Authoritative | Official Interpretation of Unsubsidized Wind Power and PV Power Generation Affordable On-grid Policy
Time:2019-01-11 10:04:00
On January 9, National Development and Reform Commission (NDRC) and National Energy Administration (NEA) issued the Notice on Actively Promoting the Relevant Work of Unsubsidized Wind Power and PV Power Generation Affordable On-grid Project (hereinafter referred to as the Notice). It became the first major policy issued by NDRC and NEA in terms of PV and wind power industries in 2019 and attracted great attention from both inside and outside of the industry.

▲The official website of NDRC
The release of the Notice fully reflects China's foresight in standing in the height of energy strategy to actively promote the progress of clean energy technology and the reduction of costs, help and support the development of the new energy industry, promote wind power and PV power generation affordable on-grid power tariff and accelerate energy structure transformation.

On January 10, NEA issued an official interpretation of the Notice to respond to the key common concerns.

What is the background and purpose for promoting wind power and PV power generation affordable on-grid power tariff?

Since the 13th Five-Year Plan, the scale of the renewable energy in China has continued to grow, the technical level improve and the cost of development and construction reduce. Compared with data of 2012, the average construction costs of wind power and PV power stations put into operation in 2017 respectively decreased by 20% and 45%. As the renewable energy consumption situation grows better, the economy of the project has been steadily improved, creating favorable conditions for phasing out subsidies and alleviating the pressure of subsidizing funds.

The on-grid power tariff set in PV leader project bidding will be in line with the coal power benchmark price. In order to actively promote the high-quality development of wind power and PV power generation, promote the industry to early get rid of the dependence on subsidies, and explore the experience of implementing the policy measures of affordable on-grid power tariff, NDRC and NEA jointly issued the Notice on Actively Promoting the Relevant Work of Unsubsidized Wind Power and PV Power Generation Affordable On-grid Project (hereinafter referred to as the Notice) on the basis of the preliminary pilot project.

What is the working mechanism for the implementation?

The Notice clearly states that relevant provincial-level energy authorities shall organize and conduct the construction of wind power and PV power generation unsubsidized affordable on-grid projects based on local resources, consumption, the application of new technologies and other conditions. Two prerequisites shall be met: First, it is necessary to coordinate the power grid enterprises to determine the reasonable construction scale after surveying the consumption situation, ensuring the full consumption of the power from affordable projects, and not squeezing the consumption market of existing projects. Second, the affordable projects should be well linked with the monitoring and early warning management of wind power and PV power generation. In red alert areas, such projects shall not be organized for the time being, except for the projects that have been arranged for construction and trans-provincial and trans-regional transmission to other areas.

In order to coordinate and promote relevant work of affordable and low on-grid power tariff, the provincial (autonomous region, municipal) energy authorities are required to submit relevant project information to NEA. NDRC and NEA will release the lists of affordable and low on-grid projects and coordinate and supervise relevant parties' implementation of relevant supporting policies.

What supporting policy measures does the Notice include?

In order to promote the smooth implementation of wind power and PV power generation affordable on-grid project, the Notice proposes the following eight supporting policy measures. First, avoid unreasonable charges, and require local governments to give support in terms of land use and land-related charges. Second, encourage people to get benefits through the Green Certificate. Affordable on-grid project can get reasonable benefits through the transaction of the Green Certificate. Third, define power grid enterprises' power grid connection work. Supervise and urge power grid enterprises to do well the assessment work on power grid connection scheme and consumption conditions of the project and do well the supporting power grid construction to match up with the schedule of the project, so as to ensure that the project can be put into operation in a timely manner after completion. Fourth, encourage the nearby direct transaction. Improve the transmission and distribution pricing policy to support the nearby direct transaction of the new energy, reduce the cost of intermediate transmission, implement the transmission and distribution price of the involved voltage level power distribution network and reduce the transmission and distribution price of the unutilized high voltage level for distributed market transaction pilot projects; exempt cross-subsidies granted for policy considerations for all types of directly traded nearby renewable energy electricity. Fifth, implement the policy of purchasing electricity at a fixed price. For wind power and PV power generation affordable and low on-grid projects, the provincial-level power grid enterprises shall sign a contract with the project contractor on purchasing and retailing electricity at a fixed price for a period of no less than 20 years according to the approved coal power benchmark on-grid price or the electricity price lower than that determined in the bidding. The contract shall guarantee the long-term stability of the electricity price policy. Sixth, strengthen the policy of guaranteed purchasing electricity in full amount. Power grid enterprises are required to guarantee priority power generation and purchase project used electricity in full amount. In case of power limitation, the limited power generation will be approved as a transferable priority power generation plan, enabling the project to obtain compensation benefits through power generation right transaction (transfer). Seventh, innovate financial support methods. Encourage financial institutions to support the construction of unsubsidized wind power and PV power generation projects, rationally arrange credit funds scale, innovate financial services, develop suitable financial products and actively support new energy power generation to achieve affordable on-grid power tariff; encourage and support qualified power generation projects and related issuers to issue enterprise bonds for financing and refer to special bond varieties to promote the examination and approval. Eighth, mobilize the initiative of local governments in "double control" assessment. Efforts will be made to dynamically improve the support mechanism for total energy consumption assessment, and the renewable energy consumption exceeding the planned energy consumption in regions will not be included in the total energy consumption and the "double-control" assessment of energy consumption intensity if the "double-control" target of national energy consumption is met, in order to promote the construction of unsubsidized wind power and PV power generation projects.

Whether all new projects will no longer enjoy state subsidies after the Notice is published?

To promote affordable (low) on-grid projects is not to immediately eliminate the subsidies for all new wind power and PV power generation projects. The unsubsidized affordable (low) on-grid projects are now mainly carried out in areas with superior resource conditions and guaranteed consumption market. Meanwhile, in regions without unsubsidized affordable on-grid projects, relevant construction shall be continued to be organized according to policies and management requirements of competitive allocation projects launched by NEA. However, these projects should sharply reduce the electricity price through completion to lessen subsidies for each kWh of the electricity. Additionally, the Notice states that local energy authorities at all levels can introduce local subsidy policies for a certain period with other relevant departments and that projects to which only these policies applicable are considered as affordable on-grid projects.

How to guarantee the full acquisition of electricity generated by unsubsidized affordable projects?

The Notice also states that power grid enterprises should guarantee the consumption of electricity generated by centralized affordable projects. In principle, the consumption related to affordable (low) projects is guaranteed through electricity sales of these enterprises. Centralized affordable (low) projects are not involved in electricity market-oriented trading and consumption related to them is guaranteed through self-supporting electricity sales of these enterprises. The distributed nearby direct transaction belongs to special electricity transaction which is concluded by project contractors and departments consuming electricity. It should strictly conform to distributed power standards and be conducted within the distribution network where grid connection points locate for nearby consumption. Power grid enterprises should give play to the grid common platform to guarantee on-grid, transmission and consumption of electricity generated by distributed wind power and PV power.

How about the duration of the Notice and relevant policies?

With the technical progress concerning wind and PV power, electricity generated by them will become affordable in the initial stage of the 14th Five-Year Plan. For wind and PV power generation affordable (low) projects approved (filed on record) and under construction from now until the end of 2020, relevant support policies in the Notice remains the same during their operating period. For these approved (filed on record) after the end of 2020, new policies will be formulated according to the degree of technical progress and cost reduction at that time.

Contents quoted from the website of NEA