China’s National Energy Administration (NEA) has confirmed that it will allocate approximately RMB 3 billion ($435 million) for solar projects this year. This is the first time that the country would be setting an annual cap on solar subsidies.

In May 2019, Mercom reported on the news of China approving over 20 GW of solar and wind projects as part of its plan to install unsubsidized renewable energy projects in the country.

This first batch of subsidy-free projects was released by China’s National Development and Reform Commission (NDRC) and the NEA.

In an emailed statement, Frank Haugwitz, the director of Asia Europe Clean Energy (Solar) Advisory Co. Ltd (AECEA), commented “The $435 million subsidies for solar projects in 2019 were communicated earlier this year and now officially confirmed. The big issue is, how much capacity can or will be supported, this is still up in the air. This information should be released in June or July, the latest.”

China aims to achieve its wind and solar power grid parity targets by 2020. To meet this goal, the government is focusing on launching measures that limit the dependence on subsidies and reduce the development of inefficient projects.

Last month, the Chinese government ended uncertainty in the solar market as the Price Bureau of the NDRC announced the level of solar FIT payments for large-scale projects which will become effective from July 1, 2019.

In April, Mercom reported that China was able to install 5.2 GW of solar capacity in the first quarter (Q1) of 2019. When compared to Q1 2018, this was a nearly 40% decline in installation numbers in which China had installed 9.65 GW of solar PV capacity.

In June of 2018, China shocked the global solar markets by imposing installation caps and reduced feed-in tariff (FiT) for solar projects in the country affecting solar demand in the country after which installations declined from 53 GW in 2017 to 44 GW in 2018. The change in policy is a result of a massive subsidy backlog of 120 billion yuan ($17.4 billion).

Currently, China is the largest solar PV market in the world. Prioritization of unsubsidized projects with an off-take guarantee will further help the country in consolidating its pole position.