On 28 December 2017, China’s National Development and Reform Commission (NDRC) and National Energy Administration (NEA) together published a supplementary notice on the pilot program for the market-based trading of electricity produced by distributed generation (DG). This notice clarifies the requirements for applying to the program and the mechanisms for trading.
According to the notice, the trial areas for the pilot program should have solar or wind DG projects connected to a local transmission network of 110 kilovolts or lower. Grid operators that own the transmission networks and developers of DG projects need to show to the relevant authorities that the generation capacity of the projects can be effectively integrated into the grid without waste. Criteria that are under consideration include the capacity scale of the project, the load of the wind or photovoltaic generation system, and the layout of the grid in relation to the project. Project developers or owners have to provide estimations on the amount of electricity that their generation systems will feed into the local transmission networks from 2018 to 2020. These estimations will include annual amounts and the cumulative total.
At the same time, the grid operators will also provide estimations on the DG capacity that they can take on before the end of 2020. In fact, the grid operators will need to produce three separate estimations, each based on a specific condition related to the development of substations. Specifically, one estimate takes account of just the existing substations that are installed on the grid. The other two estimations would factor in the revamping of the existing substations and the plans for installing new substations, respectively. Besides providing these estimations, the grid operators have to give status reports on solar and wind projects that will be applying for the pilot program. These will include projects that are in operation, commissioned for construction, and being planned.
The notice also describes three types of trading mechanisms that the program participants can choose from. The first option is direct trading between project owners and electricity users. The second option involves grid operators acting as agents for project owners. The third option is grid operators buying electricity supplied by nearby projects via the 110 kilovolts or lower transmission networks, and prices will be set according government benchmarks and regulations.
The specific trial areas for the pilot programs are chosen by authorities that regulate prices and energies at the provincial level. Each province can have one to two trial areas, where local grids and selected DG projects meet the conditions of the pilot program. Basically, individual solar and wind projects have to enter a contract that is formulated according to the rules outlined by NRDC and NEA. Afterwards, their electricity can be traded on the market, provided that at least 75% of their generation capacity is connected the grid and consumed. There will be limits imposed on the scales of the participating projects. However, scale limitation can be waived for a project that has 100% of its generation consumed by the local grid and voluntarily gives up all subsidy support.
Besides explaining the details of the pilot program, the supplementary notice reveals that application submission deadline for prospective projects has been extended to 31 March 2018. Qualified projects across China will have to officially begin participating in the pilot program no later than 30 June 2018.
(Article Source: China Power News Network.)