?

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China Solar & Wind Power Update

The world’s largest solar market accounting for almost 30% of the global demand is all set to cut its solar tariffs by 6% next year and will keep cutting in increments till 2020. The same will apply to wind power as well, since the country is facing a deficit in what it is charging to the electricity consumers and the extra money it pays to RE developers for green power generation. China follows the German model of subsiding green energy in the country. It gives higher electricity tariffs for wind and solar power for the developer’s to make a good return on their investment. The government does not pay out these subsidies from its own pocket, but charges electricity consumers extra to balance the accounts. This account is now getting misbalanced, as the solar and wind power capacity balloons in the country. Solar power is expected to increase by a massive 50-70% this year, while wind power also is maintaining a constant level of growth at 15-20 GW. The country is now proposing to reduce the tariffs gradually in order to reduce the burden placed on consumers.

Solar tariffs are unlikely to get hurt by a 6% decline, since solar power costs are coming down by 5-10% each year. China has the biggest industrial manufacturing base of solar components and prices are ultra-cheap. Technology innovation is also reducing the solar equipment costs every year. Before ending its subsidies, Germany used to reduce its solar power FIT by 5-10% each year. In the last years, solar cost declines became so rapid that Germany had to reduce the tariffs each month, in order to brake the massive boom in solar installations that were taking place.

Wind power on the other hand is going to face a hard time, as the cost curve for wind equipment is much shallower. There is not massive improvements in efficiency that can be found in PV solar panel technology. Wind equipment is not improving rapidly and a 20% cut in tariffs by 2020 will not be matched with an equivalent decline in costs. This will mean that the margins for the wind power produces will decline. I don’t think it will materially change the wind power capacity additions in China, as most of the power industry is controlled by the government which can set the targets.

Also read why Wind Power in India fails to grow

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in

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