Since the announcement of the domestic photovoltaic installation target of 10GW in 2013 at the National Energy Work Conference, the industry has been buzzing with discussions about subsidy standards and the future of solar power. The government currently offers a unified on-grid tariff of 1 yuan per kilowatt-hour for large-scale photovoltaic projects, while a separate subsidy system for distributed PV is expected to be introduced by the end of Q1. Industry experts predict that distributed subsidies could range between 0.4 to 0.6 yuan/kWh.
With the national goal of adding 10 GW of photovoltaic capacity this year, it’s estimated that over 1 billion yuan in subsidies will be required. Combined with previous projects like the “Golden Sun†initiative and building-integrated solar projects from 2012, total annual PV subsidies are expected to exceed 30 billion yuan, with the “Golden Sun†program alone requiring 24.75 billion yuan.
This massive allocation of funds has sparked renewed debate: Should a competitive mechanism be introduced into the subsidy system? While some argue that competition could drive efficiency and reduce costs, others warn that it might undermine the long-term development of the industry.
China's current subsidy model includes three main approaches: the unified on-grid tariff for large-scale projects, the “Golden Sun†initiative, and the Ministry of Housing and Urban-Rural Development’s integration projects. These programs have already required billions in funding annually, making the discussion about introducing competition both timely and necessary.
In fact, China experimented with a competitive bidding process as early as 2009 for the 10 MW Dunhuang Solar Power Station. Despite a minimum bid price of 0.69 yuan/kWh, the final price was set at 1.09 yuan/kWh, which did not follow the typical low-price winner principle. This raised concerns about whether such mechanisms truly benefit the industry.
Wang Haisheng, an analyst from Minsheng Securities, emphasized that the success of a competition mechanism depends on the country’s broader goals. He noted that while both wind and solar sectors have experienced bidding rounds, the results were often unsatisfactory. In some cases, the winning prices were too low, leading to minimal impact on industry growth.
He also warned that introducing competition in subsidies could force companies to accept lower profit margins, potentially harming the already fragile solar sector. With the market for solar products becoming more transparent, he argued that the state should focus on ensuring reasonable returns for investors rather than pushing for aggressive cost-cutting.
Meng Xianji, vice chairman of the Renewable Energy Society, echoed these concerns. He stressed that the government should support the industry as a strategic emerging sector, providing necessary financial backing to ensure sustainable development. Rather than focusing on competition, the state should concentrate on improving grid connections, resource allocation, and regulatory oversight.
Sun Tuo, an energy analyst at Maghwa Energy Power, acknowledged that competition is a global trend but warned that the timing isn’t right for China. He pointed out that the domestic power market is still imperfect, and introducing a competitive subsidy model could lead to price wars, neglect of R&D, and the marginalization of private enterprises.
Moreover, Sun warned that without proper safeguards, competition could result in a concentration of subsidies among a few state-owned firms, repeating past mistakes in other industries. This could stifle innovation and lead to the loss of key technological leaders in the sector.
Wang Haisheng also highlighted the risks of short-term thinking. Companies may take excessive risks to secure subsidies, sacrificing long-term stability for quick gains. This could create a cycle of irrational behavior, where firms rely on connections rather than merit to access funding—contrary to the original purpose of subsidies.
Experts have also raised concerns about the efficiency of fund usage, particularly with the “Golden Sun†project. While a 7 GW large-scale project would require only 4.2 billion yuan in subsidies, the 4.5 GW “Golden Sun†initiative is projected to cost over 20 billion yuan. This discrepancy raises questions about the fairness and transparency of the subsidy system.
Some analysts support a competitive approach, arguing that it could promote transparency, attract stronger players, and ultimately improve the quality of the industry. However, they stress that any competitive mechanism must be carefully designed to avoid unintended consequences.
Ultimately, the debate reflects a shared concern: how to maximize the use of limited resources while ensuring the long-term health of the photovoltaic industry. As the sector continues to grow, striking the right balance between support and competition will be crucial. For now, many believe that the time is not yet right for a full shift toward a competitive subsidy model.Replacement Parts for Sunflower
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