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Distributed transaction pilot program is coming soon. Here are some key points to understand.
Release time:
2018-01-17
In November 2017, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) jointly issued the "Notice on Conducting Pilot Market Transactions of Distributed Generation" (hereinafter referred to as the "Notice"). The Notice indicates that distributed energy projects within the 110kv voltage level can choose to sell electricity nearby. The pilot market transaction of distributed generation thus kicked off.
In November 2017, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) jointly issued the "Notice on Conducting Pilot Programs for Market-Oriented Transactions of Distributed Generation" (hereinafter referred to as the "Notice"), indicating that distributed energy projects within the 110kV voltage level can choose to sell electricity nearby. The pilot program for market-oriented transactions of distributed generation thus began.
On January 5, 2018, the National Energy Administration issued a "Supplementary Notice on Conducting Pilot Programs for Market-Oriented Transactions of Distributed Generation" (hereinafter referred to as the "Supplementary Notice"), further clarifying matters related to the preparation of pilot programs for market-oriented transactions of distributed generation, and providing supplementary information on the pilot organization methods and division of labor, requirements for pilot program content, and pilot program submission.
The distributed transaction pilot program is imminent; you must understand the following points.
1. What is the pilot program for market-oriented transactions of distributed generation?
The so-called market-oriented transaction of distributed generation refers to a trading method in which distributed electricity, such as photovoltaic and wind power, is consumed nearby. Compared with centralized power supply, distributed generation has advantages such as flexible power supply and nearby consumption, which can maximize savings in transmission and distribution costs.
Distributed generation makes use of clean energy resources nearby, with energy production and consumption completed nearby. It has advantages such as high energy utilization and low pollution emissions, representing a new direction and form of energy development. Currently, distributed generation has made significant progress, but it is still constrained by factors such as low marketization, lagging public services, and an imperfect management system.
2. What types of distributed generation projects can participate in the market-oriented transaction pilot program?
The characteristics of distributed generation are that it is connected to the distribution network and the power generation is consumed nearby within the connected distribution network. At the same time, it needs to meet requirements in terms of energy efficiency, environmental protection, and safety. In principle, distributed generation projects that meet the specified conditions, grid connection voltage level, and nearby consumption can conduct transactions. There are requirements in terms of grid connection voltage level and single project capacity. However, according to the "Supplementary Notice on Conducting Pilot Programs for Market-Oriented Transactions of Distributed Generation" issued by the Office of the National Development and Reform Commission and the Comprehensive Department of the National Energy Administration, if a project voluntarily relinquishes subsidies, it is not subject to size restrictions.
Therefore, according to the regulations, there are three situations for projects participating in market-oriented transactions of distributed generation:
(1) Grid connection voltage level is 35 kV or below, and the single unit capacity does not exceed 20 MW or does not exceed 20 MW after deducting the maximum load of its own electricity consumption for the year;
(2) Grid connection voltage level does not exceed 110 kV and is consumed nearby within the 110 kV level, with a single project capacity exceeding 20 MW but not exceeding 50 MW.
(3) Single project capacity is higher than 50 MW, voluntarily relinquishes subsidies, and is fully consumed nearby.
3. How should distributed generation projects conduct electricity transactions?
Specifically, distributed generation projects can be divided into three parties: one is the project holder (unit or individual), who is the supplier; one is the grid enterprise, responsible for power distribution, who is the transmission party; and one is the nearby electricity user, who is the buyer. Simply put, the supplier sells the project's electricity to nearby electricity users through the grid enterprise, and the grid enterprise collects a certain "grid fee" in this process. Because the supplier and the buyer are often close to each other, the supplier is equivalent to selling the electricity from their generation project to their neighbor. This trading model is also called "selling electricity over the wall".
According to regulations, market-oriented transactions of distributed generation can adopt one or more of the following methods:
(1) Distributed generation projects conduct direct electricity transactions with electricity users and pay a "grid fee" to the grid enterprise. The trading range is primarily implemented nearby and, in principle, should be limited to the supply range of the transformer one level above the connection point.
(2) Distributed generation units entrust the grid enterprise to sell electricity on their behalf. The grid enterprise will deduct the "grid fee" (including grid loss electricity) from the comprehensive electricity sales Price and transfer the remaining electricity sales revenue to the distributed generation project unit.
(3) The grid enterprise purchases electricity at the benchmark on-grid electricity Price determined by the state for various types of power generation, but the state's per-kWh subsidy to the grid enterprise must deduct the transmission and distribution Price corresponding to the users at the highest voltage level in the distribution grid area.
In summary, these three modes mainly change according to the needs of the supplier. In mode one, the supplier needs to find the buyer by themselves, negotiate the Price and contract, etc., and then transmit the electricity to the user through the grid enterprise; in mode two, the supplier does not need to find users themselves and can entrust the grid enterprise to sell electricity on their behalf; mode three is to directly sell the electricity to the grid enterprise.
