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China to Make Regional Adjustments for Solar Power Incentives

Dec. 19 (Bloomberg) -- China, the biggest manufacturer of solar panels, will make regional adjustments to the feed-in tariffs supporting solar power based on local “resource conditions,” the latest step to support the industry.

The nation also will offer photovoltaic projects preferential value-added tax policies similar to those made for wind farms, according to a statement today on the central government’s website, which cited a State Council meeting led by Premier Wen Jiabao.

The changes are the latest effort by the government to help the industry cope with plunging prices and profit margins caused by a solar panel supply glut. Feed-in tariffs are above-market prices paid for electricity for renewable energy projects. The government is working to stimulate domestic demand for the technology to help mop up some excess inventories.

“The feed-in tariffs may vary according to local irradiation conditions,” said Wang Xiaoting, an analyst at Bloomberg New Energy Finance in Beijing. “It is less likely that the current tariff of 1 yuan (16 U.S. cents) a kilowatt-hour will be cut for western regions by 2014, while the rate for less sunny locations may get higher for utility applications.”

China set the electricity rates for solar projects last year to encourage developers to shift to cleaner-burning energy sources. The country has given higher power prices for wind farms in less windier regions since 2009.

The government also has said it will encourage mergers and acquisitions in the solar industry.

The government said it plans to subsidize distributed solar power projects based on their electricity power generation. Such projects would ideally have less than 6 megawatts of capacity and would be connected to grids with voltage of as much as 10 kilovolts.

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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