BEIJING, China: China is set to scale back subsidies for renewable energy projects following a surge in solar and wind power installations, the country's top economic planning agency announced on Sunday.

The National Development and Reform Commission (NDRC), in coordination with China's energy administration, stated that new clean energy projects completed after June will transition to a "market-based bidding" system for electricity payments instead of relying on government-guaranteed prices.

"The cost of new energy development has dropped significantly compared to earlier stages," the NDRC said in a statement, explaining the rationale for the policy shift.

China's solar sector saw record-breaking growth in 2024, with installed capacity rising 45% year-on-year to reach nearly 887 GW, more than six times that of the United States, according to the International Renewable Energy Agency. This rapid expansion has allowed China to hit its 2030 renewable energy target six years ahead of schedule.

The policy shift comes as President Donald Trump has withdrawn the U.S. from the Paris climate agreement for a second time and pledged to ease restrictions on oil and gas drilling.

Despite the rollback of subsidies, the NDRC reassured that residential and agricultural power prices would remain unchanged, and rates for industrial and commercial users would be "basically the same."

However, industry analysts warn that reducing financial incentives could add pressure to China's solar sector, which is already grappling with overcapacity and falling solar panel prices. The downturn in global demand has placed smaller producers at risk of bankruptcy.

The NDRC said it would coordinate with local governments to oversee the gradual implementation of the new pricing system, though specific details on the new formula were not disclosed.