China: Renewable Energy Project Subsidies: What Has China To Offer?

Last Updated: 22 June 2009
Article by Jonathan Selvadoray and Amy Chen

As more and more western renewable energy companies look at China to grow their sales or as a manufacturing base, it seems wise to recap on what the Chinese government has to offer in terms of financial incentives.

To speed up renewable energy development, the Chinese Ministry of Finance has promulgated several regulations on renewable energy related subsidies. This article aims to describe which type of projects can be subsidised and in which form. The final parts look in more detail at subsidies granted to wind turbine manufacturers and manufacturers producing energy from plants stalks and straw.

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As more and more western renewable energy companies look at China to grow their sales or as a manufacturing base, it seems wise to recap on what the Chinese government has to offer in terms of financial incentives.

To speed up renewable energy development, the Chinese Ministry of Finance has promulgated several regulations on renewable energy related subsidies. This article aims to describe which type of projects can be subsidised and in which form. The final parts look in more detail at subsidies granted to wind turbine manufacturers and manufacturers producing energy from plants stalks and straw.

General rules

On 30 May 2006, China's Ministry of Finance promulgated the Interim Measures on Administration of Renewable Energy Development Specialised Funds (the "REDSF Measures"), which provide the general rules related to provision of financial support for renewable energy related projects.

According to the REDSF Measures, the Ministry of Finance sets up and manages renewable energy development specialised funds, which shall be used to support, by way of subsidies, the following projects:

  • scientific and technical research, standards enactment and model projects related to development and utilisation of renewable energy
  • life-utilised renewable energy projects in rural areas for daily lifestyle usage
  • construction of independent renewable energy power systems in remote and island areas
  • renewable energy resource exploration, assessment and related information system
  • promotion of localised production of renewable energy related facilities

Projects in the following areas will take priority for provision of subsidies:

  • development of bio-ethanol, being ethanol fuels made from sugarcane, tapioca and sweet broomcorn
  • development of biochemical diesel oils, being fluid fuels made from oil crop, fruit oil (from trees) and water plants
  • development and utilisation of solar and terrestrial heat in buildings
  • development and utilisation of power generation by using wind, solar and ocean energy.

According to the REDSF measures, subsidies shall be granted in any of the two following manners:

1. Direct investment subsidies, free of interest, which shall mainly be granted to projects with weak profitability but of strong public interest.

The amount of such a subsidy is determined on a case-by-case basis.

To obtain such subsidies, the applicant is required to inject an amount equal to or more than that of the granted subsidies into the related project.

2. Loan interest subsidies, which are used to subsidise the interest payments on loans used for a renewable energy project that falls into certain categories.

The amount of such subsidies is determined on a case-by-case basis, according to the amount of the loan that has been provided, the related interest rate and the amount of interest that has been paid.

Wind turbine related subsidies

In order to effectively implement the policy to support the promotion of constructing localised renewable energy related facilities, the Ministry of Finance further promulgated the Interim Measures on Administration of Wind Power Facilities Industrialisation Specialised Funds (the "WPFISF Measures").

According to the WPFISF Measures, subsidies shall be granted to the first 50 sets of wind turbines manufactured by a qualifying enterprise, at a rate of RMB600 per kilowatt. From the subsidy granted, 50% shall be enjoyed by the enterprise(s) manufacturing key parts for such wind turbines.

An enterprise seeking such a subsidy must satisfy the following conditions:

  • it must be a Chinese domestic enterprise or an enterprise which is directly or indirectly controlled by a Chinese party/entity
  • the wind turbine must have its own technology-related intellectual property rights and trademarks
  • the single machine capacity of the wind turbine must be no less than 1500 kilowatts
  • product certification related to the wind turbine must have been conducted by Beijing Jian Heng Certification Center
  • the vanes, gear case and generator in the wind turbine must be manufactured by a Chinese domestic or domestically controlled enterprise
  • the wind turbine must have been manufactured, installed and tested in China and can operate for at least 240 hours without failure
  • the wind turbine must have been examined and confirmed to be functional by its user

Plant stalks and straw energy products subsidies

In addition, the Ministry of Finance further promulgated the Interim Measures on Administration of Subsidy Funds for Utilisation of Energy from Plant Stalks and Straw (the "SFUESS Measures") in order to provide support, by way of subsidies, to manufacturers producing energy from plant stalks and straw.

The amount of such subsidies is determined, on a case-by-case basis, according to the type and quantity of the plant stalks and straw used annually for the related energy products. However, the SFUESS Measures do not provide any standards for the calculation of such subsidies.

According to the SFUESS Measures, to obtain such subsidies, an enterprise must satisfy the following conditions:

  • its registered capital must exceed RMB10 million
  • utilisation of energy from plant stalks and straw must comply with local comprehensive utilisation plans
  • the annual consumption of plant stalks and straw must be no less than 10,000 tons
  • the related energy products must have been put onto the market and have solid consumer basis

The Chinese government is continuing to formulate detailed plan for the development of renewable energy. It is expected that an increasing number of incentives (both at national and local levels) will be offered to renewable energy projects in the future.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 22/06/2009.

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