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China "smart in the way it has incented private industry to build out solar power capacity"

2 min. read

According to a new article in OilPrice.com, China is busy "cutting its dependence on coal, oil and natural gas and replacing it with solar at a breakneck pace."

According to a 2014 report by Hanergy Holding Group, China installed 12 GW of new photovoltaic (PV) generation capacity in 2013, a massive 232 percent increase over the previous year. Compare that to Germany, whose new PV capacity dropped 56.5 percent, and Italy, where new solar power additions fell by 55 percent.

Why is China racing ahead when it comes to solar power growth, while certain other countries are falling behind? Simple: the way China incentivizes solar power. A few key points form the article explain what's going on here:

  • Policies aimed at boosting market demand for solar: "While Germany and the rest of Europe have scaled back government incentives to install solar, in China, increased targets for solar power generation have been backed by programs to boost market demand. A feed-in tariff passed last year amounts to a subsidy of between 14 and 16 U.S. cents per kilowatt hour, and applies to both ground-mounted and rooftop panels. Feed-in tariffs incent renewable energy producers by allowing them to charge a higher price for their electricity than the retail rate."
  • Financing and investment innovations: "The Chinese government is encouraging financial institutions to offer discounts on loans and is encouraging the formation of PV industry investment funds among insurance companies and trusts, Bloomberg reported this month."
  • A smart and highly motivated country: "There is no doubt that China’s push to increase solar power is being driven by an acute and pressing national problem – air pollution. Solar offers a way out of the competing pressures China is under to fuel economic growth and also arrest deteriorating air quality. But the Chinese government has also been smart in the way it has incented private industry to build out solar power capacity. As long as China’s solar competitors do not have the same environmental imperative, they will likely continue to lag behind China in new solar power additions. For that reason, the solar growth story is likely to be centred in China, at least for the foreseeable future."
Topics: Public Affairs