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70% subsidy for solar power

CHINA will subsidize up to 70 percent of investment in new solar power systems as it expands a program to speed development of the clean energy industry.

The government will pay half of the price of new ground-mounted solar power projects and related power transmission and distribution systems, the Ministry of Finance has said. The subsidy will rise to 70 percent for independent solar projects in remote areas with no power supply.

In the next two to three years, China aims to subsidize solar power projects of no less than 500 megawatts - the size of an average coal-fired power plant - under the program called Golden Sun, the ministry said.

Shenyin and Wanguo Securities analyst Jiao Jian estimated a total subsidy of between 11 billion yuan (US$1.6 billion) and 14 billion yuan under the program.

"This is still a temporary incentive, as in the long term we need a feed-in tariff system to guarantee the on-grid tariffs for producers," said Zhao Yuwen, vice chairman of the Chinese Renewable Energy Society.

To qualify for the subsidy, each project must have a peak capacity of at least 300 kilowatts, while construction will have to be completed in one year and operations last for at least 20 years, in addition to other requirements.

The government in March unveiled a program to subsidize half the equipment and installation costs for building-integrated solar power projects, without specifying how much capacity would be subsidized.

China has some of the world's largest solar power panel makers, including Suntech Power Holdings Co and Trina Solar Ltd, but 98 percent of the output was sold abroad last year because of a lack of subsidies domestically and high costs. Domestic installed solar power capacity was just more than 100MW by last year.

With the new policies, China's installed solar power capacity is set to easily double annually during the next two to three years, but the pace would not be enough to offset an industry oversupply, Guotai Jun'an Securities said in a note, telling investors to remain cautious about the sector.


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