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China targets grid-access bottleneck with quota system

CHINA: The new proposal will apply to big power companies, which will have to source 11% of their capacity from renewables.

The National Energy Bureau (NEB) has published details of its proposal to introduce a quota system to increase the amount of renewable energy generated and consumed in the country.

Wind power will be responsible for meeting the lion's share of the targets, since hydropower has been excluded and other renewable sources such as biomass and wave and tidal energy are at a relatively rudimentary stage of development.

The quotas will apply to big power companies, grid companies and local governments and will be brought in this year, though the NEB has not released an exact date.

NEB introduced the system to help solve China's chronic grid-access problem, where one third of turbines are not connected to the grid. Power companies have been forced to curtail wind power, with around 10 billion kilowatt hours (kWhs) lost in 2011 alone. This has dented wind power companies' enthusiasm to construct more wind farms.

"The quota mechanism is exactly designed to solve the problem of who will generate wind power, who will buy wind power, and who will use wind power," said Meng Xiangan, vice-president of China Renewable Energy Society.

Under the NEB quota, power companies that generate more than 5GW will have a requirement for 11% of their installed capacity to come from renewable energy sources. They will also have to meet a target for electricity from renewables to comprise 6.5% of their gross power generation.

Guodian Corporation, one of the top five state-owned power companies, already has enough renewable energy generation to meet the target, with 22% of its total installed capacity coming from renewables by the end of 2011. This includes 12.3GW of wind.

The quota will also place a requirement on China's three grid companies to buy a percentage of electric power from renewable energy sources by 2015. State Grid, which supplies 88% of China's electricity, will have renewable-energy electric power constitute 5% of its generation capacity by that date.

South China Grid will have a quota of 3.2%. Inner Mongolia Grid, supplying electric power to the western half of Inner Mongolia, will have a quota of 15%, and Shaanxi provincial power grid 10%.

Inner Mongolia Grid says that wind power will supply 10% of its power mix by the end of this year, so it will have no problem to meet the 15% quota.

Four regions

As for electric power users, each province will be given specific quotas to consume renewable energy generated electric power (see map). NEB has separated the country into four types of regions with different quotas, in line with renewable energy sources, economic aggregate, total electric power consumption, and electric power transmission capacity in the provinces.

To monitor implementation of the quota mechanism, NEB said it will release public notice on the previous year performances of related parties in the beginning of each year.

However, NEB has not outlined practical economic measures to encourage or penalise parties in implementing the quotas. Grid companies are not enthusiastic about the quota mechanism, according to industry officials. As a "go-between" in the electric power market, grid companies buy renewable energy-generated electric power from power companies and sell the power to end users, and they are more interested in how much they could earn in the business.

Li Zuojun, deputy director of the energy and environment institute under State Council Development and Research Center, said that to promote the quota, China must first ensure that grid companies will profit from the process. Li said the government must force grid companies to buy the relatively higher priced electric power from renewable energy sources and, second, subsidise grid companies.

In April, NEB issued an interim measure on management of funds subsidising feed-in tariffs from renewable energy sources. China will subsidise grid companies for constructing and maintaining grid systems transmitting renewable energy generated electric power, including wind power. The subsidies are CNY 0.01/kWh ($0.002/kWh) for transmission lines within 50 kilometres, CNY 0.02/kWh for transmission lines from 50-100 kilometres, and CNY 0.03/kWh for transmission lines over 100 kilometres.

Industry officials said the the quotas may solve some problems but cannot get rid of all problems on grid access.

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