IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v167y2022ics0301421522002695.html

An analysis of the factors driving utility-scale solar PV investments in China: How effective was the feed-in tariff policy?

Author

Listed:
  • Zhang, Alex Hongliang
  • Sirin, Selahattin Murat
  • Fan, Conglai
  • Bu, Maoliang

Abstract

China has become a global manufacturing hub for many industries; recently, thanks to various renewable energy support schemes, we also see the country's growing share in renewable energy investments. However, significant renewable energy investment is still required to achieve China's ambitious carbon targets: achieving carbon peak by 2030, and carbon neutrality by 2060. Based on province-level data covering the whole period of feed-in tariff (FIT) support mechanism, this paper explores the effect of renewable energy subsidies, costs and other economic factors on the installed capacity of utility-scale solar PV (UPV) in China. Our findings indicate that the FIT mechanism in tandem with a significant reduction in renewable energy investment costs have been the major drivers of China's dramatic increase in UPV investments. However, subsidies to distributed solar PV investments also have a crowding-out effect on UPV investments, which result in a statistically significant co-opetition relationship between UPV and Distributed PV. Furthermore, heterogeneity in provincial power consumption and energy supply also affect these investment dynamics.

Suggested Citation

  • Zhang, Alex Hongliang & Sirin, Selahattin Murat & Fan, Conglai & Bu, Maoliang, 2022. "An analysis of the factors driving utility-scale solar PV investments in China: How effective was the feed-in tariff policy?," Energy Policy, Elsevier, vol. 167(C).
    • Handle: RePEc:eee:enepol:v:167:y:2022:i:c:s0301421522002695
    DOI: 10.1016/j.enpol.2022.113044
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421522002695
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2022.113044?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Huang, Ping & Negro, Simona O. & Hekkert, Marko P. & Bi, Kexin, 2016. "How China became a leader in solar PV: An innovation system analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 777-789.
    2. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
    3. Wand, Robert & Leuthold, Florian, 2011. "Feed-in tariffs for photovoltaics: Learning by doing in Germany?," Applied Energy, Elsevier, vol. 88(12), pages 4387-4399.
    4. 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.
    5. Wang, Hongye & Su, Bin & Mu, Hailin & Li, Nan & Gui, Shusen & Duan, Ye & Jiang, Bo & Kong, Xue, 2020. "Optimal way to achieve renewable portfolio standard policy goals from the electricity generation, transmission, and trading perspectives in southern China," Energy Policy, Elsevier, vol. 139(C).
    6. Corwin, Samuel & Johnson, Timothy L., 2019. "The role of local governments in the development of China's solar photovoltaic industry," Energy Policy, Elsevier, vol. 130(C), pages 283-293.
    7. Grau, Thilo & Huo, Molin & Neuhoff, Karsten, 2012. "Survey of photovoltaic industry and policy in Germany and China," Energy Policy, Elsevier, vol. 51(C), pages 20-37.
    8. Ye, Liang-Cheng & Rodrigues, João F.D. & Lin, Hai Xiang, 2017. "Analysis of feed-in tariff policies for solar photovoltaic in China 2011–2016," Applied Energy, Elsevier, vol. 203(C), pages 496-505.
    9. repec:aen:journl:ej37-si2-papaefthimiou is not listed on IDEAS
    10. Neij, Lena, 2008. "Cost development of future technologies for power generation--A study based on experience curves and complementary bottom-up assessments," Energy Policy, Elsevier, vol. 36(6), pages 2200-2211, June.
    11. Tu, Qiang & Mo, Jianlei & Liu, Zhuoran & Gong, Chunxu & Fan, Ying, 2021. "Using green finance to counteract the adverse effects of COVID-19 pandemic on renewable energy investment-The case of offshore wind power in China," Energy Policy, Elsevier, vol. 158(C).
