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Breaking: NEA publishes consultation documents outlining grid parity policy

China’s National Energy Administration (NEA) released a consultation document of the “Work Plan for the Construction of Unsubsidized (Grid Parity) Projects for Wind & Solar PV” in early April to solicit advice from state governments, the National Development and Reform Commission, China Photovoltaic Industry Association, state-owned utility companies, and China National Renewable Energy Centre.

The NEA also requested each sector and organization to provide advice by April 23. An outline of the draft is as follows:

1. Prioritize grid parity projects

State and provincial governments have to comply with regulations stipulated by the "Notice of the National Development and Reform Commission and the National Energy Administration to Actively Promote the Work Plan for the Construction of Unsubsidized (Grid Parity) Projects for Wind & Solar PV,” which requests local governments to confirm the first round of subsidy-free solar and wind projects that can start construction in 2019 on the basis of the State Grid Corporation of China and China Southern Power Grid’s argumentation and the implementation of project construction and transmission as well as consumption conditions.

2. Implementation of grid parity project’s transmission and consumption

Each management department of state and provincial government shall focus on developing energy generation and give priority to grid parity projects when allocating quotas for energy consumption.

If onshore wind and solar plants that secured approval in 2018 opted to become grid parity facilities voluntarily, priority will be given for consumption quota allocation. 

Grid parity projects constructed in 2019 will have second priority to be assigned quotas for consumption.

Transmission and consumption conditions for subsidized projects will be taken into consideration only after consumption quotas for grid parity projects are guaranteed.

3. Reorganize approved historic projects into grid-connection projects

Wind and solar projects that had yet to start construction two years after securing approval or haven’t started construction within the extension period agreed previously, will be abolished under the terms of the document even the developers have promised to continue the process.  

To continue the projects would require approval from the project management organization and agree to switch from current status to new projects and resubmit bid applications to compete with the 2019 projects for quota. The new policy also encourages wind and solar projects approved or under construction to become grid parity facilities voluntarily.

4. Local governments shall not host any bidding rounds for subsidized wind and solar projects for energy consumption quotas until the first batch of unsubsidized projects of 2019 was finalized.

5. For regions that are qualified for implementing wind and solar grid parity schemes, provincial reform commissions shall submit the list of the first batch of wind and solar unsubsidized projects of 2019 by April 25. Any project that isn't qualified shall be resubmitted to the subsidized schemes by the energy management department of each province by May 31.

Opinion by PV InfoLink:

The consultation paper issued by NEA provides insight of the Chinese government’s policy direction, which will actively push for grid parity projects this year and clear accumulated projects. Based on the consultation paper, China will allocate quotas for consumption to subsidy-free projects first and give the remaining quotas to the subsidized projects.

As mentioned in the paper, approved projects that are converted to grid parity projects voluntarily will also be given priority for grid consumption. Based on the proposal, provinces in the solar PV zone III designated by China will be willing to turn existing projects into grid parity ones if the cost for power generation could be reduced.

Compared the paper with the information released previously, China’s capacity demand this year is lower than expected, which is a result of timeframe and the order shift of grid parity projects, accumulated projects, and the subsidized projects to be added this year. Therefore, China will see a  module demand lower than the expected 43GW and experience delayed market demand.

Based on the timeframe that the list of the first batch of wind and solar grid parity projects shall be submitted by April 25 and unqualified projects shall be transferred to subsidized program for competition by May 31, China’s demand this year will delay to July and August, and the high season is expected to run from Q3 2019 through Q1 2020. 

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