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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 determine the first batch of grid parity projects of wind power and solar power 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 power supply as well as consumption conditions.

2. Implementation of grid parity project’s power supply and consumption conditions

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 approved or installed by the end of 2018 were converted into unsubsidized projects voluntarily, priority will be given when assigning consumption quotas to these projects. 

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

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

3. Reorganize approved projects to grid-connection projects

Wind and solar projects that have been approved for two years but yet to start construction and apply for extension or haven’t started construction during the extension period will be suspended under the regulations governed the document and project even the developers have promised to continue the process.  

To continue the projects would require approval from the project management organization and a switch from current status to newly-added projects and compete with the 2019 projects for quota. The new policy also encourages wind and solar projects approved or under construction to be converted into grid parity projects voluntarily.

4. Before starting the argumentation of grid parity projects and finalizing the list of the first batch of grid parity projects of 2019, local governments shall not organize event for subsidized wind and solar projects to bid for energy consumption quotas.

5. For regions that are qualified for implement wind and solar grid parity projects, provincial reform commissions shall submit the list of the first batch of wind and solar grid parity projects of 2019 by April 25. Any project that doesn’t meet the conditions of grid parity for wind and solar power shall be submitted to the subsidized schemes instead 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 grid parity 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 third solar PV regional zones determined 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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