The new policy of waiting for new energy compulsory consumption under the gap of 100 billion PV subsidies

Many PV companies such as GCL Group, Artes Solar Power Group and Yingli Group are looking forward to new changes that may appear in a month.

This expectation stems from a policy on mandatory consumption of new energy power.

On November 15, 2018, the National Development and Reform Commission and the National Energy Administration jointly issued the "Notice on Implementing the Renewable Energy Power Quota System" (draft for comments) (hereinafter referred to as the "Notice"). According to this "Notice", since January 1, 2019, renewable energy quotas will be set for power consumption, quota indicators will be determined according to provincial administrative regions, and provincial people's governments will assume responsibility for quota implementation, while power-selling enterprises and power users will Share the burden of quota obligations.

Companies including Yingli and Artes are optimistic about the long-term benefits of this system. However, they also believe that for the long-awaited quota system, the final implementation effect remains to be tested. What is certain is that there are many challenges ahead, but it also needs time and space for policy debugging.

Lv Jinbiao, vice president of GCL-Poly Energy Holdings Co., Ltd., believes that "although the policy has been twisted and twisted, the final plan has also made compromises. However, under the premise of deepening the reform of the power system, if the policy framework can be designed In the implementation of this system, this system is expected to solve the problem of the consumption and subsidy gap of renewable energy power, and ultimately achieve healthy and sustainable development of the industry."

Tao Ye, deputy director of the Renewable Energy Development Center of the Energy Research Institute of the National Development and Reform Commission, said: "The core goal of the quota system is to solve the problem of consumption, play a certain role through the implementation of quota indicators, and gradually break down the barriers between provinces. As for possible The problem that arises depends on how the next trading mechanism is set up, that is, how to solve the problem of subsidies indirectly through the quota system."

This is a renewable energy policy known as China's most difficult to produce. It has undergone a decade of brewing, and it has undergone several twists and turns until it finally landed. In 2018, the “5·31 New Deal” gave the photovoltaic industry a heavy blow. In the second half of the year, the overall growth rate of the industry showed a significant decline. At the same time, the gap in PV subsidies continued to expand during the year.

Subsidy gap

As the general manager of the Yingli Group's photovoltaic sector, Liu Dingtao closely followed the revision of the renewable energy power quota system until the final edition of November 15, 2018. “The PV industry including me has been looking forward to it.” On December 6, Liu Dingtao told the Economic Observer.

About two months before this, the National Energy Administration issued a notice requesting provinces (autonomous regions and municipalities) to enroll new energy projects (wind power, photovoltaic power generation) projects and needs that were planned but not completed by October 31. It is clear whether it is necessary to apply for subsidized PV projects for arranging, and Yingli will report the relevant projects to the development and reform department as required.

Liu Dingtao believes that the main reason for the ranking is that the central level needs to know how many gaps in new energy subsidies are, and how many historical issues remain to be resolved. Therefore, the government hopes to solve the gap in subsidies through market-based methods, or through the introduction of relevant policies.

Several of the power station projects reported by Yingli are located in Henan Province. Prior to June 30, 2016, Yingli Group invested in three ground power projects in the province with a total installed capacity of 70 MW. At that time, the policy of Henan Province was “first-come-first-served (subsidy indicator)”. After the completion of these projects, Yingli did not obtain the indicators for various external reasons. So far, only the standard price of desulfurization and coal combustion has been received. If you follow the 10% annual rate of return, the original 10-year payback period will be extended to 20 years or even 25 years.

A power station project like Yingli has achieved a capacity of only 1GW in Henan Province (the total installed capacity of China's PV in 2017 is 53GW). In 2018, Yingli received PV subsidies from several provinces (autonomous regions) such as Yunnan, Guangxi, and Hebei. However, this is only a subsidy paid in March 2017. The subsidy since March 2017 has not yet been paid. Such a phenomenon is not limited to the above provinces, nor is it limited to the Yingli family.

