Summary :
- Food security is a vital concern for the PRC government, and protection of arable land is an important component
- A hybrid model has emerged to allow land to be used for both food production and PV projects
- Recent land surveys may lead to changes to regulations and investors should monitor the situation closely
The COVID-19 pandemic is increasing food insecurity. In order to mitigate the impact, the PRC central government has established a national food security strategy, and the protection of arable land is an important component. China has put forward a policy of strictly maintaining an area of 1.8 billion mu of arable land, as anything lower than this may place China’s food security at risk.
1. By issuing a number of policies recently, the government has emphasized that arable land protection is an important part of ensuring food security
By issuing a number of policies recently, the government has emphasized that arable land protection is an important part of ensuring food security. The use of arable land for, and the converting of arable land into construction land for, photovoltaic (PV) projects will be subject to strict scrutiny. Furthermore, the Opinions on Comprehensively Promoting the Key Work of Rural Revitalization in 2022 (关于做好2022年全面推进乡村振兴重点工作的意见) (No. 1 Central Document) place emphasis on protecting farmland and strictly investigating the illegal use of land. The No. 1 Central Document points out that law enforcement and supervision over use of arable land must be strengthened and penalties will be imposed in relation to the illegal occupation of arable land for non-agricultural construction. Driven by the national food security strategy, in order to ensure the implementation of arable land protection, land use policies for PV power projects may be affected and restricted accordingly.
According to PRC law, agricultural land (农用地) means land used for agricultural production, including arable land (耕地), forestry land, grass land and other agricultural land. Arable land can be used for growing grains, vegetables, sugar and other crops. Nothing other than grains can be grown on arable land which is further sub-categorized as “permanent basic farmland” (永久基本农田).
PV projects must of course follow legal requirements and restrictions when using arable land for project development. Given the restrictions on the use of arable land for PV projects, which can lead to uncertainties in project development, agricultural-PV projects (in other words, the use of arable land to simultaneously produce food and generate PV electricity) have begun to emerge as an innovative model. According to the Opinions on Support for PV Poverty Alleviation and Standardization of PV Power Generation Industrial Land (关于支持光伏扶贫和规范光伏发电产业用地的意见) (Circular No. 8), if a project qualifies as an agricultural-PV project, then agricultural land (including arable land) may be used for layout of solar arrays and growing grains and crops simultaneously. Circular No. 8 has authorized provincial-level development and reform commissions and provincial-level natural resources authorities to formulate the qualification standards for agricultural-PV projects and specify supervision measures so as to avoid adverse impacts on agricultural production. These qualification standards include that:
(i) permanent basic farmland may not be used;
(ii) the layout of solar arrays must meet height limits and minimum solar panel distances, to the effect that this will not affect the growing of grains and crops; and
(iii) the development of PV projects on the arable land will not cause change in the land surface.
2. To further limit the impact of such PV projects on arable land protection, certain provinces across the country have launched a process to survey the use of arable land for PV projects
This system of regulation should ensure that arable land can be used to simultaneously produce food and generate PV electricity and there should, therefore, be no conflict between arable land protection and the development of PV projects. However, in practice, some agricultural-PV projects have only consisted of construction and operation of the PV component of the project, and there has been no actual agricultural cultivation. This violates the original intention of the hybrid PV project and results in insufficient utilization of arable land. To further limit the impact of such PV projects on arable land protection, certain provinces across the country have launched a process to survey the use of arable land for PV projects.
Hebei Province：
According to the Circular on Base-Touching Survey on Arable Land Occupation of Existing PV Power Projects (关于对存量光伏发电项目占用耕地情况进行摸底统计的通知) on March 11, 2022, the Hebei NEA conducted a survey on the use of arable land for agricultural–PV projects. In order to strengthen control over arable land and ensure such land can be used for actual agricultural production, the local natural resources authority will conduct an adjustment on the qualification standards and the land use policies for agricultural-PV projects based on the survey result.
Shandong Province：
Shandong natural resources authority issued the Circular on Examination of Land Use Status of PV Power Projects (关于对光伏项目用地情况进行核查的通知) on Nov. 2, 2021. According to the Circular, Shandong has suspended the filing of new PV projects involving use of the arable land and in the meantime carried out a survey on the use of agricultural land for PV projects. The key aspects of the land survey include: (1) whether projects comply with the existing provincial land use policies; (2) whether any facilities constructed on the land have changed the land surface, or in a manner which would affect agricultural production; and (3) whether there has been any abandonment of arable land.
Hainan Province：
On February 12, 2022, Hainan Province published the Letter on Accelerating the Review of the Design Scheme of PV Vegetable Greenhouses (关于加快光伏蔬菜大棚设计方案审查的函), to examine whether the agricultural land beneath existing agricultural-PV projects is fully utilized for growing vegetables.
Key takeaways for existing projects：
Modified qualification standards and land use policies for PV projects may be applied to existing projects after the surveys referenced above have been completed. When investing in agricultural-PV projects, PV project investors should therefore pay attention to the following aspects:
l Whether existing projects are approved to use arable land for agricultural-PV projects, and if the land use policy changes, whether the project owners are required to provide supporting documents or otherwise make rectifications to the project design and construction in order to meet the new requirement for use of arable land.
l Whether the arable land beneath the PV projects are fully utilized for growing grains and crops. Use of arable land for non-agricultural use would be at risk of being considered as illegal use of land and therefore PV projects could be subject to penalties or other administrative punishments.
Points to note for new projects：
The use of arable land for, and the converting of the arable land into construction land for, PV projects is subject to strict scrutiny. Agricultural-PV projects may offer a viable investment alternative for project investors.
Currently authorities are paying close attention to the development of the agricultural component of agricultural-PV project. Investors should therefore make sure that any projects being planned would achieve the simultaneous development of both the PV and the agricultural components. At the same time, investors should pay close attention to the latest modifications in qualification standards and land use policies for hybrid PV projects, and consider the impact on capital investment for the projects.
Agricultural-PV projects have emerged as an effective and smooth path towards achieving both goals in an integrated manner and in turn creating broad potential opportunities for both market sectors
Conclusion
Food security is an important national strategy and one to which China has always adhered. At the same time, development of renewable energy has long been regarded as a key pillar to accomplish the country’s ambitious pledge to reach carbon neutrality. Agricultural-PV projects have emerged as an effective and smooth path towards achieving both goals in an integrated manner and in turn creating broad potential opportunities for both market sectors.
The essential ingredient for success lies in striking the right balance between agricultural production and power generation and ensuring the equal development of both components.
