Yong Yue Medical Technology(Kunshan) Co.,Ltd , https://www.yonyue.com
**Abstract**
In the past month, a new policy supporting distributed photovoltaic (PV) projects has been released. This time, the focus is on the national level, with a notice titled *"National Energy Administration and China Development Bank's Notice on Piloting Financial Support for Distributed Photovoltaic Power Generation"* (hereinafter referred to as the "Notice"). The notice indicates that the China Development Bank (CDB) is committed to expanding credit support for distributed PV projects and increasing the scale of financial assistance for various legal entities and individuals involved in PV development.
On September 12, an executive from a PV company told reporters that the "Notice" was based on extensive research conducted with companies such as Yingli Green Energy and Trina Solar. To encourage distributed PV deployment, the notice also offers significant interest rate discounts and extended loan periods. For example, loans can be extended up to 20 years, with project interest rates potentially reduced by 5% to 10%.
This "Notice" follows a previous directive issued by the State Council on August 30, which emphasized the role of pricing mechanisms in promoting the healthy growth of the PV industry. At that time, the government urged banks to adopt flexible credit policies tailored to the unique characteristics of the PV sector and the cash flow cycles of PV companies.
Globally, distributed PV accounts for over 60% of total installed capacity, but in China, it remains below 50%. According to the 12th Five-Year Plan for PV development, more than half of the 35GW of PV installation capacity will come from distributed projects. Most existing distributed projects in China are located on rooftops of government buildings and industrial parks. However, residential, school, and hospital-based distributed power stations began to emerge in November 2012, allowing users to consume electricity themselves and sell surplus power back to the grid.
A PV industry insider in Beijing mentioned that the country’s new PV support measures are ongoing, with follow-up policies expected from local governments in the coming months. These include tariff subsidy rules, VAT rebates (with a 50% tax refund and a reduced tax rate from 17% to 8.5%), and grid connection guidelines.
**18 Photovoltaic Demonstration Zones Receive Key Support**
The pilot program focuses on the 18 distributed PV demonstration zones already announced. As distributed PV is still in its early stages, many projects are small-scale, and the developers are diverse, making it difficult to secure financing. This challenge is especially evident as the sector grows rapidly.
Industry executives acknowledged that large ground-mounted PV projects are typically funded by central enterprises, which can directly apply for CDB loans and thus fall outside the scope of this notice. The notice is a guiding document that will eventually outline specific lending rules for both enterprises and individuals.
The notice clearly states that CDB will expand support for distributed PV projects, including photovoltaic demonstration zones, new energy cities, green energy counties, and projects addressing remote and island power shortages. It also covers urban lighting, communication base stations, grid infrastructure, and microgrid projects aimed at improving distributed PV consumption.
The notice emphasizes expanding the range of beneficiaries. Manufacturing companies, power generation firms, engineering contractors, and other commercial and institutional entities are eligible to apply for direct CDB loans. Enterprises with a credit rating of BBB- or higher can access direct credit support.
CDB also provides a green channel for distributed PV projects, offering loans with a maximum term of 15 years, extendable by 3–5 years depending on the project. The interest rate is based on the benchmark rate set by the People's Bank of China, with an additional 5%–10% discount for projects recognized by the Energy Bureau. The review process must be completed within 20 working days after receiving the evaluation report.
According to a Beijing-based PV expert, while the notice expands financial support for distributed PV, the focus should remain on the 18 designated demonstration zones. These areas are considered national projects and are better managed than decentralized ones.
On August 18, the National Energy Administration announced the first batch of 18 distributed PV demonstration zones, including Zhongguancun Haidian Park, Baoding Yingli in Hebei, and Hangzhou Bay New District. The 18 projects spanned from 2013 to 2015, totaling 1.823 GW, with 749 MW commissioned in 2013 and the rest in 2015.
Based on an EPC cost of 8 yuan per watt, the 749 MW project required approximately 5.992 billion yuan in investment, with CDB allowing enterprises to contribute only 20% of their own funds, leaving about 4.8 billion yuan in needed financial support.
Shi Lishan, deputy director of the Renewable Energy Department at the National Energy Administration, acknowledged strong government support for the domestic distributed market. However, the 18 demonstration zones still face challenges, particularly due to the current power system not being fully supportive of distributed PV. Implementing pricing and management systems will take time.
**Highlights: Support for Small Businesses and Individuals**
Another positive development is the reduction of the VAT rate for PV power generation from 17% to 8.5%, matching the rate for wind power. This change significantly boosts the investment return rate for PV projects, with internal rates of return in western regions now above 10%.
One key highlight of the notice is that distributed PV projects developed by SMEs and individuals are included in CDB’s financial support. For those who do not meet direct application criteria or have a credit rating below BBB-, CDB will establish a unified investment and financing entity to handle the loans.
The model involves collaboration between the National Energy Administration, local governments, and energy management departments to create local financing entities. These entities will manage borrowing resources and capabilities, with CDB providing credit to eligible borrowers through methods like entrusted loans.
“This means CDB can issue credit to enterprises and then entrust local banks like CCB to lend to them,†explained a Beijing-based PV company.
Tan Zaixing, director of the New Energy Review Division at the China Development Bank, recently confirmed that the National Energy Administration and CDB are planning to jointly issue a document to support distributed PV financial services, with relevant documents expected to be released in September.
Previously, there was no official confirmation that individuals could build PV systems on their roofs, with potential loan sizes ranging from 50,000 to 500,000 yuan. While the notice does not specify individual loan limits, industry sources believe that around 1,000 personal PV applications have been submitted so far. With each household project averaging 10kW, the investment ranges from 30,000 to 50,000 yuan, indicating that initial support for individuals is still modest, but the long-term potential is significant.
In the first half of 2013, China’s new PV installations did not exceed 3GW. The overseas market once again became a key driver for Chinese PV companies to escape financial difficulties. In the second half of the year, domestic installations are expected to surpass 5GW, creating a positive outlook for the performance of Chinese PV companies.
Another benefit of the policy is the VAT reduction from 17% to 8.5%, bringing it in line with wind power. This tax cut significantly improves the investment return rate for PV projects, with many projects in the west achieving returns above 10%.
“The rumors are not unfounded, but this policy still requires approval from the State Administration of Taxation,†said a source in Beijing.