Quantifying the importance of feed-in tariffs to wind power development in China.

Abstract

Governments worldwide often provide subsidies to renewable energy for reasons such as climate change mitigation and environmental pollution reduction. However, the importance of such subsides is not well understood and much debated. In this study, 109 monthly observations of the installed wind power capacity at the provincial level were used to assess the most important wind power subsidy policy in China-feed-in tariffs, while controlling for other confounding factors, such as technological change, local energy mix, and wind curtailment. The long panel regression results indicate that with other factors unchanged, an increase of 0.1 yuan/kWh in feed-in tariffs added 7.4-9.6 GW of wind capacity to China's national wind power market annually, higher than most of the estimates in the literature, but more consistent with the fast wind capacity development in China. Without the FIT subsidy, China's current wind power market size would likely be approximately 80% smaller. Our findings can be used to predict the impact of future cost reduction of wind technologies, and examine the interconnected relationships between wind capacity development, subsidy burden, and wind curtailment issues.