NDRC, NEA, and the National Statistics Bureau finally released a notice to clarify the initiative to make the incremental consumption of renewable energy not included in the local government’s total yearly energy consumption (《有序推进新增可再生能源电力消费量不纳入能源消费总量控制》), after it has been highlighted in several documents and speeches by the central government since the beginning of this year.
Definition of new additionality of renewable power consumption:
2020 renewable power consumption of different provinces will be used as the reference value. During the 14FYP (2021-2025), yearly incremental renewable power consumption is considered a new additionality, which can be deducted from the national and provincial/regional annual energy consumption total. However, it will be still considered in the energy consumption intensity calculation.
It is believed that the local governments will actively promote local renewable power consumption, while monitoring the energy efficiency of power users at the same time. In this case, local governments may tend to keep incremental renewable energy for new C&I project investments with high GDP to energy consumption ratios, leaving out traditional energy-intensive industries. For example, the Shandong provincial government has already declared that incremental renewable energy during the 14FYP would not be used for new two-high industry projects, which refers to industries with high-emissions and high-energy-consumption such as coking, cement, chemical fertilizer, tyre-making etc.
The policy is a national guideline to promote renewable power consumption. When it comes to local implementation pertaining to specific industries and power consumers in different provinces, provincial governments may have the freedom to decide the details.
Green Electricity Certificate (GEC) is used as the unique token of green electricity consumption
Every year the total number of GECs owned by all power users in a province will be used for the accounting and verification of said province’s renewable power consumption. Meanwhile, the renewable power consumption of enterprises will also be calculated based on the quantity of GECs it holds.
GECs will cover all sorts of renewable power including power generated by wind and solar, hydro, biomass, geothermal sources, etc. Under such circumstances, the GEC supply will increase significantly.
It is safe to infer that more and more provincial regulators would soon impose Renewable Portfolio Standard (RPS) targets on all power users in the power trading market. For those who have constraints in sourcing renewable energy, buying GEC will become a handy solution to meet the targets.
As far as power users who hope to avoid “green-washing” and “double counting possibility”, participating in green power trading to obtain GECs bundled with green electricity will remain the best option.
To conclude, it is still important for local governments to clarify several essential questions: What are the implications and impacts on power end-users if they consume renewable energy? What should be defined as incremental renewable power consumption for end users? Besides, how will the new policy correlate to the carbon emissions accounting system for emitters? Finally, with the spike of GEC supply in the market, how will a pricing system for different sorts of renewable energy be established? There remain many more questions that need to be answered.