At the beginning of this year, Cheng Chenxi, an official of the China Energy Administration, revealed at a press conference that according to the statistics of the Ministry of Finance of China, as of the end of 2017, the subsidy for photovoltaic electricity prices reached 100 billion yuan. In 2018, the annual subsidy for scenery will reach 160 billion yuan. Among them, the annual subsidy for photovoltaics is 90.1 billion yuan, and the annual subsidy for wind power is 76.1 billion yuan. In 2019, the annual subsidy for the scenery will reach 180 billion yuan, of which the photovoltaic subsidy for one year is 102.2 billion yuan, and the annual subsidy for wind power is 82.8 billion yuan. In 2020, the wind subsidy gap will reach 400 billion yuan, of which the photovoltaic subsidy gap is 61.7 billion yuan and the wind power subsidy gap is 138 billion yuan.

The subsidy gap has become a hurdle for the photovoltaic industry. The “5·31 New Deal” of photovoltaics enacted in the middle of the year is like a head-on, making the photovoltaic companies feel unprepared and quickly appear on the data.

Wang Bohua, secretary-general of the China Photovoltaic Industry Association, revealed that the industry's polysilicon production increased by 24% in the first half of 2018, but it was lower in the second half of the year. The growth rate in January-September was only 8.8%. The output of the cell and module shows the same pattern. In addition, the newly added PV installed capacity in the first half of the year was about 24.3GW, which was flat year-on-year, but the figures for January-September fell by 19.7%. Wang Bohua said: "The recovery of household PV in the first half of the year was faster than expected, but it was almost stagnant after the May 31 New Deal."

Lu Jinbiao, vice president of GCL-Poly Energy Holdings Co., Ltd., told the Economic Observer that in 2018, almost all power companies in China reduced the installed capacity of photovoltaics. Even GCL, which is the industry leader, is also planning to reduce its PV power generation. “GCL has a total of 7 million kilowatts of photovoltaic power generation. From the perspective of renewable energy quotas, it has enough installed photovoltaic power generation and it takes up a lot of money.”

This influence has even spread to the most upstream of the PV supply chain – the component manufacturer's production equipment supplier. Wang Junchao, CEO of Shenzhen Fengsheng Equipment Co., Ltd. told the Economic Observer that even the suppliers of battery production equipment have experienced difficulties in stages: tight capital, difficult financing, and a small number of dead enterprises.

In July 2018, the chairman and CEO of Artes Sunshine Power Group, Xiao Xiaotong, said at the photovoltaic conference held in Huangshan, after the change of the May 31st New Deal, "From the perspective of the industrial chain, the more the front end, the overcapacity Seriously, the more companies are shut down. At the same time, the overseas component companies will be better than the enterprises that simply lay out the domestic market.” He introduced that Artes’ direct shipments per month exceeded at least 50, although some markets are small, and some markets have low profit margins, they will demonstrate the robustness of this strategy during the industry's low tide.

In the view of Liu Dingtao and others, at such a point, the introduction of the quota system for the photovoltaic industry is self-evident: from the perspective of the document, by advocating market-based trading behavior, to compensate for the gap in subsidies, with subsidies Gradually withdraw, forming a more benign competitive atmosphere. In the long run, this policy will bring long-term benefits to the industry.

According to analysts from the Economic Observer, if the quota is implemented as a long-term stable policy and it can improve the level of consumption and utilization of renewable energy, the result will be beneficial to the development of the industry. Predictive, reduce policy risks and accelerate the marketization of renewable energy utilization.

From the power generation end to the power end

The quota system, which Liu Dingtao and other people in the industry are eagerly awaiting, is a renewable energy policy known as China's most difficult to produce. According to Tao Ye, deputy director of the Renewable Energy Development Center of the Energy Research Institute of the National Development and Reform Commission, only from the revision of the three editions in 2018, the main framework of the policy and the core ideas have not changed, but it involves “adjustment level” and “ Simplification of content, "perfect ways", "cohesion mechanism" and other aspects of adjustment.

