China set to subsidize renewable energy

CHINA will pay 8.6 billion yuan (US$1.4 billion) in subsidies for power generated from renewable sources this year, the Ministry of Finance said yesterday.

The funds will be allocated by provincial financial authorities to grid companies which purchase renewable power from generators at above-market tariffs.

Of the funds for this year, 5.85 billion yuan will go to wind power, 723 million yuan for solar power, and 2.02 billion yuan used to subsidize electricity generated from biomass, the ministry said in a statement posted on its website.

Earlier this month, the National Development and Reform Commission, China's top economic planner, asked grid operators to pay overdue subsidies to renewable power developers for the period from October 2010 to April 2011, following a two-year delay.

Grid companies are required to pay subsidies - a fixed amount allocated on top of the benchmark tariffs for coal-fired power in each region - while they can collect a surcharge from consumers to finance the payment.

But the payment has been halted in some provinces because the surcharge failed to cover the subsidies, creating cash flow pressure on many developers.

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