OREANDA-NEWS. January 29, 2015. China's National Development and Reform Commission (NDRC), a central government department charged with the overall planning of the country's economic development, has confirmed the reduction of the onshore wind feed-in-tariff (FIT).

The cuts will affect the four wind regions classified by the first FIT scheme introduced in 2009. Rates will drop by CNY 0.02 for type 1, type 2 and type 3 wind regions, reducing electricity prices to CNY 0.49, CNY 0.52 and CNY 0.56 per kilowatt hour.

The CNY 0.61/kWh FIT will be unchanged in the type 4 region, which has low wind resources.

But the ruling has plenty of critics, not least the China Wind Energy Association (CWEA), which described it as unpredicable.

Although the CNY 0.02 cut is better than many had feared, there has been concern about a rush to develop projects in China caused by the impending changes. The policy gives developers of approved projects one year to complete their wind farms. This is a relatively comfortable period compared with the draft plan's 1 July 2015 deadline for all approved projects.

The new policy will not prevent a rush on installations, but it will help. And as more than 80% of the country's wind developers are state-owned enterprises, there is a strong likelihood companies will have been warned in advance about the changes.

Compared with the CNY 0.02-0.04/kWh proposed in the draft plan, the current cut margin is less drastic. However, according to (CWEA), a cutting the FIT by CNY 0.02 will lower the internal rate of return for a typical project to 9.21% and its first-decade average rate of return on net assets to 5.79%. The last figure is below the bank benchmark interest rate, causing some projects to lose investment value.

Projects in areas with good wind resources still have a chance of making a small profit, provided they are  managed well. But projects must first gain the company's internal approval, which is becoming increasingly difficult for wind projects with some big group companies, an industry observer said.