The Chinese government announced on Friday that due to falling construction costs, it will launch a number of subsidy-free solar and wind power projects in 2019.  ImagineChina/Corbis photo.

Subsidy-free solar, wind power projects to generate power at same prices as non-subsidized coal-fired plants

In 2019, the Chinese government will begin construction of a number of subsidy-free solar and wind power projects.  The move comes at a time when construction costs in the renewable power sector are falling rapidly.

The National Development and Reform Commission said the new projects are expected to generate power at the same price as non-subsidized coal-fired power plants.  The renewable energy facilities will not have to comply with capacity quota restrictions and will receive support on land and financing.

“Some regions with good natural resources and firm demand have already achieved subsidy-free, or grid price parity, conditions,” said the NDRC.  The agency added that pilot projects could help renewable energy to compete with coal-fired power.

According to the NDRC, solar construction costs in China are down 45 per cent from 2012 to 2017 and costs for wind power projects have fallen 20 per cent over the same period.

“The economic efficiency of projects has steadily increased, creating favourable conditions for state subsidies to retreat and pressures on subsidy funds to ease,” it said.

In recent years, China has set a goal of bringing renewable power costs down through economies of scale and technological advances.  Last year, Beijing promised to provide direct policy support to help developers get “grid price parity” with traditional energy sources.

According to Reuters, under the new policy, Chinese grid companies will be encouraged to guarantee power purchases from pilot projects, reduce transmission fees and support cross-regional deliveries of subsidy-free power.

As well, the NDRC says it will help boost income generated by solar projects by cutting land costs and promoting new market mechanisms, including green certificate trading.

The China Photovoltaic Industry Association, a group that represents equipment manufacturers, said in a note that the new policy is “good news” for the sector.

The group welcomed the announcement after last year’s decision by Beijing to suspend all new subsidized solar capacity approvals.  A record high 42-gigawatt capacity increase in 2017 left the government with a backlog of at least 120 billion yuan, or $USD18 billion in subsidy payments.

“There will still be subsidized wind and solar projects, and the unsubsidized projects are only an addition,” said the China Photovoltaic Industry Association.