On June 1, 2018, only two days after the completion of 12th SNEC International Photovoltaic Power Generation Conference, the world’s biggest solar conference and a central gathering of all the Chinese PV manufacturers, the Chinese central government announced a nation-wide solar subsidy cut that resulted in the Chinese solar stocks tumbling with the falling range from 7% to 31%. Specifically, the National Development and Reform Commission, the Ministry of Finance and the National Energy Administration of China issued the “2018 Solar PV Generation Notice” (the “Notice”), imposing caps and reducing the feed-in tariff (“FiT”) mechanism in connection with China’s domestic PV projects, and at the same time setting rules at the central government level to urge marketization of China’s solar industry.
Overview of the Notice
Imposition of Project Cap
Firstly, the Notice imposed a 10 GW cap on capacity for distributed generation projects and stopped utility-scale project for 2018. This is a steep drop from last year’s installation of 19 GW distributed generation projects (out of 53 GW of all PV projects in China). Also, the Notice provided that only those distributed generation projects that are connected to the grid no later than May 31, 2018 would be covered by central government’s budget, whereas the financial responsibility for other distributed generation projects would be shifted to local governments. In addition, the Notice encouraged the local governments to come up with more solar supportive policies, to reduce non-technological costs, and as a result to reduce the needs for central and local governments’ solar subsidies. Separately, the Notice abolished the utility-scale projects and instructed local governments not to approve any utility-scale projects until central government’s further notice.
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