The State Energy Administration has recently made it clear that the intensity of renewable energy subsidies will remain unchanged for 20 years without distinction between stocks and incremental assets.
Previously, the industry was worried about the reduction of subsidies.
In March this year, the State Energy Administration announced to the public the "Renewable Electric Energy and Electricity Quota Assessment Method (Draft for Opinions)". According to this document, in the future, the state will stipulate the lowest proportion of renewable energy and electric power consumption in provincial and administrative regions. The competent energy authorities shall formulate the quota indicators of renewable energy and electric power in each province annually, and the relevant administrative regions and market entities that fail to meet the standards will Punished.
The head of the State Energy Administration made the above statement during the consultation period. Reporters learned that the document is expected to be published in 2018.
Along with the quota system, there is also a renewable energy power certificate system, which is generally referred to as the "green certificate". For renewable power producers, a green certificate can be obtained for each megawatt-hour (1000-degree) transaction settlement. The green certificate is divided into conventional hydropower certificate and non-hydropower certificate.
The combination of quota system and green certificate means that the quota can be fulfilled by purchasing green certificate for the market subject whose quota does not meet the standard. In the future, the Green Certificate System will be combined with the Renewable Energy Fund to support new energy power. 2018-2020 is a transitional period. The introduction of green certificate will relieve the pressure of renewable energy subsidy to a certain extent. After 2020, new energy will usher in the era of parity. The compulsory quota and green certificate will jointly guarantee the proportion of renewable energy in China.
After the publication of the draft in March, the State Energy Administration planned to publicly release the second draft at the end of June, but eventually cancelled it. The reason is that in the second edition of the draft, the new content on the strength of renewable energy subsidies has been disseminated in the industry, which has caused great repercussions in the industry.
The second edition of the draft solicits opinions requires that the compulsory quota of renewable energy be combined with the green certificate, and the minimum guaranteed utilization hours of wind power and photovoltaic power are defined by the provinces. Within the guaranteed utilization hours, the National Renewable Energy Fund will grant full subsidies to ensure that the amount of electricity generated outside the utilization hours is no longer supported by subsidies, but the power generation enterprises can obtain the green certificate and sell it. Incremental income shall be obtained, but the amount shall not exceed the original subsidy amount.
This new regulation means that in addition to guaranteed utilization hours, the subsidies that new energy enterprises can get for generating electricity will only depend on the sale of green certificates, and the amount of subsidies does not exceed the original amount, which means that this part of the revenue will be damaged and faced with uncertain risks.
As soon as this information came out, it caused strong fluctuations in the market. The share prices of leading wind power indicators such as A-share Golden Wind Technology, Hong Kong-share Datang New Energy, Longyuan Electric Power and so on were adjusted by a large margin at one time. A capital market analyst said that if this is implemented, the financial model of the stock assets of new energy operation enterprises is facing collapse. At the beginning of investing in new energy operation assets, all operators build financial models and make investment decisions on the premise that the intensity of state subsidies remains unchanged for 20 years. More importantly, in the middle and eastern regions where electricity is not limited, new energy consumption is in good condition and the power grid is fully absorbed. The practice of delimiting minimum guaranteed decimal utilization and reducing subsidies in these areas will trigger investors to revalue their assets in an all-round way.
Article 20 of the Renewable Energy Law promulgated in 2006 stipulates that the cost incurred by power grid enterprises in purchasing renewable energy power according to the grid price determined in Article 19 of this Law is higher than the difference between the costs incurred in calculating the average grid price of conventional energy generation, and is supplemented by the price of renewable energy levied nationwide for the sale of electricity.
According to "Some Opinions of the State Council on Promoting the Healthy Development of the Photovoltaic Industry" (Guofa [2013] 24), photovoltaic power generation projects which enjoy the subsidies of the national electricity price shall conform to the renewable energy development plan, the procedures for approval of fixed assets investment and relevant management regulations. The benchmarking tariff or tariff subsidy standard for photovoltaic power generation projects has been implemented since they were put into operation, with a period of 20 years in principle.
A person from a new energy power generation company said that operators usually use electricity fee income after putting into production as collateral to finance banks. If subsidies are reduced, banks may draw loans or ask for more collateral, which poses a major challenge to the development of new energy enterprises. At the same time, this is also a major shift in national policy, which will impact the credibility of the government.
According to the reporter of Finance and Economics, in early July, the State Energy Administration held two closed-door symposiums to redefine the idea of quota system and the way to combine it with the green certificate system. At present, the idea of reducing stock subsidies has been overturned. At the meeting, the energy bureau's business leadership was clear, keeping the intensity of new energy subsidies unchanged, and introducing the green certificate trading system.
At the same time, the Energy Bureau requires that the local governments strictly enforce the hours of protection and utilization in the previously designated northwest power-limited areas. The state subsidy within the hours of utilization will remain unchanged for 20 years. The basic electricity price outside the hours of utilization will be guaranteed to encourage market-oriented transactions. The intensity of the subsidy will remain unchanged for 20 years. New energy operators can obtain income by selling green certificates first, and the income will be supplemented with the original one. The difference between the total allowances is covered by the Renewable Energy Fund.
On the one hand, this approach eases the pressure of new energy subsidies gap, on the other hand, the rapid return of green card income can also alleviate the cash flow pressure caused by the default of subsidies to a certain extent. At the same time, the Energy Bureau also emphasizes that there will be no minimum guaranteed utilization hours in the central and Eastern open power region, and the total purchase of new energy power will keep the subsidies intensity unchanged for 20 years.
The above ideas were approved by experts and insiders who participated in the discussion from different perspectives. The ideas for the final landing of the quota system were clarified. At present, the third edition of the draft for consultation is being formulated.
