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China's Carbon Tax is Very Real
Writer: yangfuqiang
Date: February 3, 2012
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Help Improving the Implementation of China’s Landmark Renewable Energy Law

NRDC makes recommendations aimed at improving the implementation of China’s landmark Renewable Energy Law

Background: China’s Renewable Energy Law Experiences Growing Pains; China Passes Amendments to Renewable Energy Law to Address Challenges

Since 2005, China has rapidly grown its renewable energy resources, particularly wind energy, solar energy and biomass power. Much of this growth has come about through changes brought about by the landmark Renewable Energy Law, passed in 2005 and amended in 2009.
Although the 2005 Renewable Energy Law played a critical role in the development of China’s renewable energy resources, the country’s growth in this area, especially wind, has experienced some growing pains.

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NRDC Recommendations to Strengthen Implementation of the Amended Renewable Energy Law

Although the 2009 amendments to the Renewable Energy Law will help to address some of the challenges to expanding China’s renewable energy resources, detailed and effective implementing regulations are required in order for the law to have the greatest impact. Based on experiences internationally and within China, NRDC provides the following recommendations for ensuring the effectiveness of the implementing regulations:

  • Set Gradually Increasing Renewable Power Generation Targets for Grid Companies. The renewable energy quota amount to be purchased by grid companies should increase gradually and predictably every few years and should be set high enough to encourage additional investment in renewable energy. Increasing the target annually or biannually helps drive the sustained development of renewable power generation.
  • Set Quotas According to Different Types of Renewable Energy. Quotas should be set for different types of renewable energy technologies, in order to encourage a diverse renewable energy portfolio and provide market certainty for next generation renewable technologies.
  • Verify Compliance with the Quota Using a “Tracking Method”. The government should initially use a pure “tracking method” to verify compliance with the relevant quota. The potential for adding a trading system—in which utilities are permitted to trade Renewable Energy Credits (RECs) when a unit of renewable electricity is generated—should be explored.
  • Create a Target Responsibility and Evaluation System to Verify the Performance of Grid Companies in Implementing the Renewable Energy Law. Create a target responsibility and evaluation system to verify the performance of grid companies in meeting the requirements under the Renewable Energy Law, including renewable energy quotas. The “Top 1,000” program, which assesses the performance of the top 1,000 most energy-consuming enterprises and has already achieved significant progress, could be a model.
  • Clearly Define Penalties for Grid Companies that Fail to Purchase the Quota Amount. Penalties for grid companies that fail to comply with the quota system should be clearly defined, and they should be automatically triggered once the reconciliation period, the time during which grid companies are to remedy any failure to purchase the quota amount, has passed. They should also be set high enough to discourage non-compliance.
  • Address Financial & Operational Issues During Transition to Renewable Power. Some financial mechanism must be adopted to compensate conventional power plants and grid companies for their revenue loss as they transition to using more expensive renewable energy under the priority dispatch policy.
  • Provide Real-Time Data and Forecasts from Renewable Energy Generators to the Grid Dispatcher. The implementation of priority dispatch can be technically difficult because electricity can’t be stored and renewable energy is variable. Given this situation, renewable generators should provide real-time information and forecasts to assist the grid dispatcher in balancing electricity supply and demand.
  • Make Detailed Regulations Governing Dispatch During Grid Disturbances.
  • Regulations should spell out clear requirements governing renewable power dispatch during grid disturbances—when the grid would be overloaded if curtailment were not to occur, or if the largest amount of electricity from renewable sources has already been purchased. These regulations would make clear under what circumstances grid companies could deviate from the mandatory connection and purchase policy and any compensation that may be involved.
  • Set Compulsory National Technical Standards for Interconnection to the Grid. Technical standards for connecting renewable energy sources to the grid should be developed with the participation of relevant stakeholders in a transparent, inclusive process. More specific technical standards for wind farms above a certain capacity level should be created, while small-scale renewable projects should be exempt from having to meet the same standards for utility-scale projects.
  • Improve the Functioning of the Renewable Energy Development Fund. To improve the fund’s effectiveness, subsidies from the fund should be distributed as frequently and as regularly as possible. This would help to ensure prompt compensation to the grid companies and renewable generators. In addition, the government should clearly define the conditions determining which projects are eligible to receive funding.
  • Increase Central Oversight Over Provincial Planning. After filing plans with government agencies, provincial renewable energy development plans should be made publicly available to increase transparency and gain support of investors and the public.

To download the full report on Improving China’s Renewable Energy Legal Framework:

download: NRDC - China Renewable Energy Legal Framework 

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