Blockbuster | New Deal to Solve the Problems of "Abandoning Wind power and Solar energy

up date:2016-07-12

Recently, the National Development and Reform Commission and the National Energy Board have jointly released the Notice of Relevant Requirements on Full Security Acquisition Management on Wind Power and PV Power (hereinafter referred to as “the Notice") which has approved and announced the utilization hours of security acquisition of wind power and PV power of the areas abandoning wind and sun, as well as the relevant settlement and regulatory requirements. As the core measure of implementation of  Management Measures for the Full Security Acquisition of Renewable Energy Generation(hereinafter referred to as “Measures") issued on 24th March this year, the Notice provides specific measures and means to implement full security acquisition stipulated by Renewable Energy Law, provides effective ways to step out of the biggest difficulty faced by the renewable energy industry, and lay the foundation for fulfillment of China’s commitment of self- emissions reduction to the climate change.

Great significance: radical cure of the problem of " Abandoned Wind power and Solar energy", and implementation of the specific measures of the central electric power reform spirit

       "Abandoning Wind power and Solar energy" has been the largest stumbling block of restricting the healthy and sustainable development of China's wind power and PV power industry, and also a huge obstacle to the fulfillment of China’s commitment of emissions reduction to the climate change, and the matter has come to a head.. National abandoning wind power reached 33.9 billion KWH in 2015 with the direct economic losses of over18 billion YUAN. The situation of abandoning wind has become more severe in the first of this year, with abandoning wind power of19.2 billion kwh which has an increase of 8.5 billion kwh on a year-on-year basis and is more than half of the total abandoning wind power last year, with the average abandoning wind rate of 26% which has an increase of 7% on a year-on year basis. The average abandoning wind rate of the Three-North region is close to 40%. What make the situation of enterprises worse is that, under the circumstance that the on-grid energy cannot be guaranteed, the on-grid price has been reduced in disguise, leading to a fall price in prices and transaction volume. Gansu, Ningxia, Xinjiang and other provinces have launched the "direct power supply transaction", "alternative trading of captive power plant", "inter-regional trading". Wind power and PV enterprises even have to quote zero price in order to obtaining on-grid energy. If you do not participate intrans actions, few on-grid energy would be given or even on-grid energy would be completely ordered not to give. Additionally, local governments require the wind power business to share their income, in compensation for local thermal power enterprises. In the Replacement Transaction Work Program of Such Clean Energy as Wind Power and Thermal Power for November and December2015, Yunnan Provincial Commission requires the wind power enterprises to pay the electric power income, that is 60% of thermal power price approved by the state, to the thermal power enterprises.

All chaos above show that the problem of abandoning wind power and solar energy has the tendency of normalization. If it is not effectively resolved, China will not be able to honor the goal commitment of non-fossil energy occupying 15% of primary energy consumption in 2020 put forward by itself, and not only the structural adjustment of national energy and the green development tasks will not be completed, but also a strategic emerging industry which could have been a global leader will die halfway. Electricity reform No.9 will regard it as an important task of current electric power system reform to address the problems of security acquisition of renewable energy and ensure renewable power to the grid without discrimination and barrier. In this sense, whether the problem of abandoning wind power and solar energy can be solved is an important part of electricity reform, even a sign of measuring the success or failure of the electric power reform, and the key to the success of the energy revolution. Therefore, both of the Notice and Measures are to resolve the pressing danger and also a specific measure to deepen the reform and establish the market mechanism of efficiency and fairness.

Being Reasonable and Feasible: full security acquisition of annual utilization hours ensures a reasonable return on renewable energy projects

The overriding principle of security acquisition of electricity is to ensure a reasonable return on renewable energy power generation projects. The return on a generation project is determined by the on-grid price and the on-grid energy, and only acquisition of guaranteed price and quantity can ensure return on investment. In fact, the classification of China's renewable energy is based on the resource level of different regions, investment costs, and determined according to the return rateof8% of internal capital. Therefore, when approving the electricity of the security acquisition, work backwards according to the internal return rate of 8% and then refer to such relevant parameter as the cost of per kilowatt and fixed electric price so the electricity can be determined. The divided regions of utilization hours of the security acquisition match with the divided regions of benchmark generation price. Multiply utilization hours by installed capacity to obtain the on-grid energy of the security acquisition.

 According to the above principles, the Notice approved and released the annual utilization hours of security acquisition of wind power and PV powder of the regions with abandoning wind power, abandoning solar energy and power rationing. For the regions with abandoning wind and power rationing, wind power project is separately approved according to Class IV Wind Resource Area, combined with resource conditions and consumptive ability, and the utilization hours of the security acquisition of wind power of each region is 1800~2000 hours (Details see the Notice); for the regions with abandoning sun and power rationing, the utilization hours of the security acquisition of PV power of each region is 1300~1500 hours(Details see the Notice).Meanwhile, the Notice stressed again that it is strictly prohibited to obtain the generation rights by paying for such power resources as coal-firepower plants via renewable energy generation projects. The security acquisition of electricity is settled according to the state regulations of renewable energy benchmark price of all kinds of resource areas. Only the excess of minimum annual utilization hours of security acquisition can be consumed via market transactions, and besides market transaction electricity price, the electricity quantity of market transactions can enjoy renewable energy subsidies based on the difference between the local renewable energy benchmark price and the coal-fire power plant’s benchmark price. It is fair to say that this approved and announced annual utilization hours of the security acquisition has basically guaranteed the reasonable return of wind power and PV power generation projects.

It should be noted that the number of hours of the security acquisition mainly applies to the regions with abandoning wind power and solar energy, and there is no regions which limit the renewable energy generation. Electric power enterprise shall make full acquisition according to its generating capacity of interconnected power generation project of resource energy resources. The Notice makes it clear that provinces (autonomous regions and municipalities) which are not listed in the Notice shall be accordance with their resource conditions, fully acquire generating capacity of wind power and PV power generation projects based on the renewable energy benchmark price. All provinces (autonomous regions and municipalities) shall not be free to set the minimum annual utilization hours of the security acquisition. In other words, the minimum annual utilization hours of the security acquisition is jointly determined by the National Energy Board and the National Development and Reform Commission State Development and other related departments. In order to avoid the situation where the locality intentionally lowers on-grid hours of renewable energy projects, provinces or power grid companies are not involved in the determination.

 Clearly Defined Rights and Responsibilities: If the requirement of the hours of the security acquisition cannot be met, the locality shall not newly build projects and the power grid enterprises and trading institutions implement the compensation for power rationing.

The Notice has cleared the rights and responsibilities of each party and the specific requirement of the implementation, which has a strong operability.

 The relevant departments of the local government, when making the plan of power generation and electricity trading scheme, shall fully reserve the guaranteed power space for wind power and photovoltaic power generation, and shall not be allowed to settle the electricity power in the transaction market part in the case that the guaranteed purchased power is not accomplished; and the formulated market trading mechanism needs to identify and implement the requirement of the monthly guaranteed power purchase. The power grid enterprises should, within the time limit, sign the annual preferred contract with wind power, photovoltaic power generation enterprises. Power grid enterprises and power trading institutions should, according to power history and prediction, divide the yearly guaranteed power purchase of each wind power and photovoltaic power generation project to each month, and give priority to settle the guaranteed power purchase of renewable energy in the same month.