4. How is the electricity Price calculated for market-oriented transactions of distributed generation?
According to regulations, renewable energy power generation projects included in the pilot program for market-oriented transactions of distributed generation are automatically included in the renewable energy development fund subsidy after completion and are given a per-kWh subsidy based on total power generation. For photovoltaic power generation, the per-kWh subsidy standard is moderately reduced based on the local per-kWh subsidy standard for distributed photovoltaic power generation; the per-kWh subsidy standard for wind power is determined by subtracting the local benchmark on-grid electricity Price for wind power from the benchmark coal-fired electricity Price (including desulfurization, denitrification, and dust removal electricity Price) and is moderately reduced. For single projects with capacity not exceeding 20 MW, the reduction ratio of per-kWh subsidy demand shall not be less than 10%; for single projects with capacity exceeding 20 MW but not exceeding 50 MW, the reduction ratio of per-kWh subsidy demand shall not be less than 20%.
In other words, renewable energy power generation projects included in the pilot program for market-oriented transactions of distributed generation enjoy renewable energy subsidies, but the subsidy standards will be moderately reduced. For projects with capacity not exceeding 20 MW, the reduction ratio of per-kWh subsidy is not less than 10%, and for projects with capacity exceeding 20 MW but not exceeding 50 MW, the reduction ratio of per-kWh subsidy is not less than 20%.
Taking household photovoltaic projects not exceeding 20 MW as an example, the industrial and commercial electricity Price in most areas of the country during peak daytime hours is around 1 yuan/kWh. Combined with the coal-fired electricity Price of around 0.5 yuan/kWh, the "selling electricity over the wall" Price of household photovoltaic power generation will be approximately between 0.5 yuan/kWh and 1 yuan/kWh. Adding the reduced subsidy (0.3 yuan/kWh) and deducting the grid fee (0.15 yuan/kWh), the household photovoltaic electricity sales revenue under this model will be between 0.65 yuan/kWh and 1.15 yuan/kWh.
5. What are the pilot areas?
According to relevant policies, pilot areas for distributed transactions will prioritize county-level regions and economic development zones, industrial parks, and new urbanization areas with favorable development conditions such as distributed renewable energy resources and sites, high local electricity demand, good grid access conditions, enabling on-site grid access and consumption of distributed power generation, and achieving a large total scale. Areas with red alerts for wind and photovoltaic power investment monitoring and early warning (or areas with a curtailment rate exceeding 5%) will not be included in this pilot program.
In other words, only areas with good resources, high demand, good grid conditions, and no wind or solar power curtailment issues are likely to become pilot areas for distributed transactions.
According to the latest policy, pilot areas need to meet the following conditions:
(1) The local power grid has certain consumption conditions to meet the project access needs.
(2) The selected projects can refer to the requirements of the "Notice of the National Development and Reform Commission and the National Energy Administration on Carrying Out the Marketization Transaction Pilot Program for Distributed Generation" (NDRC Energy [2017] 1901) and sign direct transaction agreements according to relevant regulations to ensure that the on-site consumption ratio is no less than 75%.
(3) Projects with full on-site consumption, if they voluntarily give up subsidies, are not subject to scale restrictions.
Currently, the National Energy Administration is requesting that provincial Price authorities, together with energy authorities, select 1-2 regions to apply for the pilot program.
6、When will the transaction pilot program begin?
According to the "Notice on Carrying Out the Marketization Transaction Pilot Program for Distributed Generation", before December 31, 2017, the relevant pilot areas should complete the preparation of the pilot plan and the construction of the trading platform. After the National Development and Reform Commission and the National Energy Administration review the pilot plan, they will send their opinions to the relevant provincial energy authorities.
Before January 31, 2018, pilot areas will complete the construction of the trading platform, the formulation of trading rules, and other related work, and start trading from February 1, 2018.
Before June 30, 2018, a summary assessment of the pilot program will be conducted, and the relevant mechanism system will be improved. The scope and time of promotion will be determined based on the situation. Regions with successful pilots can apply to the National Development and Reform Commission and the National Energy Administration to expand the pilot program or implement it across the provincial region ahead of schedule.
In other words, before December 31, 2017, various regional units need to submit pilot program plans, complete all preparations before January 31, 2018, and start trading on February 1. After five months of the transaction pilot program, relevant departments such as the National Development and Reform Commission and the National Energy Administration will conduct a summary assessment of the pilot program and determine the scope and time of promotion based on the situation.
However, when this policy was released, only two months remained in 2017. It is obviously demanding to complete the selection of pilot areas and the preparation of pilot plans in such a short time.
Therefore, according to the latest supplementary notice, the deadline for units to submit pilot plans has been extended from December 31, 2017, to March 31, 2018. No timeline has been set for completing the construction of the trading platform and the formulation of trading rules. The original requirement to complete all preparations before January 31 has been changed to: each region can determine the start time of the pilot program based on the actual situation. The original deadline for pilot areas to start trading was February 1, and this deadline has now been changed to: the latest start date should be before July 1, 2018.
In summary, the deadline for units to submit pilot plans is March 31, 2018; the start time of trading in each region will be determined based on the actual situation before July 1, 2018. Although no specific deadline is given in the policy for the summary assessment of the pilot program, it is expected to be postponed to the end of 2018.
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