China Adjusts Strategy on Renewable Energy Subsidies

China’s National Development and Reform Commission (NDRC) announced plans to scale back subsidies for renewable energy projects after witnessing a significant surge in solar and wind power installations.

In 2024, China achieved record-breaking growth in solar energy, with new installations increasing the country’s capacity by 45% compared to the previous year. Currently, China’s installed solar capacity stands at almost 887 gigawatts, which is more than six times the capacity of the United States, according to the International Renewable Energy Agency.

This rapid expansion allowed China to reach its 2030 clean energy targets six years ahead of schedule. This development occurs at a time when the United States, under President Donald Trump, has exited the Paris Agreement for a second time, shifting focus towards fossil fuel exploitation.

The NDRC, in collaboration with China’s energy administration, has introduced ‘market-oriented’ policy changes aimed at further promoting clean energy projects. These changes reflect a response to the reduced costs associated with new energy development as compared to earlier stages.

Under the new regulations, any renewable energy projects completed after June will have electricity payments determined by ‘market-based bidding.’ This shift is expected to maintain stable electricity prices for residential consumers and agricultural usage, while prices for industrial and commercial sectors are anticipated to remain largely unaffected.

The implementation of these policy adjustments will involve coordination with local governments across China. However, the NDRC has not yet disclosed the specific formula for the new pricing model.

The reduction in subsidies for new solar projects could pose challenges for China’s solar industry. Overcapacity in comparison to global demand has led to plummeting solar panel prices, which threatens smaller manufacturers with financial instability.

Despite the challenges posed by subsidy reductions, China remains committed to expanding its renewable energy capacity. This shift in strategy reflects confidence in the country’s ability to sustain growth through market dynamics.