Mixed response to renewable energy law amendment

CHINA: Stricter obligation to buy wind power is set to help finance better transmission and renewables research. Is it enough?

A techician examines turbine blades in Jinquan plant, in Gansu
A techician examines turbine blades in Jinquan plant, in Gansu

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China's wind energy has received a boost from a legal amendment that tightens requirements on utilities to buy all power generated from renewable energy sources. The adjustment to the country's 2006 Renewable Energy Law will also finance renewable energy research and new transmission to ease wind power bottlenecks. But sceptics wonder whether the law has the teeth to achieve its aims.

The 2006 law is broadly credited for sparking China's wind power boom and boosting the country's installed wind capacity to third place worldwide. It introduced subsidies and ways to supervise power prices, and required utilities to buy all power generated from renewable energy plants. But enforcement was weak.

With the amendment, electricity utilities will be fined up to double the losses suffered by renewable energy generation companies when their power goes to waste. It was adopted in December 2009 by the Standing Committee of the National People's Congress, China's top legislative body, and comes into force on April 1.

The amendment also requires the government to set up a dedicated fund for renewables research, rural clean energy projects, power systems for remote areas and islands, and information technology to speed the uptake of renewable energy. It follows a recent announcement by China's top administrative body, the State Council, that the country will cut carbon dioxide emissions intensity per unit of gross domestic product in 2020 by 40-45% on 2005 levels. Wang Zhongying, the National Development and Reform Commission's director of renewables development, says: "The amendment bolsters our confidence that we can achieve the target."

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Yang Fan, an energy analyst at financial securities company Citic Securities, agrees the amendment will encourage investment from stateand privately-owned enterprises while increasing power firms' obligations.

The government will set aside money for key renewables projects, explains Yang, and electricity ratepayers will also bear part of the burden. The 2006 law saw power grid companies charge electricity consumers a premium rate of CNY 0.004/kWh ($0.00059/kWh) to offset the higher costs of renewable energy sources. In 2009, power utilities collected around CNY 4.5 billion ($660 million), and Yang estimates that in 2010 this will reach CNY 9 billion ($1.3 billion) - money available for purchase of power from renewables.

Jiang Qian, chief energy researcher at China Investment Consultant, expects the new fund to cultivate research programmes and help to establish industrial standards and improve testing of renewables technologies. It is, says Jiang, a needed response to China's chaotic proliferation of equipment manufacturing and electric power plant construction.

From April, the amendment says that grid companies will have to improve transmitting technologies and enhance grid capability to absorb more power produced by renewable energy generators. Help cannot come too soon. At end-2008, only 73.6% of installed wind capacity was linked to the grid (Windpower Monthly China Special Report, October 2009). According to State Grid, in the absence of massive upgrades to the electricity grid, China's power grids would only be able to absorb 50-60% of wind power output if planned wind power installed capacity is elevated from around 20GW to the unofficial target of 150GW by 2020.

Concerns over detail

Industry observers, however, are concerned about the detail of the amendment. Zeng Shaojun, secretary general of the new energy chamber of commerce under the All-China Federation of Industry and Commerce, says that among the powerful voices of the grid companies, the cries of the great number of new-energy firms can go unheard. "In the course of implementation, we are wondering if the (subsidies and redirected ratepayer proceeds) can be delivered in time," he says.

Others are concerned about a lack of policy support for high tech, efficient power-grid construction. And details still to be worked out include the proportion of renewable energy power to total power purchased by utilities and the amount of access to the grid for renewables-generated power.

Hu Zhaoguang, vice-president of State Grid's Energy Research Institute, says the amendment "does not approve, in an overall perspective, the concept of building a solid, unified, smart power grid". With so many holes yet to be filled, Chinese Wind Energy Association vice-president Shi Pengfei says it is too early to forecast benefits to wind.

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