Subsidies for green energy

Beijing granted about 260 million yuan of subsidies to renewable energy power projects last year, according to National Development and Reform Commission (NDRC), the top industry policy planner.

The subsidies are the key to boosting the nascent and high-cost sector's economies of scale and make the business sustainable in the long term as the government seeks to contain coal consumption to cut pollution.

The government, which passed a renewable energy law at the start of last year, doled out 251.46 million yuan of tariff subsidies to 38 renewable power projects in 12 provinces and autonomous regions, a NDRC circular said.

Wind power projects received 90.1 per cent of the total, or 226.61 million yuan, while biomass power plants got 21.74 million yuan and solar power projects took 100,000 yuan.

The subsidy for each project is equivalent to the excess of its ex-plant tariff over the average tariff at coal-fired plants installed with sulphur gas filtering facilities.

Apart from tariff subsidies, 7.61 million yuan of financial support was given to certain public renewable power projects and another 1.15 million yuan to finance connection of renewable energy projects to power grids.

The subsidies are financed through the collection of tariff increments by the power grid companies.

Most of the country's renewable energy resources are located in the sparsely populated northern and western regions, where power consumption is smaller than the coastal regions. The NDRC has devised a quota system to even out the imbalances, whereby power firms in interior regions can sell subsidy shortfall 'quotas' to their counterparts in coastal regions running surpluses.