Congress passes China green law -- Key measures abandoned

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A law designed to achieve China's goal for renewables to meet 10% of the country's energy supply by 2020 will come into force on January 1, 2006. China's National People's Congress (NPC) passed the law -- formerly known as the Renewable Energy Promotional Act -- after its second reading. While widely welcomed by global environmental organisations, the final result is a much watered down version.

xAs passed, the law outlines a series of principles and guidelines to boost renewable energy development, including the need for specified payments for renewable power, discounted loans, tax incentives, and aid from a national renewable energy development fund. Grid companies are obliged to buy all renewable power generated in their regions, with permission to pass on extra costs to their customers. Any grid operator refusing to buy green electricity will be held responsible for the electricity company's losses.

xThe specific details of the law are to be finalised over the next nine months, mainly by the State Development & Reform Commission (SDRC). It is responsible for approving any wind project with a rated capacity of 50 MW or more, or costing more than ´200 million.

xxadjusting rates

xDetails to be decided include the rates to be paid for renewables electricity, which will be banded for different technologies and regions. The law stipulates they must be high enough to allow renewable energy producers a reasonable profit. As technologies become more advanced, the rates will be adjusted downwards. "A working plan is being formulated," says Shi Lishan of SDRC's Renewable Energy & Rural Power Division. "Hopefully, the detailed implementation measures would be announced before the law comes into force next year."

xMuch of the specifics and several key measures outlined in the draft law were removed to allow its swift passage through Congress. These included specified targets for total installed capacity and methods for deciding electricity rates. Moreover, plans to enforce major utilities and power companies to meet a mandatory 5% target for the share of renewables in their energy portfolio were scrapped. China favours "flexibility" in its laws, explains a government official. Indeed, this flexibility extends to the definition of renewable energy. Large hydro is not specifically excluded. The lawmakers have yielded to pressure from China's powerful hydro power industry for projects to be considered for inclusion under the law on a case by case basis.

xThose who had argued for making the law as detailed and accurate as possible lament the deletions. "A vague law amounts to having no law," says one disappointed analyst. But as one NPC insider notes: "The result would be the same if there was another round of discussion." Another analyst concurs. "Those controversial issues that had been left out of the law will be easy to deal with in the post-law stage, because no votes will be called on for the decision making," he says. "Any complaints against the implementation measures, should they arise, could be quenched with official interpretations."

xZhang Yuan of Longyuan Electric Power Group, the biggest wind player in China, says the law will make a difference: "The former policies were all government administrative decrees. Now they are legal terms." Longyuan currently operates 330 MW of wind capacity, accounting for about 40% of the national total. Last year it commissioned 60 MW of new wind capacity, with a further 100 MW expected to be completed by the end of 2005. Work is also due to start this year to progress plans for an additional 400 MW. Meanwhile, under the existing system of government concessions, SDRC is soon to issue invitations to tender for three major projects in Jimo, Shandong, one in Dongtai, Jiangsu, and another in Gansu.

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