The adjustment to the feed-in tariff for photovoltaic (PV) power has been finalized. The National Development and Reform Commission (NDRC) announced today that, effective January 1, 2017, the benchmark feed-in tariffs for newly built PV power plants in resource zones I to III will be adjusted to RMB 0.65, RMB 0.75, and RMB 0.85 per kilowatt-hour, respectively. However, the subsidy standards for distributed PV power generation and the benchmark tariff for offshore wind power will remain unchanged.

　　In the second half of 2016, a draft notice from the National Development and Reform Commission regarding adjustments to the benchmark on-grid tariff for new energy sources circulated in the industry and media. The draft proposed that the on-grid tariff for photovoltaic power in resource zones I, II, and III would be reduced from 0.8 yuan, 0.88 yuan, and 0.98 yuan in 2016 to 0.55 yuan, 0.65 yuan, and 0.75 yuan respectively. Meanwhile, subsidies for rooftop distributed generation with "self-consumption and surplus fed into the grid" and "complete self-consumption" would be reduced from the current 0.42 yuan to 0.2 yuan in Class I areas, 0.25 yuan in Class II areas, and 0.3 yuan in Class III areas. This significant price reduction sparked considerable discussion within the industry.

　　In December, further news emerged that the benchmark on-grid tariff for photovoltaic power in 2017 would be adjusted to: 0.6 yuan/kWh for Class I, 0.7 yuan/kWh for Class II, and 0.8 yuan/kWh for Class III.

　　A document officially issued today shows that, effective January 1, 2017, the benchmark on-grid tariffs for newly built photovoltaic (PV) power plants in resource zones I to III will be adjusted to RMB 0.65, RMB 0.75, and RMB 0.85 per kilowatt-hour, respectively. It also clarifies that the PV benchmark tariff will be adjusted annually based on cost changes.

　　Furthermore, the document states that, to continue encouraging the development of distributed PV and offshore wind power, the subsidy standards for distributed PV power generation and the benchmark tariff for offshore wind power will remain unchanged. Simultaneously, to further leverage the role of market-based pricing, the document encourages local governments to continue using market competition methods such as bidding to determine the owners and on-grid tariffs for various new energy projects.

　　The announced PV benchmark on-grid tariffs exceeded industry expectations. Qin Haiyan, Secretary-General of the Wind Energy Professional Committee of the China Renewable Energy Society, stated that my country's PV industry has made rapid technological progress, with PV module manufacturing and photoelectric conversion efficiency reaching world-class levels. The adjusted benchmark on-grid tariffs, under current technological conditions, can ensure reasonable returns for PV power generation projects, maintain the investment attractiveness of new energy projects, and promote the healthy development of the entire PV industry chain. Meanwhile, maintaining the price of distributed photovoltaic (PV) power generation at its current level, and minimizing reductions in PV prices in eastern regions, is conducive to rationally guiding the optimization of the PV industry's layout, encouraging the development of new energy sources locally in eastern regions, reducing coal consumption and greenhouse gas emissions, and promoting air quality improvement.

　　Qin Haiyan also believes that to achieve this goal and promote technological progress and lead industrial development, two prerequisites must be addressed simultaneously: first, the problem of curtailment of solar and wind power must be resolved; second, the issue of timely and appropriate subsidies must be addressed. Otherwise, the healthy and sustainable development of the new energy industry will be affected.

　　Sun Xingping, President of GCL New Energy Holdings Co., Ltd., stated in an interview that the price reduction is reasonable and meets the needs of industry development. Through the efforts of the entire industry, the overall cost of PV systems has been reduced. Whether a company is profitable depends on the level of the feed-in tariff and whether subsidies are in place. Prices of 0.65 yuan, 0.75 yuan, and 0.85 yuan allow truly high-quality companies reasonable profit margins while also eliminating inferior companies.

　　This document also clarifies the 2018 wind power feed-in tariff. After January 1, 2018, the benchmark on-grid tariffs for newly approved onshore wind power projects in resource zones I to IV were adjusted to RMB 0.40, RMB 0.45, RMB 0.49, and RMB 0.57 per kilowatt-hour, respectively, representing reductions of 7 fen, 5 fen, 5 fen, and 3 fen per kilowatt-hour compared to the 2016-2017 tariffs.

　　my country's renewable energy development has been rapid, but it also faces some difficulties and contradictions. In August 2016, Li Yangzhe, Deputy Director of the National Energy Administration, stated that as of the first half of that year, the cumulative subsidy gap for renewable energy had reached RMB 55 billion, placing immense pressure on decision-making departments.

　　It is understood that based on the current development speed of photovoltaic and wind power, the reduction in the benchmark on-grid tariff for photovoltaic power will reduce the annual demand for new subsidies by approximately RMB 4.5 billion after 2017; and the reduction in onshore wind power prices in 2018 will reduce the annual demand for new subsidies by approximately RMB 1.5 billion. This totals a reduction of approximately RMB 6 billion.