Advancing Sustainable Development: Feed-In Tariff Subsidies and Renewable Electricity Growth in China

The clean energy transition of the power sector is essential for achieving sustainable development. However, an important question is how, and to what extent, government subsidy policies contribute to this transition. Using county-level data on wind and photovoltaic capacity and power generation in China, we demonstrate that Feed-in Tariff (FIT) subsidies have substantially increased both the installed capacity and power generation of wind and PV energy. Specifically, for every 10% increase in FIT subsidies, wind power installed capacity increases by 24.33%, and power generation increases by 19.33%. Similarly, PV power installed capacity increases by 19.80%, and power generation increases by 15.50%. Further analysis reveals that FIT incentivizes market participants to invest in wind and PV power generation by increasing the likelihood of profitability for renewable energy enterprises. However, fixed FIT subsidies, probably due to over-incentivization, transmission constraints, and the intermittent nature of renewable energy, cause a decline in the capacity utilization rate of wind and PV power. Additionally, our findings highlight that tailoring FIT policies to local resource endowments and improving transmission infrastructure can enhance policy effectiveness and support the clean energy transition.