China’s Distributed Generation Policy Set to Boost its Rooftop Solar

China’s distributed generation policy forms part of the government’s effort to encourage distributed solar power projects.
Published: Tue 28 Oct 2014

China’s distributed generation is expected to see major growth, thanks to the introduction of an ambitious distributed solar policy.

Driving rooftop solar installations

The policy was released by the government's National Energy Administration (NEA) which has pledged to help local authorities drive rooftop installation across the country. The details were revealed in an investment note issued by Deutsche Bank.

According to the note, the national policy will drive rooftop installations –with all systems below 20MW in size eventually being classed as distributed generation- with local authorities incentivized to install such systems across China in affordable housing, railway stations, motorway services, airports and other transport hubs as well as in sports venues, parking areas, and agricultural land.

The policy is part of the government’s effort to encourage so-called distributed solar power projects, where smaller photovoltaic units are placed near consumers who use the power. These contrast with utility-scale projects designed to feed electricity into a traditional grid.

The smaller projects would be used by industrial and commercial companies with large rooftops. The largest consumers of electricity are also being encouraged to develop solar projects as a way to reduce their electricity bills.

Improving grid connection of distributed generation

The policy also calls for a streamlining of interconnection to enable a more efficient grid connection of distributed generation systems. It also stipulates that energy utilities should plan to incorporate distributed generation in their operations and ensure prompt payment, possibly monthly, for distributed generators.

With the NEA announcing its intent to develop innovative financing methods for distributed generation, Deutsche Bank points to the potential for solar leasing companies, based on the model used by US firm SolarCity, to flourish under the new policy.

China’s ambitious solar plans

China’s government is aiming to add 8GW of solar energy for small users and 6GW for larger projects, which would make it the biggest market for photovoltaics. The country could install as much as 14GW, according to a Bloomberg New Energy Finance forecast.

Last month, China’s policymakers set a 70GW solar target for 2017 (China's total electricity-generating capacity is about 1,100GW). That means adding 50GW, or more than the world installed last year, in three years across rooftops and solar farms. Engerati discusses the country’s green plans in China- To Clean Up Its Act?

Greater development of distributed generation would boost demand for panel manufacturers led by JinkoSolar Holding Co. and Canadian Solar Inc. and to a lesser extent Yingli Green Energy Holding Co. (YGE), JA Solar Holdings Co. and Trina Solar Ltd. Investors such as GCL New Energy Holdings Ltd. are working to reap those incentives, says Patrick Jobin, analyst at Credit Suisse Securities USA in New York.

China will also be introducing a nationwide carbon cap-and-trade system two years earlier than planned, in 2016. This will only serve to further develop solar and other renewable energy sources in the country which is one of the biggest air polluters in the world.