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Standard FiT (feed-in tariffs) of China's PV power stations for grid connection will be cut, according to the notice publicized by the National Development and Reform Commission (NDRC) on Dec. 22, with the new rates listed below:
1. Cut FiT for PV power stations inaugurated after Jan. 1, 2018 in I, II, and III resources category areas to 0.55 yuan/kWh, 0.65 yuan/kWh, and 0.75 yuan/kWh (tax inclusive).
2. For distributed PV power facilities mainly for own use with excess output fed to grid inaugurated after Jan. 1, 2018, subsidy for entire output will be cut by 0.05 yuan to 0.37 yuan/kWh. For distributed PV power facilities with entire output fed to grid, rates will be set according the fixed prices for the resource category of their areas.
3. For village-level poverty-alleviation distributed PV power stations (0.5 MW and smaller), poverty-alleviation subsidies for standard rates will be unchanged.
EnergyTrend notes that there are three highlights in the rate cut:
1. Small cut for distributed stations and no cut for poverty-alleviation projects
Subsidy for distributed stations mainly for own use with excess output fed to grid will be cut by only 0.05 yuan and FiT will remain unchanged for projects connected to grid before Jan. 1, 2018, with subsidy for projects connected to grid for entire output on Jan. 1, 2018 and later to be cut to 0.37 yuan/kWh.
With only 10 days away from the end of 2017, the publication of the notice is unlikely to spark a rush for installation of distributed PV power stations.
Poverty-alleviation projects will enjoy even stronger policy support, as standard rates for such PV power stations, for both centralized and distributed ones, will remain unchanged. Such projects will become a major source of demand, should more provinces engage in the development of poverty-alleviation PV power stations with open "enclaves economic model."
2. Installation rush expected in 2018
As projects approved before 2018 and entitled to previous higher subsidies will be subject to 2018 lower rates, if they fail to kick off operation by June 30, 2018, a round of installation rush is expected before the deadline. Capacity of the installation rush, however, will reach 7.2 GW at most, as 7.2 GW of the 14.4 GW approved capacity belongs to poverty-alleviation items and rates for distributed stations will remain unchanged.
EnergyTrend remarks that completion for grid connection of some second-batch projects under the auspices of the 2017 "Top Runner Program" has been postponed to Q1 2018, which, plus the stimulation of the 630 deadline, will bolster demands for ground-mounted PV power stations in the first half. Demand during the one-month period from the second half of March to the first half of April, however, will be the weakest in 2018.
According to the NDRC notice, from 2019 there will be no half-a-year grace period for PV power projects, meaning the installation rush for the sake of more generous subsidies of the previous year, as the expected 630 rush, will no longer exist.
However, the reported plan to cut standard rates quarterly has yet to be confirmed.
Construction for projects under the 2018 indicator, set at 12.9 GW by the National Energy Administration, will fall in the second half. EnergyTrend believes that half of the amount will be converted to use for poverty-alleviation ground-mounted projects, which will have to be completed for grid connection by the end of the year. Thanks to handsome profits and absence of restriction of indicator, demands for distributed stations will remain robust in 2018. Overall speaking, there will be a hectic installation rush in Q4 2018, before the Dec. 30 deadline, when demand is expected to top 20 GW, including 5 GW for projects under "Top Runner Program," poverty-alleviation projects, and distributed projects.
3. Adjustment of top bidding rates for "Top Runner Program"
According to the schedule of the National Energy Administration for the third-batch projects under 2017 "Top Runner Program," application bases will have to be completed for grip connection by Dec. 31, 2018, while the deadline for technological bases is June 30, 2019. Biddings for the third-batch bases will be completed by April 30, 2018, with the standard rate on Jan. 1, 2018 being the maximum bidding rate. Winning bids are expected to reach 85-90% of the local standard rates.