Quota System May Alleviate the Bottleneck of New Energy Resources

By Liu Weixun
Published: 2010-10-28

Economic Observer Online
October 27, 2010
Translated by Rose Scobie and Zhang Chao
Original article:

The high speed development of new energy has caused a network bottleneck, yet there is hope that the establishment of a power quota can alleviate the problem.

The EO learned that the government has made it clear that power companies must implement a quota system as well as promote the integration of renewable energy sources into the power grid, especially wind power. An official from the National Energy Administration says that goals will be set to adopt wind power in regions with abundant wind energy resources. The official also stated that power companies will bear the responsibility of purchasing a set proportion of renewable energy.

This statement means that power companies will have a mandatory, quantified quota of renewable energy that they must integrate into their power grids, which will also be an important basis for performance assessment. Before, the government did not set mandatory requirements for power companies regarding the purchase of renewable energy and relevant subsidies; stimulus measures were also insufficient. These were seen as signs of a lack of enthusiasm for renewable energy integration, leading to problems with the power grid and subsequent restrictions.

In China, new energy sources, particularly wind, have quickly expanded in recent years, but the bottleneck complication has begun to appear in China’s power grids. The chief manifestation of the bottleneck is some established wind power farms are unable to synchronize their power in time and are frequently met with power grid power limits. Some controversial statistics show that since end of 2009, one third of wind power equipment in China has been idle.

One cause for concern is that China's ability to generate electricity from solar energy cells is currently still in its beginning stages. After large scale development, it could face the same challenges in power integration as wind power.

According to the officials from National Energy Administration, reasons for inconsistencies between renewable energy and power system operations include recognition problems along with problems with technology and management. We need to adopt comprehensive step by step measures to resolve the problems; the application of a power company quota system is one of those measures.

The quota system takes two forms. The first type is allocating set proportions of renewable energy that power companies must purchase; the second type is allocating to electricity generation enterprises a set proportion of renewable energy to electricity generation that must be met.

Previously, China’s concept for the quota system has been put forward in several projects and regulations. In September, 2007, the National Development and Reform Commission released the Medium and Long Term Development Plan for Renewable Energy to set market share targets for renewable energy. The plan stipulates that in 2010 and 2020, the proportion of non-hydroelectric renewable energy in the coverage areas of the power grid should reach over 1 percent and 3 percent respectively.

The recently released State Council Decision on Accelerating the Cultivation and Development of Strategic New Industries includes advancing the “implementation of a new energy quota system and a new energy generation guarantee quota purchasing system.”

However, the quota system for new energy has not been put to use for various reasons. Our source said the application of a quota system for new energy will be included in the energy resource industry section of the Twelfth Five-Year Plan. The Administrative Measures for the Renewable Energy Quota System is also in the process of formulation. We are very close to launching the power industry quota system.

This article was edited by Ruoji Tang