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 The law as originally enacted included this simple and clear requirement at Article 14: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.