NRDC makes recommendations aimed at improving the implementation of China’s landmark Renewable Energy Law
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.
The Renewable Energy Law as passed in 2005 established an important policy framework for developing renewable energy, including: requiring the government to set renewable energy production and development targets; establishing a mandatory connection and purchase policy that requires grid companies to connect renewable energy generators to the grid and purchase all electricity generated; establishing a “feed in” tariff system to pay above market electricity rates (i.e., a subsidy) to renewable electricity generators; and establishing a system for financing renewable energy development through a renewable energy surcharge on electricity bills, with provincial grid companies sharing costs in an equitable manner.
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, including:
-- Grid companies’ lack of resources and incentives to invest in grid infrastructure to keep pace with the increase in renewable power facilities.
-- Insufficient transmission capacity even after renewable generators are connected to the grid.
-- A lack of compensation paid to renewable generators for curtailing a portion of their production when necessary to ensure grid stability.
To address these challenges, China passed amendments to the Renewable Energy Law in 2009 that made several significant changes:
-- Grid Companies Required to Purchase Specific Quotas of Renewable Power. The amended law adds measures that would require grid companies to buy specific quotas of renewable power as a proportion of total power purchased and directs government agencies to set the amounts and enforce the quotas annually.
-- Renewable Power Generators to Receive Priority Dispatch Over Coal Fired Plants. The amended law also directs government agencies to set regulations requiring grid companies to give priority to the dispatch of electricity from renewable power generators over coal-fired power plants, with zero and low emitting generators ranked ahead of high emissions power plants. This change represents a significant departure from the general practice in China, where grid companies have traditionally set dispatch priority based on the lowest average cost.
-- Renewable Power Generators Obligated to Meet Certain Technical Grid Standards. The amended law also stipulates that renewable power generators must meet certain grid connection standards in order to receive the benefits of the mandatory connection and purchase policy.
-- Pooling Renewable Energy Surcharges into a Central Renewable Energy Development Fund. The amended law reforms the process for collecting and allocating renewable energy surcharges. Instead of having provincial grid companies collect the renewable energy surcharges and allocate them equitably amongst themselves, the renewable energy surcharges will be pooled together into a renewable energy development fund managed by the central government. Each grid company will then seek compensation from the fund for the additional cost of purchasing renewable power and the costs associated with grid connection.
-- Central Government Oversight of Provincial-Level Planning to Be Strengthened. The amended law strengthens central government oversight of provincial-level planning of renewable energy development. The previous lack of unified planning created coordination problems between the development of the grid and renewable energy projects.
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