China heats up solar market with new feed-in tariff

China is already the world’s biggest solar panel manufacturer, but now it is making a move to become a major solar energy consumer as well, with a nationwide feed-in tariff to pay people or businesses a subsidy for electricity they produce with solar panels. This follows on the heels of the country’s wind energy feed-in tariff in 2009, which led to explosive growth in their wind industry.

China had a mishmash of solar incentives before, but the new policy will give a clearer signal to the market and “encourage more companies to participate in the industry,” said an analyst from Bloomberg New Energy Finance.

China’s latest five-year plan, released in March, set the goal of using 20 percent renewable energy by 2020, and a solar feed-in tariff has been expected for months—so in anticipation many solar installations have already gotten rolling, and a flurry of projects may soon qualify.

Fast and Steady Wins the Race?

China, Germany and the U.K. have the most stable and consistent clean energy policies, which helps boost investment, according to a new report by Deutsche Bank Climate Change Advisors.

However, on the same day as China’s announcement, the U.K. put into place a cut in its solar power subsidy for installations over 50 kilowatts, “effectively ending solar farm development” in the country, Business Green argued.

There was a stampede of projects trying to get completed before the deadline, but some are planning more large installations nonetheless. Also, it turns out a loophole in the solar feed-in tariff would have allowed large projects to still get high subsidies—but the government is now moving to close that.

The U.K. had planned to raise subsidies for other clean energy—but it is delaying the raise in the feed-in tariff for anaerobic digesters.

Besides the U.K., a number of other European countries—including Spain, Italy and the Czech Republic—hacked away at their solar subsidies before, and now the Australian state of Western Australia has also eliminated theirs.

The Canadian state of Ontario, on the other hand, is trying to protect clean energy projects by changing regulations to make it harder to cut clean energy subsidies.

Meanwhile, solar installations have been rising fast worldwide as the price of solar panels has fallen about 20 percent in the past year. But manufacturer’s margins are also falling, so it is not clear how much longer these price trends can continue.

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