In fact, as early as nine years ago, in the Renewable Energy Law promulgated in 2009, the quota system was first introduced. In 2014, the General Office of the State Council issued the Energy Development Strategic Action Plan (2014-2020). ), once again proposed to implement the renewable energy power quota system. In the eyes of the industry, the discussion of the quota system has not been implemented for nearly a decade because it is not a single policy, but rather involves the design of the entire system.

"The quota system involves all aspects of the electricity market such as power generation, transmission, electricity sales and electricity consumption. There are many factors to consider when designing a system. Of course, it also involves multi-interest gaming. This should be the reason for the quota system 'difficult to produce'." Sis said to the Economic Observer.

On April 22, 2016, a draft quota system issued by the National Energy Administration caused an uproar in the power industry. This document is related to the requirements for establishing a non-water renewable energy power generation quota assessment system for coal-fired thermal power units. Notice". According to this document, coal-fired thermal power units should bear the quota responsibility for renewable energy power generation. In 2020, the quotas for renewable energy power generation by coal-fired power generation enterprises should account for more than 15% of thermal power generation. The assessment indicators will be implemented according to the annual decomposition.

When the document came out, it was strongly opposed by the China Electricity Council (CEC) and the five power generation groups. Xue Jing, deputy director of the Industry Development and Environmental Resources Department of CEC, told the Economic Observer that she represented the China Electricity Council and later formed a research report by collecting opinions from large power generation companies and local power generation companies. This reporting system analyzes the impact of this policy on the coal-fired power industry.

The report was quickly submitted to the National Energy Administration and the relevant department of the National Development and Reform Commission. Xue Jing recalled that the opposition had caused a "big repercussions" in the National Development and Reform Commission and the National Energy Administration. Under the opposition of CEC and related companies' “reasonable evidence”, this version of the quota system for the assessment of renewable energy power quotas for thermal power companies has finally failed.

In fact, "the internal energy bureau of the time and the drivers of the National Development and Reform Commission have not been able to reach a consensus on this policy." Xue Jing said. Xue Jing’s point of view is that adjusting the energy consumption structure, increasing the proportion of clean energy use, and gradually reducing the proportion of disposable energy use, this direction is beyond doubt, but the question is, who should bear the responsibility for developing new energy?

In her view, the development of a low-carbon economy requires the joint efforts of the whole society, rather than being imposed on coal-fired power companies. In this respect, coal-fired power companies do not bear the "original sin." For this reason, the design of the system should start from the consumer side, not from the power supply side.

On February 6, 2017, the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration jointly issued the Notice on the Trial Implementation of the Green Power Certificate Verification and Voluntary Subscription System for Renewable Energy. This document further improves the subsidy mechanism for wind power and photovoltaic power generation. It plans to pilot the renewable energy green power certificate and voluntary subscription nationwide, and start voluntary subscription transactions from July 1.

It is envisaged that by guiding the green consumption of the whole society and promoting the consumption and utilization of clean energy, the subsidy mechanism for wind power and photovoltaic power generation can be further improved. However, since the listing of the listing, the issue of “greening more transactions and less transactions” has become more prominent.

Xue Jing said that the voluntary trading system of the Green Card can only be used as a transition because the system is not mandatory, the lack of driving force in trading, and the trading volume is naturally limited. According to the data of the China Green Power Certificate Subscription Platform, as of October 31, 2017, there were 1576 subscribers to the Green Card and a total of 21,257 green certificates were subscribed. In stark contrast to this is the increasing number of green cards to be listed for trading - at the same time, more than 8 million green certificates have been issued, that is, the green card purchases only account for 0.26% of the issued volume.

Based on this, the renewable energy quota system for mandatory performance of obligations is on the horizon.

