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The impact of subsidies on overcapacity: A comparison of wind and solar energy companies in China

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  • Zhang, Huiming
  • Zheng, Yu
  • Ozturk, U. Aytun
  • Li, Shanjun

Abstract

Determining the level of subsidy is an important measure in addressing overcapacity in Chinese renewable energy enterprises. In this article, we employ a threshold regression model to analyze the impacts of government subsidies on the overcapacity of wind and solar energy companies. Our findings indicate the separate subsidy thresholds for solar and wind energy companies. The results reveal that even where the subsidy falls into a relatively effective interval, it will still intensify the risk of overcapacity in solar energy companies, but can help address overcapacity in the wind energy companies. The paper concludes that the level of subsidies should be unique for each industry, and suggests a prudent reform of the subsidy policy for the solar energy enterprises.

Suggested Citation

  • Zhang, Huiming & Zheng, Yu & Ozturk, U. Aytun & Li, Shanjun, 2016. "The impact of subsidies on overcapacity: A comparison of wind and solar energy companies in China," Energy, Elsevier, vol. 94(C), pages 821-827.
  • Handle: RePEc:eee:energy:v:94:y:2016:i:c:p:821-827
    DOI: 10.1016/j.energy.2015.11.054
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    4. Zhishuang Zhu & Hua Liao, 2019. "Do subsidies improve the financial performance of renewable energy companies? Evidence from China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 95(1), pages 241-256, January.
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    7. Pan, Yingjie & Yao, Xing & Wang, Xin & Zhu, Lei, 2019. "Policy uncertainties: What investment choice for solar panel producers?," Energy Economics, Elsevier, vol. 78(C), pages 454-467.
    8. Li, Wei & Lu, Can & Ding, Yi & Zhang, Yan-Wu, 2017. "The impacts of policy mix for resolving overcapacity in heavy chemical industry and operating national carbon emission trading market in China," Applied Energy, Elsevier, vol. 204(C), pages 509-524.
    9. Lin, Boqiang & He, Jiaxin, 2017. "Is biomass power a good choice for governments in China?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 1218-1230.
    10. Rupayan Pal & Ruichao Song, 2019. "Externalities, entry bias and optimal subsidy policy in oligopoly," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-028, Indira Gandhi Institute of Development Research, Mumbai, India.
    11. Ma, Teng & Takeuchi, Kenji, 2017. "Technology choice for reducing NOx emissions: An empirical study of Chinese power plants," Energy Policy, Elsevier, vol. 102(C), pages 362-376.
    12. Zhang, M.M. & Zhou, D.Q. & Zhou, P. & Chen, H.T., 2017. "Optimal design of subsidy to stimulate renewable energy investments: The case of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 873-883.
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    15. Zheng-Xia He & Shi-Chun Xu & Qin-Bin Li & Bin Zhao, 2018. "Factors That Influence Renewable Energy Technological Innovation in China: A Dynamic Panel Approach," Sustainability, MDPI, Open Access Journal, vol. 10(1), pages 1-30, January.

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