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China threatens grid operators with fines -- Naming and shaming policy to force accept of renewables

The Chinese government is cracking down on grid operators who fail to comply with the country's two year old renewable energy law, warning that it will apply stiff penalties if renewables generators suffer financial losses after being refused access to the network. Under the law, which came into force at the start of 2006, every grid operator in China must accept all power from renewable energy sources, but enforcement of the regulation has been weak.

The State Electricity Regulatory Commission (SERC) has now taken steps to ensure full implementation by outlining exactly what is required of grid companies and warning that penalties of up to two times the losses suffered by generators will be applied for non compliance. "It effectively helps regulate the activities of grid firms in fully purchasing the renewable electricity," says Li Junfeng of China Renewable Energy Industries Association.

Grid companies are responsible for providing all necessary infrastructure and services for connection of renewables in a timely manner. They must also sign power purchase and distribution contracts and will be penalised if proven to be deliberately obstructing implementation of agreements. They must also give renewable energy capacity priority access to grid networks over other supplies.

For SERC to check compliance, grid firms and renewables plant operators must submit monthly reports to local electricity regulators outlining how much electricity has been fed to the grid, prices agreed and purchase clearances. SERC and its agencies have authority to levy penalties and name and shame any grid company that fails to comply.

The updated implementation rules will help get more renewable energy on the network, says Shi Pengfei of China Wind Energy Association. Zhang Yuan of China's leading wind developer, Longyuan Electric Power Group, agrees: "It should be a good thing. As a developer, we find it encouraging."

Floor prices

Meanwhile, China's highly competitive system for awarding concession contracts for wind plant construction, which is criticised for encouraging such low prices that projects either do not get built or are sub-standard (page 70), may be up for reform. SERC is proposing to introduce both floor and ceiling prices to control bids within a pricing framework. "This may be helpful in preventing a company from quoting a too low price," says Zhang. "But it will not be easy to establish reasonable upper and lower limits. Considering the complex overall conditions, the rising prices on materials and equipment, it's a dynamic process, very difficult to achieve fairness."

While Zhang suspects any change in pricing policy for wind power in China could be some way off, one analyst notes that September is usually the month in which new rounds of state sponsored tendering for wind concession projects take place. So far, however, no such tender has been announced. The delay gives food for speculation about policy change, he says.

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