China's solar power to moderate amidst renewable subsidy phase-out

Solar projects in the pipeline are few whilst wind projects are expected to accelerate.

The growth of solar power in China will moderate in contrast to wind power as the government aims to push grid parity projects and phase out subsidy on renewables, Moody’s Investors Service reported.

Wind power companies like China Longyuan Power Group are expected to accelerate construction in time to still be able to apply for subsidies before 2021-22.

In contrast, solar power companies lacked a long pipeline of approved projects. They are also expected to balance between expansion and investments in light of government measures on competitive bidding for new projects and cap on subsidies for capacity additions that could lower tariffs and compress margin for new projects.

Industry consolidation involving state-owned (SOEs) and privately-owned enterprises (POEs) is also expected to intensify in the solar power sector, with the former observed to have been acquiring renewable assets or stakes from the latter. POEs have been facing tight liquidity from prolonged subsidy collection timetables and tightened funding access.

China has been pushing for new wind and solar projects to function at grid parity over the next three years. This seeks to prove commercially viable renewable projects as possible without government support.

The first batch of grid parity projects was announced in May, totalling 1,478MW for 168 solar power projects, 451MW for 56 wind projects and 147MW for 26 distributed energy projects.