On March 23, 2018, the National Energy Administration issued the "Renewable Energy Power Quota and Assessment Method (Draft for Comment)"; on September 13, 2018, the National Development and Reform Commission issued the "Renewable Energy Power Quota and Assessment Method" for the second time. Consultation draft; on November 15, 2018, the National Development and Reform Commission and the National Energy Administration jointly issued the Notice on the Implementation of the Renewable Energy Power Quota System (Draft for Comment).

The "obligation subject" that bears the quota system has finally moved from the power generation end to the power supply end. The above-mentioned "Notice" stipulates that the power selling enterprise and the power user shall jointly undertake the quota obligation and bear the market subject of the quota obligation. Among them, the electricity-selling enterprise shall bear the quota corresponding to the annual sales of electricity, and the electricity-consuming enterprise shall bear the corresponding power consumption. quota.

Waiting for implementation

Before and after the National Day of 2018, the domestic mainstream PV enterprise executives, including Liu Dingtao, held two meetings under the call of the China Photovoltaic Industry Association, and put forward opinions and suggestions on the upcoming new industry policy. “The most concern of enterprises is the situation of policy landing.” Liu Dingtao told the Economic Observer that “it is necessary to wait and see if the target can be achieved. The decision-makers of the provinces pay different attention to this matter and the implementation will not be effective. Do the same, and again, depending on whether the follow-up supervision can keep up."

Lv Jinbiao, vice president of GCL-Poly Energy Holdings Co., Ltd., expressed similar views: "The quota system will certainly play a role in improving the use of clean energy in the whole society, but the specific targets will depend on the implementation rules and implementation. The provinces must implement their respective indicators, and do not rule out the emergence of some special circumstances in the process, in which case the results will be discounted."

It is worth noting that the document stipulates that the joint subject of failure to complete the quota will be “jointly punished”. The head of the New Energy Department of the National Energy Administration explained to the Economic Observer that at present, the “joint disciplinary” approach is to include enterprises in bad credit records.

Lv Jinbiao analyzed: “The implementation deviations that occur after the decentralization of the provinces. The reward and punishment mechanism does not work, or does not function as intended, especially when some specific economic and political issues arise, often dilute the renewable energy as an aid. The development of status, and ultimately the development of traditional energy sources, will be slowed down by the reform of the power system."

On December 6th, Artes told the Economic Observer that, in view of the fact that the current Notice does not contain implementation details, it is expected that the relevant departments will issue supporting regulations and policies in a timely manner, and the 2019 quota index will not be available until the first quarter of 2019. release. In the short term, the impact of the quota system on the industry is whether to increase the use of stock assets and whether to increase the scale of the industry.

Tao Ye, deputy director of the Renewable Energy Development Center of the Energy Research Institute of the National Development and Reform Commission, said to the Economic Observer: "The main body of the quota system is covered by the consumption side. The actual implementation process involves all aspects of power generation, transmission, distribution, and electricity use. The stakeholders involved are very broad." For this reason, the landing of the quota system may face many challenges in reality.

In the view of Tao Ye, the core objective of the quota system is to solve the problem of consumption, play a certain role through the implementation of quota indicators, and gradually break the barriers between provinces. As for the problems that may arise, it depends on how the next trading mechanism is set up, that is, how to solve the problem of subsidies indirectly through the quota system. "What we have to do now is to improve the green certificate market on the one hand, and to formulate rules for quota over-completion transactions on the other hand. Based on the current electricity market, we cannot fully support the direct renewable energy trading, which requires corresponding Supporting reforms. In short, how to use the market-oriented mechanism to fulfill quota obligations requires further or faster improvement.” Tao Ye said.

For PV companies, the problem is still tricky: At present, the industry's annual subsidy gap of 100 billion yuan is still not settled, a large number of subsidies can not be in place, has affected the company's existing capital turnover, and subsequent development is also weak. How much income can the quota system bring to them? It is still difficult to predict.

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