BEIJING (Reuters) - China will struggle to pay billions of yuan in subsidies to clean energy companies, with the shortfall set to quadruple by 2020, a government official said on Wednesday, underscoring the cost of funding the country’s ambitious renewables push.
The total shortfall by 2020 will be 200 billion yuan ($30.2 billion), up from 50 billion yuan last year, Dongming Ren, director of the National Development and Reform Commission’s Energy Research Institute, told an industry conference.
“The shortfall will continue to widen if China keeps its current renewable policy of fixed power prices unchanged,” he said.
The world’s top energy consumer has vowed to raise non-fossil fuel to 15 percent of its total energy mix by 2020 and cap its carbon emission by 2030 as part of its effort to wean the nation of coal.
Moody’s Investors Service warned last month that the dependence of China’s renewable sector on government subsidies will be one of the main near-term challenges for clean power.
“Two years of delays in getting government subsidies will cut a solar project return by 5-6 percentage points,” Pang XiuLan, deputy director at State Power Investment Corp’s [CPWRI.UL] Huanghe Hydropower Development Corp, told the conference on Tuesday.
To ease the government’s financial burden on renewable projects and keep the rate of waste power under control, China has cut subsidies for new large-scale solar and onshore wind power projects and set capacity limits in regions with high waste rates.
It also introduced green electricity certificate system in February and aimed to enforce compulsory quota system on coal-fired power plants in 2018.
The country also plans to launch a nationwide carbon trade emissions trading market this year, although Ren said earlier on Wednesday that plan is delayed into 2018.
“China needs to expand the source of renewable subsidies, otherwise it would be very difficult for clean energy to compete with coal, especially before environmental costs are showed on coal-fired power prices,” said Ren.
Reporting by Muyu Xu and Josephine Mason; Editing by Manolo Serapio Jr.