In the context of distributed generation, although China has yet to establish a mature business model system, the process of exploration has never ceased. The Golden Sun subsidy program, which is no longer in place, represented an early trial and error phase, revealing that subsidies based on equipment were flawed. As a result, China shifted its focus, drawing lessons from European and American models by instead subsidizing power generation itself. This approach eliminated the possibility of fraudulent claims for equipment without actual electricity production. In this way, China made progress in developing a more effective business model for distributed power subsidies, demonstrating that innovations based on terminal electricity prices are indeed feasible.
Although specific and detailed provisions for the subsidized business model of distributed generation have not been fully introduced, after extensive discussions in the first half of the year, the National Energy Administration issued the “Notice on Launching a Distributed PV Generation Application Demonstration Area†in the second half of the year. According to Xinneng [2013] No. 296, the first batch of distributed photovoltaic application demonstration zones were approved across 18 industrial parks, offering a subsidy of 0.42 yuan per kWh. Compared to the proposed 0.35 yuan per kWh in the draft of the “Consummation of Photovoltaic Power Pricing Policy†released earlier in the year by the Development and Reform Commission's Price Division, this was an upward adjustment.
The 0.42 yuan per kWh subsidy significantly accelerated the return on investment for these newly approved projects. For instance, within the Zhongguancun Haidian Park in Beijing, a photovoltaic engineer analyzed the city’s industrial electricity consumption, average daily sunlight, and electricity generation. With the incentive of 0.42 yuan/kWh, the project’s investment could be recovered within three years. This development greatly encouraged the expansion of distributed photovoltaic demonstration areas across China.
However, the 0.42 yuan/kWh tariff subsidy model remains limited to the initial discussion and applies only to the 18 currently approved industrial parks. It has not yet been widely implemented as a standard fixed subsidy. This is due to the disparity in electricity prices between industrial and residential consumers in China. Industrial electricity prices range from 0.8 to 1.4 yuan/kWh, while residential rates are between 0.3 and 0.5 yuan/kWh. This imbalance creates unfair returns, making it challenging for investors to choose suitable buildings or users for photovoltaic projects. According to Wang Sicheng, a researcher at the National Development and Reform Commission’s New Energy Research Institute, only industrial power with a price above 0.8 yuan/kWh can generate profit when the cost of photovoltaic power is around 1.2 yuan/kWh.
Because of the uneven distribution of electricity prices among consumers, China has struggled to find a balanced subsidy amount and settlement method for "self-generation and surplus power feeding." While a fixed tariff is transparent and easy to manage, it is directly influenced by the user's electricity price. This is why the current Energy Bureau primarily encourages the construction of distributed photovoltaic demonstration zones in industrial parks—due to higher electricity prices and greater load capacity, making them ideal for on-site solar absorption and aligning with the state’s self-use model.
China’s distributed generation must start with pilot projects in industrial parks, gradually exploring viable business models. For models applicable to residential areas, further research and discussion are needed, building upon the experience and results from previous demonstration projects.
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