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Levelized cost of electricity (LCOE) of renewable energies and required subsidies in China

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  • Ouyang, Xiaoling
  • Lin, Boqiang

Abstract

The development and utilization of renewable energy (RE), a strategic choice for energy structural adjustment, is an important measure of carbon emissions reduction in China. High cost is a main restriction element for large-scale development of RE, and accurate cost estimation of renewable power generation is urgently necessary. This is the first systemic study on the levelized cost of electricity (LCOE) of RE in China. Results indicate that feed-in-tariff (FIT) of RE should be improved and dynamically adjusted based on the LCOE to provide a better support of the development of RE. The current FIT in China can only cover the LCOE of wind (onshore) and solar photovoltaic energy (PV) at a discount rate of 5%. Subsidies to renewables-based electricity generation, except biomass energy, still need to be increased at higher discount rates. Main conclusions are drawn as follows: (1) Government policy should focus on solving the financing problem of RE projects because fixed capital investment exerts considerable influence over the LCOE; and (2) the problem of high cost could be solved by providing subsidies in the short term and more importantly, by reforming electricity price in the mid-and long-term to make the RE competitive.

Suggested Citation

  • Ouyang, Xiaoling & Lin, Boqiang, 2014. "Levelized cost of electricity (LCOE) of renewable energies and required subsidies in China," Energy Policy, Elsevier, vol. 70(C), pages 64-73.
    • Handle: RePEc:eee:enepol:v:70:y:2014:i:c:p:64-73
    DOI: 10.1016/j.enpol.2014.03.030
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