The economy of distributed PV in China

Distributed PV (DPV) has become the policy priority of renewable energy development in China since 2012 and ambitious planning for it has been formulated and updated. In 2013 a national unified subsidy policy was put into implementation. However, the actual progress is far below expectation. In this paper, the analytical framework of levelized cost of electricity (LCOE) is employed to estimate the generation cost of DPV in China. We find that under existing tariff and subsidy policies, with ideal conditions of most favorable financial arrangement and maximum annual operation hours, DPV projects located in regions with best solar resource or high commercial/industrial retail electricity prices are able to break even; but with practical conditions DPV projects are economically unfeasible at most cases. We further find that, difficulty in obtaining roof space, complicated grid integration procedure, barriers in obtaining bank loan, and unattractive and rigid subsidy policy, lead to high investment risks, which largely explains why DPV can't take off in China. A series of policy packages are proposed to address these issues.