The Chinese photovoltaic (PV) industry, which has been struggling for two years, is finally starting to see signs of recovery. On August 30, the National Development and Reform Commission 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 compared to the previously proposed 0.35 yuan per kWh, offering much-needed support to an industry that has faced prolonged challenges.
This updated policy aims to boost investor confidence and promote faster deployment of solar projects. The reform also introduces regional pricing mechanisms for centralized PV power plants, dividing the country into three resource zones with different tariffs: 0.90, 0.95, and 1.00 yuan per kWh. This approach is seen as more equitable, reflecting local solar potential and construction costs.
For distributed PV projects, the government will continue to offer a generation-based subsidy of 0.42 yuan per kWh. This shift from upfront subsidies to performance-based incentives encourages actual energy production, aligning financial rewards with real output.
Experts believe the policy is a positive step toward a more sustainable and competitive solar market. Lin Boqiang, director of the China Energy Economic Research Center at Xiamen University, noted that the 0.42 yuan per kWh rate exceeds expectations and could significantly improve the competitiveness of solar power against traditional thermal electricity, which currently costs around 0.4–0.5 yuan per kWh.
The 20-year subsidy period is another key feature of the new policy, providing long-term stability for investors. Previously, there had been concerns about shorter subsidy durations, but this extended timeline is expected to attract more capital and accelerate project development.
According to industry forecasts, China's PV installation capacity could reach 8.5 GW in 2013, a dramatic increase from 4.5 GW in 2012. In 2014, the figure may surpass 10 GW. With grid connection issues and tariff support now backed by strong policy, the sector is gaining momentum.
Moreover, the government plans to introduce a 50% value-added tax (VAT) reduction for PV projects, potentially increasing returns for power plant operators by 1–2%. This additional incentive is expected to further stimulate investment.
Despite these positive developments, some experts caution that the success of the policy depends on effective implementation, particularly regarding timely payments from the grid. Meng Xianyi, deputy director of the China Renewable Energy Society, emphasized that administrative efficiency and grid cooperation are crucial for ensuring the long-term health of the industry.
Overall, the revised policy marks a turning point for the Chinese solar sector, signaling a stronger commitment to renewable energy and a more stable environment for future growth.
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