The role of local governments in the development of China's solar photovoltaic industry

Leading the world in manufacturing and installations, China's solar PV sector has attracted the attention of academia, government, and business. However, inadequate attention has been paid to the role of local governments in the development of China's domestic solar industry. This paper describes the omnipresent role of local governments in each stage of solar market development, examines the political motivations for this outsized presence, identifies the consequences of excessive local government involvement, and provides policy recommendations to compliment changes being made at the national and local levels. The paper finds that while local government support has enabled China to become the global leader in solar development, it has also led to overproduction and overcapacity. These outcomes are oftentimes the direct result of local governments acting in accordance with their incentive structures. The findings indicate that the future healthy development of China's solar PV market will be dependent upon enforcement of central policy and aligning the policy objectives and incentives between the central and local levels.