China's distributed photovoltaic power generation is lost again

**Abstract** Recently, the National Development and Reform Commission (NDRC) released a draft of the “Notice on Improving the Photovoltaic Power Price Policy,” commonly referred to as the “Opinion Draft,” to government agencies and photovoltaic power generation companies. This document outlines a new pricing mechanism for the next generation of solar power grid integration. The proposed changes have sparked significant concern, particularly regarding the future of distributed photovoltaic (PV) projects. The “Opinion Draft” significantly reduces subsidies for distributed PV, especially for residential installations, creating uncertainty in the market. Unlike previous policies that offered uniform feed-in tariffs, the new proposal divides the country into four zones based on solar irradiation levels, with varying tariffs for each region. For distributed systems, the subsidy for self-consumed electricity is set at 0.35 yuan per kWh, far below the previously expected range of 0.4–0.6 yuan. Surplus power fed back to the grid is compensated at the local thermal power desulfurization benchmark price, which is also lower than before. This reduction in support has raised concerns about the viability of distributed PV projects. For example, under current conditions, a system that generates 5 days of self-use and 2 days of surplus energy would require an internal rate of return of 9%, which demands a cost reduction of 30% from the current 10 yuan/Wp to 7 yuan/Wp. Such a drop is unlikely in the short term, making the development of distributed PV highly challenging. The impact on the industry has been severe. Companies that once thrived on government incentives are now struggling. A recent report by Aoke Shares showed a sharp decline in revenue and net profit in 2012, reflecting the broader struggles within the sector. Similarly, Jiangsu Aikang Solar Technology reported a dramatic drop in profits, blaming weak demand, declining margins, and increased financing costs due to policy uncertainties. While the Chinese government continues to push for renewable energy growth, the new policy may slow down the expansion of the domestic market. Analysts suggest that the 2013–2015 period could see annual market sizes below 10 GW, which is far below expectations. This creates a bleak outlook for companies reliant on the downstream solar market. Despite these challenges, there is still hope. The reform of the National Energy Administration and the potential for more market-oriented power systems could eventually open up new opportunities for distributed PV. However, until clear regulations are implemented, the future remains uncertain. For now, the industry faces a difficult path forward, with many companies under immense pressure to adapt and survive.

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