The current state of photovoltaic subsidies

After more than two months of suffering, the year without ground power station quota, two distributed indicators of China's photovoltaic industry ushered in a ray of light.  

The unsubsidized photovoltaic demonstration project will be started soon  

According to multiple media reports, the National Energy Administration held an internal closed-door meeting and will organize the construction of a number of non-subsidized photovoltaic demonstration projects in the near future.  

It is understood that these non-subsidy projects will start application around October 2018, start work around March 2019, and be connected to the grid before September 30 or December 30, 2019.  

In terms of project construction, the local development and reform commission will coordinate to reduce related non-technical costs and promise to ensure the consumption of electric energy.  The scale of projects in each province is around 300-500MW.  

According to this conservative forecast, 20 out of 31 provinces and cities in mainland China will pass the declaration, and the total scale will reach 6-10GW.  Viewed from this perspective, the new additions to the market brought by unsubsidized demonstration projects are considerable.  

Importantly, according to relevant reports, this batch of non-subsidy projects strengthen two points, one is to reduce non-technical costs, and the other is to ensure the consumption of electricity, which will help increase the enthusiasm of enterprises to participate.  

Non - technical cost block affordable Internet access  

In recent years, the rising cost of non-technology has been one of the "obstacles" that block photovoltaic power generation to achieve affordable Internet access.  Land tax, grid connection project, high financing cost, all kinds of intermediate fees, these taxes and fees have completely "swallowed" the component cost reduction and efficiency improvement produced by the positive effect.  

"Non-technical costs have accounted for more than 20 percent of the total investment cost, including at least 10 cents on the electricity price," Wang Bohua, secretary general of the China Photovoltaic Industry Association, said in a public event.  That includes the cost of land, the cost of finance, the cost of connectivity and so on."  

For example, take the 100MW agrooptical complementary project of a province in central and eastern China as an example, covering an area of nearly 6000 mu, the land rent is 800 yuan/year/mu, estimated 25 years of land rent is up to about 120 million yuan.  The person in charge of a photovoltaic enterprise frankly said, "Regarding the payment of land rent, some places even require one-time payment of 20 years of rent, which will undoubtedly bring great cash difficulties to the enterprise."  

An engineering project construction director said, in Qinghai to build a 1 million kilowatt photovoltaic power station, the same period will invest hundreds of millions of yuan supporting the construction of a 330 kv booster station, investment of more than 50 million yuan to build a 45 km and a 12 km 330 kv transmission lines, and will be responsible for the operation and maintenance of these transmission facilities.  According to industry statistics, in recent years, the ratio of self-built transmission facility assets of domestic photovoltaic power stations to be repurchased by power grid enterprises is not more than 5%.  

The rising cost of non-technology has reduced the profit margin of enterprises and delayed the arrival of the era of parity.  It is reported that even with the "careful" investment and construction, the final return rate of individual projects of the second batch of PHOTOVOLTAIC power generation leaders has dropped to 2-3% due to the pull and pressure of non-technical costs.  

It can be seen that the non-subsidy demonstration project starts from reducing the non-technical cost, and then focuses on promoting the consumption of electric energy and improving the income of power generation. These two market-oriented means of cost reduction and efficiency increase will improve the enthusiasm of enterprises to participate.  

At the same time, with the promotion and popularization of non-subsidy demonstration projects, photovoltaic power generation will also accelerate the development road of realizing affordable Internet access without national subsidies.  

Billions of dollars in subsidies is an unbearable burden  

Backfill is the unbearable pain of photovoltaic enterprises, hundreds of billions of subsidies into the financial unbearable heavy.  

On the one hand, the lack of compensation brings serious test to the capital intensive photovoltaic enterprise capital chain;  On the other hand, with the expansion of photovoltaic power station construction scale, the subsidy gap is also expanding.  

At present, the demand for subsidy funds for photovoltaic power generation is growing particularly fast, accounting for 31% of the total subsidy funds in 2015, 43% in 2017, and is expected to reach 46% this year. Photovoltaic will surpass wind power and biomass power generation and become the renewable resource with the largest demand for subsidy funds.  

According to Shi Jingli, a researcher at the Energy Research Institute of the National Development and Reform Commission (NDRC), by the end of 2017, the cumulative subsidy funding gap for renewable energy had exceeded 110 billion yuan (45.5 billion yuan, or about 40 percent, was missing).  According to no. 823 document issued by the National Development and Reform Commission, the Ministry of Finance and the National Energy Administration to control the scale of needed subsidies, the subsidy funding gap in 2020 is still close to 100 billion yuan.  

