Recently, the Ministry of Finance issued the Interim Measures for the Administration of Special Funds for Renewable Energy Development (hereinafter referred to as the "Measures"). This marks the third round of formulation and revision of regulatory provisions governing the management of special funds for renewable energy development by competent authorities.

Experts pointed out that compared with previous rules, the Measures explicitly introduce a "competitive allocation" mechanism for fund disbursement, meaning subsidies will be granted to high-quality renewable energy projects through merit-based selection. This carries great significance for improving the efficiency of fiscal fund utilization and leveraging fiscal capital to guide the growth of the renewable energy industry. Meanwhile, the Measures set out specific provisions defining the division of responsibilities among the Ministry of Finance, other relevant central authorities and local finance departments in administering renewable energy special funds, further strengthening overall fund coordination.

Cutting Costs for Renewable Energy

It has been more than 200 years since James Watt invented the steam engine, triggering the large-scale exploitation of fossil fuels. Over this relatively short period, fossil fuel consumption has exerted widespread adverse impacts on the global ecological environment. Yet hampered by the high costs of renewable energy, fossil fuels remain the preferred option for most users.

Zhang Ping, Executive President of the China Renewable Energy Industry Association and Secretary-General of the National Strategic Alliance for Biodiesel Industrial Technology Innovation, stated that China’s renewable energy sector is in urgent need of support from dedicated fiscal funds. Excessively high costs constitute the biggest bottleneck restricting renewable energy substitution for fossil fuels. Fiscal backing enables renewable energy enterprises to compete against traditional energy firms and creates room for companies to upgrade technologies, cut costs and boost efficiency.

In fact, the development of renewable energy industries in all developed economies hinges on fiscal support. State funding has fueled industry expansion, allowing renewable energy sectors to mature into emerging industries capable of rivaling conventional energy businesses.

Take the United States as an example. In 2009, U.S. fiscal subsidies for renewable energy peaked at approximately USD 45 billion. Direct cash subsidies from the federal government covered up to 30% of total investment costs for key renewable energy projects. This spurred technological innovation and drove sharp declines in renewable energy prices; wind power in the U.S. has since become highly cost-competitive in electricity markets.

After the U.S. renewable energy industry achieved self-sustaining growth, federal financial support was gradually scaled back. Reports show that fiscal allocations to the sector in 2014 fell to less than 25% of the 2009 peak.

Industry experts note that China’s renewable energy industry has entered a critical phase of technological breakthroughs and large-scale commercialization, making fiscal support more essential than ever. Furthermore, growing the renewable energy sector will deliver both economic and social benefits.

Zhang Ping took biodiesel as an illustration. Biodiesel is a clean renewable energy source that prevents waste cooking oil from re-entering food supply chains and mitigates smog pollution. Blending just 10% biodiesel into regular gasoline can reduce vehicle exhaust emissions by roughly 50%. It also serves as a new income stream for farmers. "Refining biodiesel from the 3 million tons of waste cooking oil generated annually only meets limited demand. Jatropha curcas, a shrub suitable for biodiesel feedstock, can thrive in barren land as long as winter temperatures stay above zero degrees Celsius. Cultivating jatropha in remote rural areas can not only supply raw materials for biodiesel production but also raise local farmers’ incomes."

Multi-dimensional Guidance to Foster a High-quality Industry

Renewable energy is a high-tech intensive industry. How can limited fiscal funds be channeled to support outstanding enterprises and drive sector-wide progress? The Measures address this question by introducing multi-layered innovations in special fund administration.

Regarding fund allocation, the Measures stipulate that distribution shall factor in the nature, objectives and investment costs of renewable and new energy initiatives, as well as the comprehensive utilization efficiency of energy resources. Primary allocation methods include competitive allocation, factor-based allocation and settlement based on actual expenditures. Yang Zhiyong, Research Fellow at the National Academy of Economic Strategy, Chinese Academy of Social Sciences, argued that lowering renewable energy enterprises’ costs hinges on incentivizing technological innovation, and competitive allocation realizes merit-based subsidy awards for industry players.

To drive corporate R&D, the Measures clearly define priority funding areas for renewable energy development special funds: demonstration, promotion and industrialization of core technologies for renewable and new energy; large-scale development, utilization and capacity building of renewable and new energy; construction of public service platforms for renewable and new energy; and comprehensive application demonstration projects for renewable and new energy, among others.

Zhang Ping commented that the Measures feature major adjustments to the scope of priority support, representing an innovative shift in the objectives of renewable energy fund management that will deliver strong guiding effects for the whole industry.

On the construction of public platforms for renewable and new energy, Zhang Ping emphasized the necessity of channeling special funds into innovation platforms oriented toward national strategic and market demands, integrating enterprises, universities, research institutes, financial institutions and commercial players. Such platforms can consolidate the sector’s scientific and technological resources, accelerate the sharing and commercialization of research outcomes, and build integrated innovation teams spanning research, development, manufacturing and promotion. By pooling the industry’s premium resources and leading technologies, these platforms can elevate the overall technological content, industrial sophistication and global competitiveness of China’s renewable energy sector.

The Measures also revise the mechanisms for fiscal disbursement. Funds will be disbursed to local authorities or incorporated into central departmental budgets in the forms of incentives, subsidies and interest discounts, tailored to project mandates and characteristics. Yang Zhiyong explained that fiscal capital should leverage limited public resources to catalyze massive industrial investment. Unlike the previous model of unconditional grants, the three new funding instruments introduce market-oriented mechanisms, adopt a more pragmatic approach, prioritize tangible industrial outcomes and tilt support toward high-quality enterprises.

Overall, the multi-dimensional guiding framework laid out in the Measures aims to build the independent capacity of the renewable energy sector. Government financial backing cannot continue indefinitely. As technological advances drive down renewable energy costs, a turning point will arrive where renewables compete evenly with fossil fuels and transition fully to market-driven development.

Anticipating Supporting Implementation Rules

The reform direction for fiscal support outlined in the Measures has raised widespread industry expectations for the release of detailed implementing rules governing special fund operations.

Cost reduction stands as the top priority for the renewable energy sector, and technological innovation holds the key to lowering expenses. Zhang Ping suggested that scientific and technological innovation determines the future of renewable energy development. Policy support should be guided by industrial R&D demands, target the formation of core industrial competitiveness, center on enterprises as primary innovators, and align with the full technological innovation chain of the renewable energy sector. By deploying market mechanisms to gather innovation resources, effective strategic collaboration between enterprises, universities and research institutions can break through the technical bottlenecks restraining industrial growth.