By Huayan Liao Contributed by Broad & Bright From ILO

Introduction

On 3 April 2018 the National Energy Administration (NEA) issued the Interim Administrative Measures for the Development and Construction of Distributed Wind Power Projects (NEA Order 30). The measures took effect on their date of issuance and are valid for five years.

The measures aim to simplify the approval and development process for wind power projects established in the Interim Measures for Distributed Power Generation, which the National Development and Reform Committee published in 2013. In this respect, the NEA published the Draft Regulation on Distributed Power Generation for public consultation on 20 March 2018.

The measures further optimise the development and construction policies concerning distributed wind power projects with regard to:

• planning and guidance;
• project construction and management;
• grid access;
• operations management; and
• the financial and investment development model.

It is hoped that the measures will accelerate distributed wind power development and construction in China.

Legislative aims and background

As the focus of wind power development in China shifts to the eastern and middle regions, distributed development is emerging as the main model. As such, the relevant authorities have successively issued numerous supporting documents for distributed wind power development since 2011.

In July 2011 the NEA issued its Notice on Distributed Access Wind Power Development, which:

• required the competent energy department of each province to investigate and study its wind energy resources in view of distributed wind power;
• proposed a preliminary plan for distributed wind power development; and
• explored the existing rules and prior experiences pertaining to the development and construction of distributed wind power projects.

The NEA’s notice clarified the main ideas and limits for distributed wind power development in China for the first time, and corresponding arrangements were made for distributed wind power development work. However, a lack of specific provisions regulating the development and construction of distributed wind power projects remained.

In December 2011 the NEA promulgated its Guidelines on the Development and Construction of Distributed Access Wind Power Projects, which included provisions on:

• project conditions;
• site selection;
• early stage tasks and approval;
• access system technical requirements and operations management;
• construction; and
• the approval of distributed wind power projects.

On 26 February 2018 the NEA issued the Circular about the Guidelines on Energy Work in 2018, indicating that China will:

• prioritise distributed wind power development;
• construct key wind power base projects in an orderly manner; and
• accelerate the promotion of distributed wind power development.

As matters stand, the rapid development of distributed wind power rapidly requires a number of practical problems to be resolved, including:

• the complicated approval process;
• the unclear grid access requirements,
• existing financing problems; and
• the difficulties associated with land acquisition.

Focusing on these problems, the new measures promote:

• simplification of the project management process;
• reduction of project investment thresholds; and
• improved project financing.

In addition, the new measures include several favourable policies for distributed wind power projects.

Key elements

The key elements of the measures, which comprise seven chapters and 35 articles, are as follows.

More specific requirements for grid access work
The previous voltage level of 35 kilovolts and below has been expanded to 110 kilovolts and below, which will enable distributed wind power plants to have a larger acceptance range and a wider installed space. Grid companies should provide favourable conditions for distributed wind power projects and establish green channels for access system engineering. The measures also include specific requirements for grid companies to avoid wrangling.

Planning formulation
The measures specify the distributed wind power development planning process and include detailed requirements in this respect. Grid companies at all levels must actively cooperate with distributed wind power plant development and construction, including by:

• providing relevant information on power grid construction plans, trends and new energy consumption in their region; and
• identifying the data of each grid point and its potential access capacity.

Areas with good conditions for distributed power development should compile special plans for the access and consumption of new energy power. Environmental impact assessments should be produced, along with distributed wind power plans. In particular, the measures emphasise that a distributed wind power development and construction plan should be formulated in strict accordance with the Guidance on the Implementation of the 13th Five-Year Plan for Renewable Energy Development. Expanding the scale of distributed wind power construction should be treated with caution.

Simplified management process
The approval of distributed wind power projects will shift from pre-approval to post-regulation supervision. The government’s role will also shift from managing projects to providing services. For the first time, a pilot project approval system has been encouraged, under which local energy authorities will not review the pre-requisites. Instead, companies will submit a project application report and credit commitments in accordance with the relevant requirements, in which they must confirm that the project complies with the relevant industrial policies and regulations and that bid activities have been carried out legally. The project will be approved after it has been reviewed and approved by the local energy authorities. The measures also state that all local governments should establish a one-stop-shop service system and encourage developers to bundle wind turbines of multiple grid access points located in the same county into one project in order to carry out the preliminary work and apply for the relevant supporting documents.

Various measures to resolve financing problems
The measures encourage all types of enterprise, social organisation, rural collective economic organisation and individual to invest in distributed wind power projects in order to achieve investor diversification. Other initiatives to expand funding sources include:

• encouraging banks and other financial institutions to explore loan mechanisms that use charge rights to project electricity sales and project assets as a pledge;
• on the condition of landowner support, compensating for the acquisition and renting of agricultural land in the form of assets for equity projects that constitute collective shares, which will be quantified to members of rural collective economic organisations;
• encouraging various types of fund, insurance and trust, together with industrial capital funds, to establish distributed wind power project investment funds;
• encouraging social capital funds to adopt mixed ownership and establish funds and consortiums to participate in the construction of distributed wind power projects led by local governments under a public private partnership cooperation model;
• encouraging local governments to offer discount loans and launch financing platforms with financial institutes (eg, banks and insurers) to fund distributed wind projects; and
• encouraging guarantee agencies to provide credit guarantees for SMEs and individuals to build distributed wind power projects.

More flexible grid connection and better subsidy allocation process
When distributed wind power developers apply for approval, they can choose a mode of spontaneous self-use, redundant power-on-grid or full-on-line access. Some self-use power will not be subsidised by the National Renewable Energy Development Fund; instead, grid load will be purchased by grid companies according to the local benchmark prices of wind power. The measures also specify that the state’s policies and regulations on distributed generation apply to distributed wind power projects, which means that distributed wind power projects can be involved in market transactions and sell electricity to other industrial and commercial users. Electricity generated from distributed wind farms will receive government subsidies. The measures require grid companies to:

• settle electricity tariffs and transfer the state subsidy funds to developers each month;
• prioritise the use of budgets and planning for subsidy funds; and
• ensure the timely and full transfer of state subsidy funds.

Special emphasis is placed on subsidies for distributed wind power projects that have not been strictly constructed in accordance with the technical requirements. In this case, subsidies are not available.

Reducing land restrictions
For the first time, the measures clarify that project developers can build or rent land to build distributed wind power projects. However, basic farmlands cannot be used for project development.

Comment

The development of distributed wind power will help to:

• realise the sustainable development of China’s wind power industry;
• accelerate energy transformation in key regions, such as the eastern and middle regions; and
• revitalise the development of the national economy.

The NEA’s new measures have removed institutional obstacles and addressed in detail the required resources and technical conditions for distributed wind power development. The industry must now take action and increase its investment into distributed wind power so that it can become the major source of wind power development in China.

For further information on this topic please contact Huayan Liao at Broad & Bright by telephone (+86 10 8513 1818) or email ([email protected]). The Broad & Bright website can be accessed at www.broadbright.com.