Shi Jingli pointed out that from the perspective of subsidy demand, the peak of renewable energy subsidy is during the 14th Five-Year Plan period, which is about 200 billion yuan per year. By 2026, because some projects have reached the implementation period of 20 years, the total subsidy demand will turn around and decline.  So existing policies will have to be implemented and new ones will have to be created in order to address the need for subsidies.  

Subsidies for previously completed photovoltaic projects in China will peak between 2022 and 2025 at 100 billion yuan to 175 billion yuan, according to a report by the Energy Internet Innovation Institute of Tsinghua University.  

We need to implement the two measures to solve the problem  

One way to address the funding gap is to raise the surcharge for renewable energy.  During the two sessions this year, Cao Renxian, chairman of sunshine Power, And Nan Cunhui, chairman of Chint Group, have suggested that renewable energy will be added from the current 1.9 cents to about 3 cents, in order to solve the dilemma of renewable energy subsidy gap.  

In addition, the implementation of renewable energy quota system and renewable energy electricity certificate system, commonly known as "green certificate", is also an effective way to solve the source of funding.  In March this year, the National Energy Administration released to the public the Assessment Method of Renewable power Energy Quota (Draft), marking that the renewable energy quota system, which has been six years in the making, is finally coming.  

The energy sector is under pressure from subsidies  

Still, the facts suggest that reining in subsidies remains a top priority.  

To this end, on May 31, the three ministries and commissions issued a notice on photovoltaic Power Generation in 2018, proposing to further optimize the scale of photovoltaic power stations, accelerate the withdrawal of subsidies, and actively encourage projects that do not need state subsidies.  

According to this policy, the interpretation jiing li said, no. 823 document is not to say that limiting the size of the photovoltaic power generation, but now the file is more of a hope to be able to control, need a large amount of subsidies, said to put it more simply, countries don't have the money, if the grid has given conditions, do not need to state subsidies project, we hope you continue to do,  Of course, the benchmark electricity price and distributed photovoltaic kilowatt subsidy have been reduced by 5 cents each.  

To a certain extent, the lack of money and the need for subsidies is a very serious problem, not only photovoltaic power generation, traditional thermal power generation is also facing such embarrassment.  

It is understood that the domestic coal power industry annual desulfurization and denitration subsidy of more than 120 billion yuan, in the past two decades, the average annual subsidy is also about 100 billion yuan, from 2000 to 2017 this nearly 20 years, the country for the domestic coal power subsidy of more than 2 trillion yuan.  

According to the media statistics from the annual reports of petrochina (601857) and Sinopec (600028), from 2007 to 2016, the two companies received a total of 125.883 billion yuan of national financial subsidies, of which, petrochina received 48.438 billion yuan of subsidies, and Sinopec received 77.445 billion yuan of subsidies.  

In addition, the state subsidized about 55 billion yuan for new energy vehicles in 2015, more than 70 billion yuan in 2016, and more than 65 billion yuan in 2017.  

Comprehensive "marketization" is imperative  

In recent years, in view of the increased financial pressure and the original intention of promoting the market-oriented development of the industry, the new energy industry subsidy regression system began to be fully opened, photovoltaic power generation and new energy vehicles have been put on the agenda.  

Senior pv personage said that the 823 document, marking the photovoltaic power generation to the full subsidy has opened the prelude.  Combined with the state to encourage the construction of photovoltaic projects without subsidies, and the proposed introduction of demonstration projects without subsidies, indicating that photovoltaic will usher in a comprehensive "marketization".  

An unnamed photovoltaic company executive said that from the perspective of maintaining the stable development of the market, relevant departments may regulate centralized and distributed indicators in the future, so that the market has a buffer period for policy development and adaptation.  But in the long run, the implementation of the 5.31 photovoltaic New Deal and the construction of demonstration projects without subsidies has basically determined the two major keynote of industrial development: affordable Internet access and no subsidies.  

According to Shi Jingli, the 823 document has a very clear goal, regulating the photovoltaic power market in 2018.  Of course, we can't rule out doing the same in 2019.  But policymakers don't seem to have an answer on what to do in 2019.