China has high hopes for distributed PV. This year, it aims to add 8 gigawatts of solar energy for small users and 6 gigawatts for larger projects, which would make it the largest market for photovoltaic. Yet it is struggling to reach those goals.

“This new policy will loosen current regulations, which will give the market a needed push,” said Arthur Xu, a research manager at EnergyTrend, a subsidiary of the Taiwan-based market intelligence firm TrendForce.

China’s distributed PV market must overcome three main hurdles – financing, grid connection and electricity price subsidies, Xu said, adding that Beijing’s new policy addresses all of those issues.

Indeed, the new policy will encourage financial institutions to offer discounts on loans and longer loan terms for distributed PV projects. That will help alleviate financial strain on firms investing in distributed PV.

Additionally, the new policy is intended to expand the usage of solar panel installations in public infrastructure. Under the policy, solar projects will also be connected to low-voltage grids built on deserted areas, hills, agricultural greenhouses, lakes and ponds.

At the same time, China’s new policy also aims to stimulate innovation in the distributed PV industry, especially in the combination with the greenhouse gas emissions and carbon trading, and the construction of the solar leasing mechanism. Given China’s ambitions to become a major player in carbon trading, investors have cheered the new policy.

Thus far, China has only assembled 1 GW of distributed PV this year, or 12.5% of its 8 GW target. “To reach its goal for 2014, China will need to assemble 2 GW per month in the next 4 months,” Xu said.

“That’s good news for global solar manufacturers.” Yet Xu cautioned against excessive optimism about the policy. “It is beneficial for the development of China’s distributed PV market – that’s for sure,” he said. “But we need to wait and see if it is capable of driving growth in the near term.”