China’s Renewable Energy Law (Policies & Plans)

We have previously introduced China’s Renewable Energy Law, so let’s now take a closer look at some of the policies and plans which support this law. The main policy pronouncement is found in the National Development and Reform Commission’s (NDRC) Medium and Long-Term Development Plan for Renewable Energy (the “Plan”)(see right sidebar under “Laws & Regulations”).

From the standpoint of a renewable energy project developer, the key components of the law itself are:

1. the establishment of a renewable energy target system which starts at the national level and eventually works its way down to individual energy-production entities;
2. a mandate that China’s state power grid companies purchase, favorably dispatch, and build transmission lines to renewable power sources and gasoline wholesale companies purchase liquid bio-fuels;
3. general guidance on establishing purchase prices for renewable energy that are based on the principles of benefiting renewable energy development and being economically reasonable; and
4. a description of the types of fiscal and tax incentives that will be developed to support the renewable power industry and specific projects.

As to the first point, the Plan provides specific 2010 and 2020 targets for a host of renewable energy types. It sets forth as a “Guiding Principles” (section 2) the “speed[ing] up [of] the development and deployment of hydropower, wind power, solar energy, and biomass energy.”

The Plan does not articulate many specific new requirements, but it does provides that:

Power generators with self-owned installed capacity of over 5 GW will be required to have a non-hydro renewable energy installed power capacity (self-owned) that accounts for 3 percent of their total capacity by 2010 and for over 8 percent of their total self-owned capacity by 2020. (section 5 (1))

The administrative authorities under the State Council responsible for the construction industry and the Standardization Administration of China will take responsibility for developing national standards for solar systems in buildings, and update the relevant construction standards, engineering specifications, and management regulations of urban construction to create good conditions for the development of solar systems in buildings. In the towns with rich solar resources, through the use of necessary policy measures, the market share of solar thermal technologies will be driven up. (section 5 (2))

The Plan also includes some cautionary language (section 2.1):

a lot of attention should be given in the case of the development of biomass energy to the relationship with both grain and the ecological environment. Cultivated land should not be illegally occupied, food grains should not be excessively consumed, and the ecological environment should not be destroyed.

This caution with respect to biomass energy has found its way into the Guidance Catalogue for Foreign Investment (as amended in 2007) (copy now attached under “Laws & Regulations” in the right sidebar). The 2007 version of the Catalogue moved to the “restricted” category the

Manufacture of biological liquid fuel (fuel ethanol, bio-diesel) (the Chinese party holds controlling share)

This Catalogue, of course, should be consulted when planning any investment in China. A number of investments in the renewable energy sector are, in fact, “encouraged,” including:

* Construction & operation of power plants using solar, wind, geothermal, wave/tidal, hydro and biomass remain on the encouraged list, with no ownership restrictions.
* Manufacture of parts or finished components for power generation in renewable energy fields, but in some cases investment limited to CJVs and EJVs.

As to items 2, 3, and 4 above, the Plan does not add much detail to the laws fairly vague pronouncements. Items 2 and 3, in particular, have been primarily addressed through regulations, and we will discuss those later.

Foreign investors should be aware that the Plan also makes it clear that China intends to encourage and strengthen the domestic renewable energy sector (section 5 (5)):

By 2010, a basic system of renewable energy technologies and industry will have been established, so that equipment capabilities based mainly on domestic manufacturing will have been established. By 2020, a relatively complete renewable energy technology and industry system will have been established, so that a domestic manufacturing capability based mainly on China’s own IPRs will have been established, satisfying the needs for deploying renewable energy on a large scale in China.

The NDRC issued the Renewable Energy Five Year Plan last month. I have not seen an English translation of this plan yet, but from the news reports it seems to parrot the Medium and Long-Term Development Plan for Renewable Energy (I know these plans can get confusing) except that it may have doubled the expected wind power production from 5 GW to 10GW by 2010. When I get a chance to read it, I’ll let you know.

Source : http://www.chinaenvironmentallaw.com/2008/04/13/china%E2%80%99s-renewable-energy-law-policies-plans/