China reduces FITs over two-year period

CHINA: China's National Energy Administration (NEA) has cut its onshore wind feed-In tariff (FIT) rates to regulate development.

The CNY0.02/kWh cut will be applied to projects approved after 1 January 2016 (pic: Zhu Shiliang)
The CNY0.02/kWh cut will be applied to projects approved after 1 January 2016 (pic: Zhu Shiliang)

Rates for category I, II and III wind regions will be cut by CNY 0.02/kWh ($0.003/kWh) in 2016 and by CNY 0.03/kWh ($0.005/kWh) in 2018. The FIT for category IV low-wind region projects will be cut by CNY 0.01/kWh in 2016 and CNY 0.02/kWh in 2018.

The cuts were announced in December, and came into effect from 1 January. China's FIT was cut by a similar amount last year. 

China's wind regions are divided into four categories. Areas I, II and III are mainly in north-west, north central, and north-east China, where wind resources are comparatively good, in descending order. Category IV refers to all other regions of the country.

China introduced its onshore wind benchmark FIT scheme in July 2009. In December 2014, the NEA announced the first revisions to the rates.

Under the current scheme, projects approved before the end of 2015 would have FIT rates of CNY 0.49/kWh, CNY 0.52/kWh, and CNY 0.56/kWh for categories I, II and III, respectively. The wind power price for category IV region is slightly higher at CNY 0.61/kWh because of the lower wind resources.The FIT price for a wind project usually lasts 20 years.

The latest reductions affect wind projects approved after 1 January 2016 and then on the same date in 2018.

The change is aimed at directing the onshore wind sector towards healthy and orderly development, for balancing the growth of new energies in various regions, and for enhancing the efficiency of renewable power subsidy payout, the NEA said.

Renewables surcharge levy

In a separate notice issued the following week, the NEA said the renewables surcharge levied on electricity consumptions other than for household living or agricultural production will be raised to CNY 0.019/kWh.

The surcharge was first imposed in 2006, when the rate was CNY 0.001/kWh.

In China, a wind power company sells electricity to the grid operator at the benchmark rates of local coal-fired power.

The difference between the wind FIT and that of coal power is covered by the national renewable energy development fund, which comes from the renewables surcharge and has increasingly been in shortfall in recent years because of the growth of new renewables installations.

With the new measure, the wind FIT rates in category I region will be reduced to CNY 0.46/kWh by 2018. That will bring it close to the benchmark price for coal-fired power, which is expected to be around CNY 0.40/kWh by then.

This is expected to further ease the pressure on state subsidies. The NEA has said it wants to make the pricings of wind and coal compatible by 2020.

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