China amended its Renewable Energy Law (Chinese version) on December 26, 2009. Chinese spokespersons have emphasized the fact that the amendments require the state grid companies to purchase all power produced by renewable energy sources, but they (and the news agencies that have run with the story) fail to point out that the prior version of the law required the same thing. In fact, the actual amendments to the law are extremely minor.
The changes include somewhat more national oversight of the preparation of sub-national renewable energy development and utilization plans, and a more explicit recitation of what should be considered in the preparation of such plans (Articles 8 & 9).
As relates to the purchase of renewable power by the grids, an argument could be made that the amendments actually weaken, or at least complicate, this obligation. The law as originally enacted included this simple and clear requirement at Article 14:
Grid enterprises shall enter into grid connection agreement with renewable power generation enterprises that have legally obtained administrative license or for which filing has been made, and buy the grid-connected power produced with renewable energy within the coverage of their power grid, and provide grid-connection service for the generation of power with renewable energy.
Article 14 has been amended to require the promulgation of an annual regulation that will govern grid purchases of renewable power
The department of the State Council in charge of energy affairs shall, jointly with the state power regulatory organ and the financial department of the State Council, determine the percentage of the quantity of electricity generated from renewable energies in the total quantity of electricity generated during the planned period, and formulate the specific regulations on the priority power dispatching and purchase of the full amount of electricity generated from renewable energies by power-grid enterprises, in accordance with the national programs for the development and utilization of renewable energies. The foregoing regulations shall be implemented under the supervision by the department of the State Council in charge of energy affairs, jointly with the national power regulatory organ, within the year concerned.
This process seems somewhat cumbersome, but let’s see how it works in practice.
One notable addition of the new amendments (also in Article 14) is that they specifically require grid companies to “expand the scope of distribution of power generated from renewable energies, develop and apply such technologies as smart power grids and energy storage, improve their management of power grid operation, enhance their capabilities for taking up electricity generated from renewable energies, and provide grid connection services for electricity generated from renewable energies”
Perhaps the most significant change is in the penalty section. In the original law, electric grid companies, natural gas and heat pipeline companies, and gas-selling enterprises that fail to purchase or accommodate renewable sources of power or fuel are liable for compensation. The “energy authorities of the State Council” or local people’s government at the provincial level shall order them to correct the situation within a stipulated period of time; if they refuse to correct the situation, a fine of up to double the amount of economic loss shall be imposed against them (Articles 29 to 31). The original law limited the maximum fine to no more than the actual amount of the economic loss.
These amendments provide a great way to test the bona fides of the numerous consultants and commentators in this space. Anyone who touts these amendments as establishing a new requirement that the grid companies purchase renewable power should be avoided in the future.
7 responses so far ↓
1 jim rothstein // Dec 28, 2009 at 11:20 am
Saw twitter post …
Ok, law (new or old) sounds good,as you say. Any idea how much renewables are purchased from small, local source? Example, if I put PV panels on a roof of bulding in Dalian (where I lived), how difficult to sell to grid?
Or is law intended for larger renewables (commerical wind/solar farm)?
2 darnoc // Dec 28, 2009 at 1:07 pm
Great post…always helpful to clear the smoke. On a related note…my understanding is that co-generation (with excess powergen sold to the grid) is not yet legally permissible. This would seem like a wise amendment to encourage industrial projects to consider co-gen in development plans. While having an effective amendment in place to encourage guaranteed tariffs to ‘pure’ renewable project developers (’effective’ remains to be seen), the co-gen issue would seem a productive step for a range of industrial development not normally seen in the ‘renewable’ perspective.
3 Greener China // Dec 28, 2009 at 1:38 pm
Charlie. Thanks for this. I saw it on Christmas, but like a present that is wrapped in duct tape… I did not want to touch it!
ne of the big problems has been the grid (not the law) and their willingness to accept power. Long payback periods on investments. uncertain feed in tarriffs.. etc, which may explain why the old law was left to collect dust.
However, I have seen a couple of articles that have annouced pricing changes (Chinese utilities accept 2010 coal price hikes in regions and another on the pricing for solar - that I cannot find right now), and I am wondering if you think this may help to prod Grid to begin taking the power onto the grid?
@Jeff - I would think that this is geared towards the larger investment projects that are going on. Not towards personal rooftops. When at the smartgrid conference last month, it was clear that the larger investors were having real issues with putting their energy on the grid… and I can only imagine the service plans that Grid has for those who are looking for their assistance)
R
4 sustainablejohn // Dec 28, 2009 at 11:41 pm
I believe co-gen projects at industrial plants can sell legally to the grid. Well, I infer this after noting a controversy in the CDM in late 2008 and early 2009. A number of coking plants wanted to sell co-gen electricity to the grid and an “additionality” argument was sparked over whether that project (for their CDM project design document) should use power sector benchmarks or industry sector benchmarks for proving financial additionality. See here (http://cdm.unfccc.int/UserManagement/FileStorage/D4WKHFKAKV308N3WRCFMA5IECM0KGU) as an example PDD. The project says they’ll get a tariff of CNY 0.228/kWh. This must be roughly what coal fired power gets in Shanxi, so no extra subsidy it seems, but it is legal!
5 Paul // Jan 4, 2010 at 6:15 pm
Thank you for the informative post and the great blog. It is an excellent resource!
I have to say though, that i think the provision in the RE Law amendment to “determine the percentage of the quantity of electricity generated from renewable energies”, cumbersome as it may be, is set to be an important change in the way renewable energy targets are formulated in China.
As it stood before, in the Medium- to Long-term Renewable Energy Plan targets were set in terms of renewable energy capacity rather than the amount of electricity generated. This is a decisive change. To date, power generation companies simply added RE capacity in order to fulfill the mandatory market share requirements promulgated in above mentioned plan regardless of the fact of how much electricity the installed capacity would deliver, resulting in a wide range of problems especially, in the wind power sector. WP projects have been plagued by inadequate project planning, low availability of turbines, and delayed connection to the grid (among other things).
The shift of focus from capacity installed towards electricity generated could be a significant driver to make efficient use of the RE capacity already installed and set the priorities straight for future projects.
What do you think?
6 jwright // Jan 11, 2010 at 12:36 pm
These new ammendments are a significant imporvement hopefully in the area of enforcement at the local levels. Given some of the work I have done, especially in understanding the small and medium hydro situations in Yunnan and Sichuan, where many of these small power stations struggle with grid connection, and then struggle selling their power, usually at lower rates than the bigger producers, and often times in terms of quantity, selling far less than their generating capacity. Through these improvements, hopefully the grid companies will be more induced to co-operate. The creation of the RE Development fund also helps for the grid companies to manage costs.
In terms of wind power production, with the new feed-in tariff system proposed by the NDRC last July, wind power development looks a lot more profitable than years previous.
Good foward progress, hope to see more.
7 Paul // Jan 18, 2010 at 3:06 pm
A colleague of mine just pointed out to me that contrary to widespread reports in the english and chinese media (even on Xinhua) - checking with the original chinese document - in the penalty section there is no change with regard to the amount that can be fined.
The fine is still limited to an amount not exceeding the losses suffered by the relevant power enterprise (”一倍以下的罚款”).
So, (not only) in that regard a disappointment.
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