The Chinese government is considering a reduction of its feed-in tariff of around 3-5%, according to reports by Reuters.
Tariffs are currently around the RMB1/kWh mark (US$0.158). The newswire cites a government source claiming that a cut of RMB0.03-0.05/kWh is on the cards for next year with a series of RMB0.03/kWh reductions from 2017 to 2020. The official was speaking after a meeting of the National Development and Reform Commission.
While this could be interpreted as a negative, reductions of 3% are unlikely to outpace falling equipment (BOS) costs and reductions in the cost of capital for projects.
The added certainty of scheduled reductions till 2020 also provide greater visibility for investors and developers alike.
The subsidy level was set at RMB1 in 2011 meaning that next year’s reduction will also be absorbed by five years of industry cost reductions and is unlikely to catch any developers in China by surprise.