    12. Zhang, Libo & Chen, Changqi & Wang, Qunwei & Zhou, Dequn, 2021. "The impact of feed-in tariff reduction and renewable portfolio standard on the development of distributed photovoltaic generation in China," Energy, Elsevier, vol. 232(C).
    13. Zhang, M.M. & Zhou, D.Q. & Zhou, P. & Liu, G.Q., 2016. "Optimal feed-in tariff for solar photovoltaic power generation in China: A real options analysis," Energy Policy, Elsevier, vol. 97(C), pages 181-192.
    14. Wang, Hongwei & Zheng, Shilin & Zhang, Yanhua & Zhang, Kai, 2016. "Analysis of the policy effects of downstream Feed-In Tariff on China’s solar photovoltaic industry," Energy Policy, Elsevier, vol. 95(C), pages 479-488.
    15. Avril, S. & Mansilla, C. & Busson, M. & Lemaire, T., 2012. "Photovoltaic energy policy: Financial estimation and performance comparison of the public support in five representative countries," Energy Policy, Elsevier, vol. 51(C), pages 244-258.
    16. He, Gang & Kammen, Daniel M., 2016. "Where, when and how much solar is available? A provincial-scale solar resource assessment for China," Renewable Energy, Elsevier, vol. 85(C), pages 74-82.
    17. Li, Jianglong & Huang, Jiashun, 2020. "The expansion of China's solar energy: Challenges and policy options," Renewable and Sustainable Energy Reviews, Elsevier, vol. 132(C).
    18. Zhang, Sufang & Andrews-Speed, Philip & Ji, Meiyun, 2014. "The erratic path of the low-carbon transition in China: Evolution of solar PV policy," Energy Policy, Elsevier, vol. 67(C), pages 903-912.
    19. Karneyeva, Yuliya & Wüstenhagen, Rolf, 2017. "Solar feed-in tariffs in a post-grid parity world: The role of risk, investor diversity and business models," Energy Policy, Elsevier, vol. 106(C), pages 445-456.
    20. Zhang, Sufang & Andrews-Speed, Philip & Li, Sitao, 2018. "To what extent will China's ongoing electricity market reforms assist the integration of renewable energy?," Energy Policy, Elsevier, vol. 114(C), pages 165-172.
    21. Shen, Wei & He, Jijiang & Yao, Shangheng, 2021. "Green industrial policy in the post grid parity era: Governing integrated Solar+ projects in China," Energy Policy, Elsevier, vol. 150(C).
    22. Liu, Cengceng & Li, Nan & Zha, Donglan, 2016. "On the impact of FIT policies on renewable energy investment: Based on the solar power support policies in China's power market," Renewable Energy, Elsevier, vol. 94(C), pages 251-267.
    23. Wang, Yu & He, Jijiang & Chen, Wenying, 2021. "Distributed solar photovoltaic development potential and a roadmap at the city level in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 141(C).
    24. Zhang, M.M. & Zhang, C. & Liu, L.Y. & Zhou, D.Q., 2020. "Is it time to launch grid parity in the Chinese solar photovoltaic industry? Evidence from 335 cities," Energy Policy, Elsevier, vol. 147(C).
    25. Guo, Hongye & Davidson, Michael R. & Chen, Qixin & Zhang, Da & Jiang, Nan & Xia, Qing & Kang, Chongqing & Zhang, Xiliang, 2020. "Power market reform in China: Motivations, progress, and recommendations," Energy Policy, Elsevier, vol. 145(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Chang & Liu, Linlin & Zhang, Dayong & Fu, Jiasha, 2021. "How does the capital market respond to policy shocks? Evidence from listed solar photovoltaic companies in China," Energy Policy, Elsevier, vol. 151(C).
    2. Zhang, Mingming & Guo, Qianxi & Liu, Liyun & Zhou, Dequn, 2025. "Renewable energy investment under the market-oriented transition of policies," Energy Policy, Elsevier, vol. 204(C).
    3. Hengtian Wang & Xiaolong Yang & Xinxin Xu & Liu Fei, 2021. "Exploring Opportunities and Challenges of Solar PV Power under Carbon Peak Scenario in China: A PEST Analysis," Energies, MDPI, vol. 14(11), pages 1-28, May.
    4. Corwin, Samuel & Johnson, Timothy L., 2019. "The role of local governments in the development of China's solar photovoltaic industry," Energy Policy, Elsevier, vol. 130(C), pages 283-293.
