Factbox: China's incentives for renewable or clean energy

BEIJING Fri Aug 27, 2010 2:05am EDT

BEIJING (Reuters) - China is expected to unveil soon details of a five-trillion-yuan ($736 billion) investment plan for clean energy in the next decade.

The clean energy industries targeted include nuclear, solar, wind, biomass, unconventional gas, clean coal, smart grid and new-energy vehicles.

The amount of spending will also include incentive policies such as subsidies in feed-in power tariffs and imports and income tax rebates.

Here are some existing sweetners Beijing offers to support the development of renewable or clean energy.

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SUBSIDIES ON FEED-IN TARIFFS:

Feed-in rates for power generated from renewable sources, excluding hydropower, are higher than from coal-fired generators.

Biomass: the rate now is 0.75 yuan per kilowatt hour(kWh).

Wind power: prices range from 0.51 yuan to 0.61 yuan/kWh, depending on regions.

Hydro, solar, geothermal and tidal power prices are set project by project based on a cost plus scheme.

Coal-fired: coal fires around 80 percent of China's total power output, and average grid feed-in rate for coal-fired plants owned by China's five major state-run groups was 0.3676 yuan/kWh in 2009. Benchmark feed-in rates differ by region.

Beijing levies a 0.004 yuan/kWh surcharge on power users, except those in Tibet or in agriculture. The surcharge, which could be more than 10 billion yuan ($1.47 billion) this year, is used to compensate grid firms that buy electricity from wind, solar and biomass developers at higher rates than from coal-fired plants.

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VAT REBATES, WAIVERS:

Value-added tax on electricity production by nuclear generators is cut by 75 percent in the first five years after the start of commercial operation, by 70 percent from the sixth year to the 10th year, and by 55 percent from the 11th to 15th year.

Imports of large, efficient power generating systems, high or ultra-high voltage transmission and transformation equipment, key parts of nuclear, wind and hydro power generators are exempt from import tariffs and value-added taxes.

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CARROTS FROM LOCAL GOVERNMENTS:

Some local governments also provide their own incentives, such as power price subsidies, tax rebates and preferential land use for renewable energy projects.

For instance, eastern Shandong province set a target on-grid solar power price of 1.7 yuan/kWh ($0.25/kwh) in 2010, 1.4 yuan in 2011 and 1.2 yuan in 2012, by topping up the difference with the state-set rates.

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ADMINISTRATIVE MEASURES:

China also requires grid firms to source more than one percent of electricity from renewables, excluding hydropower, by 2010 and 3 percent by 2020.

Power firms with generating capacity over 5 GigaWatts (GW) are required to have more than 3 percent of their installed capacity from renewables excluding hydropower by 2010, and 8 percent by 2020.

Power companies in general can meet the 2010 target but grid firms may not, Liu Qi, a deputy head of the National Energy Administration said in March.

China's renewable energy development was also in part helped by the Clean Development Mechanism (CDM) by which Chinese clean energy developers recoup part of their investment by selling carbon credits to firms in industrialized countries.

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ELECTRIC/HYBRID VEHICLES:

China grants one-off subsidies of up to 60,000 yuan ($8,823) per vehicle of the electric type and up to 50,000 yuan for electric/hybrid cars. The government also hands out 3,000 yuan for small-engine cars of 1.6 liter capacity or less.

These subsidies, which will be paid to auto makers, have been launched under a pilot scheme in the five Chinese cities of Shanghai, Changchun, Shenzhen, Hangzhou and Hefei.

Last week, the State-owned Assets Supervision and Administration Commission pledged a 1.3-billion-yuan subsidy for the establishment of a technical platform for electric vehicles.

($=6.79 yuan)

(Reporting by Jim Bai and Chen Aizhu; Editing by Clarence Fernandez)

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