The Chinese photovoltaic (PV) industry, which has been struggling for the past two years, is finally starting to see signs of recovery. On August 30, the National Development and Reform Commission (NDRC) announced a new feed-in tariff policy for distributed PV systems, setting the subsidy at 0.42 yuan per kilowatt-hour. This represents a 20% increase from the previously proposed 0.35 yuan per kWh, exceeding market expectations and offering much-needed support to an industry that has been in a prolonged downturn.
The revised policy also introduces a regional benchmark pricing system for centralized PV power plants, dividing the country into three resource zones with different tariffs: 0.9 yuan, 0.95 yuan, and 1 yuan per kWh. This move aims to better align electricity prices with local solar potential and construction costs, promoting more efficient project development and resource allocation.
For distributed PV projects, the government will continue to offer subsidies based on actual electricity generation, ensuring that investors are rewarded for real output rather than just installation. This shift from upfront construction subsidies to performance-based incentives is seen as a positive step toward sustainability and long-term growth.
Industry experts, such as Lin Boqiang from Xiamen University, believe the new policy will significantly boost the competitiveness of PV power, especially when compared to thermal power, which currently ranges between 0.4 and 0.5 yuan per kWh. With subsidies, solar energy becomes a more attractive and viable option for both consumers and investors.
The NDRC emphasized that this policy update is part of broader efforts to promote the healthy and sustainable development of the PV sector. By leveraging price mechanisms, it encourages technological innovation and cost reduction among manufacturers and developers.
Another key feature of the policy is the 20-year duration for both the benchmark tariffs and the subsidy period. This long-term commitment is seen as a major confidence booster for investors, who had previously feared shorter subsidy timelines.
Looking ahead, the industry anticipates a surge in PV installations. In 2013, total capacity is expected to reach 8.5 GW—up 88% from 4.5 GW in 2012—and could exceed 10 GW in 2014. The policy support, combined with improved component pricing and stronger demand, is driving renewed interest and investment in the sector.
Additionally, the government is considering a 50% value-added tax (VAT) reduction for PV projects, which could further improve returns for power plant operators. If implemented, this measure would reduce the VAT from 17% to 8.5%, potentially increasing project returns by 1-2%.
However, some experts caution that while the policy framework is promising, its success depends on effective implementation. Meng Xianyi from the China Renewable Energy Society highlights the importance of grid integration and timely payment of subsidies. Without proper coordination between the grid and PV operators, the full benefits of these policies may not be realized.
Overall, the recent policy changes signal a turning point for the Chinese PV industry, offering hope for a brighter future amid ongoing challenges.
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