    5. Ye, Liang-Cheng & Rodrigues, João F.D. & Lin, Hai Xiang, 2017. "Analysis of feed-in tariff policies for solar photovoltaic in China 2011–2016," Applied Energy, Elsevier, vol. 203(C), pages 496-505.
    6. Zhao, Yujia & McLellan, Benjamin Craig & Wang, Chaofan & Shuai, Jing & Xiang, Wanting & Shuai, Chuanmin, 2026. "Risk dynamics and strategies of China's solar PV industry chain under trade frictions: A review," Energy Policy, Elsevier, vol. 208(C).
    7. Kejia Yang & Johan Schot & Bernhard Truffer, 2020. "Shaping the Directionality of Sustainability Transitions: The Diverging Development Patterns of Solar PV in Two Chinese Provinces," SPRU Working Paper Series 2020-14, SPRU - Science Policy Research Unit, University of Sussex Business School.
    8. Koo, Choongwan & Si, Ke & Li, Wenzhuo & Lee, JeeHee, 2022. "Integrated approach to evaluating the impact of feed-in tariffs on the life cycle economic performance of photovoltaic systems in China: A case study of educational facilities," Energy, Elsevier, vol. 254(PB).
    9. Xin-gang, Zhao & Wei, Wang & Ling, Wu, 2021. "A dynamic analysis of research and development incentive on China's photovoltaic industry based on system dynamics model," Energy, Elsevier, vol. 233(C).
    10. Cheng, Xiaobin & Liu, Pengfei & Zhu, Lei, 2024. "The impact of electricity market reform on renewable energy production," Energy Policy, Elsevier, vol. 194(C).
    11. Zhixin Zhang & Min Chen & Teng Zhong & Rui Zhu & Zhen Qian & Fan Zhang & Yue Yang & Kai Zhang & Paolo Santi & Kaicun Wang & Yingxia Pu & Lixin Tian & Guonian Lü & Jinyue Yan, 2023. "Carbon mitigation potential afforded by rooftop photovoltaic in China," Nature Communications, Nature, vol. 14(1), pages 1-12, December.
    12. Binz, Christian & Gosens, Jorrit & Hansen, Teis & Hansen, Ulrich Elmer, 2017. "Toward Technology-Sensitive Catching-Up Policies: Insights from Renewable Energy in China," World Development, Elsevier, vol. 96(C), pages 418-437.
    13. Lin, Boqiang & Xie, Yongjing, 2024. "How feed-in-tariff subsidies affect renewable energy investments in China? New evidence from firm-level data," Energy, Elsevier, vol. 294(C).
    14. Zou, Hongyang & Du, Huibin & Brown, Marilyn A. & Mao, Guozhu, 2017. "Large-scale PV power generation in China: A grid parity and techno-economic analysis," Energy, Elsevier, vol. 134(C), pages 256-268.
    15. Wang, Tiantian & Wang, Yanhua & Wang, Ke & Fu, Sha & Ding, Li, 2024. "Five-dimensional assessment of China's centralized and distributed photovoltaic potential: From solar irradiation to CO2 mitigation," Applied Energy, Elsevier, vol. 356(C).
    16. Zhang, M.M. & Zhang, C. & Liu, L.Y. & Zhou, D.Q., 2020. "Is it time to launch grid parity in the Chinese solar photovoltaic industry? Evidence from 335 cities," Energy Policy, Elsevier, vol. 147(C).
    17. Wang, Hongwei & Zheng, Shilin & Zhang, Yanhua & Zhang, Kai, 2016. "Analysis of the policy effects of downstream Feed-In Tariff on China’s solar photovoltaic industry," Energy Policy, Elsevier, vol. 95(C), pages 479-488.
    18. Ou, Yinlin & Hsiao, Cody Yu-Ling & Chui, Chin Man, 2024. "How does the supply chain market respond to policy shocks? Evidence from solar photovoltaic sectors in China," Renewable Energy, Elsevier, vol. 232(C).
    19. Song, Xiao-hua & Han, Jing-jing & Zhang, Lu & Zhao, Cai-ping & Wang, Peng & Liu, Xiao-yan & Li, Qiao-chu, 2021. "Impacts of renewable portfolio standards on multi-market coupling trading of renewable energy in China: A scenario-based system dynamics model," Energy Policy, Elsevier, vol. 159(C).
    20. Behuria, Pritish, 2020. "The politics of late late development in renewable energy sectors: Dependency and contradictory tensions in India’s National Solar Mission," World Development, Elsevier, vol. 126(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:167:y:2022:i:c:s0301421522002695. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.