China, as a major market for renewable electricity, has already announced to launch renewable energy certificate (REC) program officially since 2018. This system would be helpful for China to establish a firmer, healthier renewable energy market as well as reducing Chinese government’s financial stress on subsidy, stated an analyst at EnergyTrend.
China’s National Development and Reform Commission, Ministry of Finance, and National Energy Administration jointly announced a document regarding REC program trial and transaction mechanism. Starting this July, RECs will be awarded to certified independent power producers (IPPs) as a test for this program, along with allowance for agencies, companies, social institutions and individuals to purchase renewable electricity received RECs.
The program is scheduled to be officially implemented since 2018, when renewable electricity certifications will become compulsive for IPPs that are selling renewable energies.
Although the Chinese agencies have yet unveiled details such as price and required ratio of an IPP’s renewable electricity mix, the document distinctively list solar PV and wind power as categories that will be involved in the REC program, while distributed PV generations are excluded.
RECs will be awarded per MWh of certified clean electricity, and the price will be lower than existing FiT rates. Renewable electricity that have been traded through RECs will be excluded from the FiT scheme.
The new program plans to ask IPPs to provide a certain ratio of renewable electricity, so the IPPs may transfer the extra costs to its customers and hence increase the nation’s overall electricity costs. To avoid this situation, it is necessary to establish comprehensive supporting measures.
Nonetheless, a reliable REC program is crucial for a nation to establish a liberalized renewable power market.
“Renewable power liberalization in China will accelerate under the REC program,” stated Celeste Tsai, an analyst at EnergyTrend. “For one thing, the program is likely to require IPPs to supply a certain ratio of clean electricity as well as require manufacturers to operate by a certain rate of renewable energy, creating a stable demand to renewable electricity.”
As the price of renewable electricity under RECs will be lower than FiT rates, IPPs will get rid of subsidies and turn to market mechanism.
“For another, this will help create a healthier market in China,” added Tsai. “The Beijing government will also relief from crisis of being unable to provide subsidies.”
However, the REC program will be undergone with a trial-and-revision style in the short term due to absence of details. Consequently, Chinese renewable market will see possible transformation after the new program is officially implemented in 2018.