China Slashes Renewable Subsidies After Surpassing Goals

BEIJING, 10 February 2025 – In a move to reshape the global renewable energy landscape, China announced that it will reduce subsidies for wind and solar projects after achieving its clean energy targets six years earlier than expected. This decision, presented by the National Commission for Development and Reform (NDRC) and the National Energy Administration (NEA), shows a significant shift towards market-oriented electricity pricing.

Why is China reducing renewable energy subsidies?

China\’s drive for renewable energy has led to an increase in solar and wind capacity, making public subsidies less necessary. According to the International Energy Agency (IEA), the country accounted for 40% of global renewable energy growth between 2019 and 2024. With more than 40% of China\’s total installed capacity, Beijing believes that the sector can be maintained alone without financial incentives.

As the CDN indicated, “the cost of new energy development has decreased significantly compared to previous stages.” This rapid cost reduction and technological advances have made renewable energy economically viable without government intervention.

What will be the impact of this electricity price?

One of the most important changes is the change in a market-based price model. Previously, the government guaranteed the prices of renewable energy sold to the grid. Now, wind and solar energy will be subject to supply and demand forces.

According to South China Morning Post, NDRC and NEA have instructed local governments to develop their own market-oriented price plans by the end of the year. However, officials found it reasonable that the change did not have a significant impact on electricity prices for residential users, farmers or most businesses.

What impact will this have on the solar industry?

China\’s solar industry is already facing problems of overcapacity, with plumbing panel prices due to oversupply in global markets. The reduction of subsidies could increase the financial strain of small manufacturers and promoters who depended on government incentives to remain competitive.

In 2024, China set a new record for solar installations, increasing its capacity by 45% compared to the previous year, bringing its total solar capacity to nearly 887 gigawatts, more than six times that of the United States, according to the International Renewable Energy Agency (IRENA). With the reduction of subsidies, some analysts anticipate further consolidation in the solar sector, with small businesses risking bankruptcy.

How is this compared to other countries\’ renewable energy policies?

China\’s decision to reduce support for renewable energy is in sharp contrast to the policies of other major economies. The European Union and the United States continue to provide tax incentives and subsidies to accelerate clean energy adoption. However, Beijing\’s confidence in the market-based approach reflects the rapid maturation of its renewable energy sector.

The change also comes at a time when former US President Donald Trump, after his re-election, once again left the Paris Climate Agreement and gives priority to the expansion of fossil fuels. This policy divergence could affect the global balance of clean energy investments.

What\’s next for China\’s renewable energy sector?

Although subsidy reductions may lead to short-term volatility, China\’s long-term commitment to clean energy remains unchanged. The country continues to lead battery storage technology and network modernization, which are key to maintaining its renewable energy sector.

According to CNDR, “market-based price reforms will ensure a more sustainable and competitive energy sector.” Experts believe that, despite policy changes, China will continue to become the world\’s clean power plant.

Investors and industry leaders will see how these changes are developing and whether other countries will adopt similar models without subsidies in the future.