Renewable electricity prices and cost-sharing management (pilot scheme)

Annex：

Renewable electricity prices and cost-sharing management (pilot scheme)

Chapter I General Provisions

Article 1 These Measures have been specially formulated in accordance with the Renewable Energy Law and Price Law of the People’s Republic of China for the purpose of promoting the development of the renewable energy power industry。

Article 2 This measure is applicable to：wind power, biomass power (including power generation from both the direct combustion and gasification of agricultural and forestry residues, municipal solid waste incineration, landfill gas, and biogas), solar power, marine power and geothermal power。For the moment, the pricing of hydropower shall be implemented according to existing provisions。

Article 3 Renewable energy power projects within the territory of the PRC approved by the responsible government department in or after 2006 will implement this measure；projects approved by the responsible government department before December 31, 2005, will implement the relevant existing regulations。

Article 4 The pricing and cost sharing standards for renewable electricity are formulated on the principles of promoting development, enhancing efficiency, standardizing management and sharing burdens fairly。

Article 5 The pricing of renewable energy power adopts two forms: government fixed pricing and government guided pricing。Government guided pricing is the pricing selected through a public request for tenders。

The price difference between renewable electricity and local desulfurized coal power should be shared nationwide across power sales at the provincial level and above。

Chapter II Establishment of Electric Power Prices

Article 6 The grid-connected power price of wind power projects will be determined by government guided pricing, the standard of which is set by the department responsible for pricing of the State Council, in accordance with the price selected through a public request for tenders。

Article 7 The feed-in tariff of biomass power projects will be determined by government fixed pricing, the benchmark power price being set by the department responsible for pricing of the State Council, separately for each region, and calculated as the 2005 desulfurized coal power price of the province, autonomous region, or directly administered municipality, plus the electricity subsidy。The standard for the renewable electricity subsidy is 0.25 RMB per kWh。The renewable electricity subsidy is enjoyed for the first 15 years of operation；after 15 years of operation, the renewable electricity subsidy will be canceled。Beginning in 2010, the renewable electricity subsidy for new power projects approved each year will be 2% less than those approved in the previous year。If conventional energy sources supply more than 20% of the power generated by a multi-fuel biomass power project, the project is not eligible for the renewable electricity subsidy。

Article 8 The feed-in tariff of biomass power projects when the investor has been selected through a public request for tenders will be determined by government guided pricing, that is, it will be based on the price decided through bidding, but should not exceed the local benchmark power price。

Article 9 The feed-in tariff for solar power, marine power and geothermal power projects will be determined by government fixed pricing, the standard of which is set by the department responsible for pricing of the State Council, according to the principle of reasonable production costs plus reasonable profit。

Article 10 The power price offered to users by off-grid public renewable energy power systems will be the local provincial power grid’s sale prices。

Article 11 To encourage electric power consumers to voluntarily purchase renewable energy power, its price will be set as the renewable energy power generation price plus the average transmission price of the power grid。

Chapter III Payment and Sharing of Expenses

Article 12 The difference between the feed-in tariff for renewable energy projects and of local desulfurized coal power, the difference between the operating and maintenance costs of off-grid public renewable energy power systems constructed with state investment or subsidies and the average sale price of the local provincial power grid, as well as the cost of connecting renewable electricity generation projects to the grid, will be met by levying an additional surcharge on end users。

Article 13 The surcharge for renewable electricity will be collected from end-users served by provincial or inter-provincial power grid companies (including wholesale customers of provincial power grid companies, users running their own power plants, and users buying power from power plants directly)。Temporarily not included are: cities and counties with their own power grids, power users in Tibet, and agricultural power users。

Article 14 The surcharge for renewable energy power will be decided by the responsible pricing department of the State Council, and will be collected based on a unified national standard according to the actual amount of power consumed by the user。

Article 15 The formula for calculating the renewable electricity surcharge：Aggregate renewable electricity surcharge / Nationwide sale of surcharged electricity. Aggregate renewable electricity surcharge = ∑[(renewable electricity price – local desulfurized coal power price of provincial power grid) × quantity of renewable electricity purchased by power grid + (cost of operating and maintaining off-grid public renewable electricity systems − average sale price of provincial power grid × quantity of power sold by off-grid public renewable electricity systems) + cost of connecting renewable electricity generation projects to the grid and other reasonable expenses]. Of which ：(1) Nationwide sale quantity of surcharged power = national sales volume of renewable electricity over the period of the plan at the provincial level and above – quantity of electricity used in agriculture – quantity of electricity sold in Tibet。(2) Quantity of renewable electricity purchased by power grid = Planned quantity of renewable electricity generated – Quantity of electricity used by the plant itself。(3) Cost of operating and maintaining off-grid public renewable electricity systems = Operating costs of off-grid public renewable electricity systems × (1 + VAT rate)。(4) Cost of connecting renewable electricity generation projects to the grid and other reasonable expenses refers to the investment in construction and the operation and maintenance costs incurred in connecting renewable electricity generation projects to the grid, and is based on formal design documents approved by the relevant government departments。Before the national government is certain of the cost of power transmission, these costs will temporarily be included in the renewable electricity surcharge。

Article 16 The aggregate renewable electricity surcharge that should be shared by each provincial power grid enterprise is determined by the proportion of the nationwide sale quantity of surcharged electricity sold by each provincial power grid enterprise。The formula for its calculation is as follows：Aggregate renewable electricity surcharge that should be shared by each provincial power grid enterprise = Nationwide aggregate renewable electricity surcharge × Quantity of surcharged electricity sold within the service area of the provincial power grid enterprise / Nationwide sale quantity of surcharged electricity

Article 17 The renewable electricity surcharge is to be included in the electricity sale price of power grid enterprises. It is collected by the enterprises, and its accounting will be kept independent; it is a special fund for a special usage。The relevant preferential tax policies should be implemented according to the regulations of the State Council。

Article 18 The renewable renewable electricity surcharge shall be adjusted by the department responsible for pricing of the State Council when appropriate, according to the actual situation of renewable energy development. The adjustment interval shall be no less than one year。

Article 19 The difference between the subsidized electricity price actually paid by provincial power grid enterprises and the incurred costs of connecting renewable electricity generation projects to the grid, and the aggregate renewable electricity surcharge that it should share, will undergo unified nationwide reallocation。The specific management measures are to be formulated by the state electric power regulation department, and shall be approved by the department responsible for pricing of the State Council。

Chapter IV Supplementary Provisions

Article 20 Renewable electricity enterprises and power grid enterprises must maintain and store full and accurate records of transmitted electricity quantity, price, and value for renewable electricity, and are subject to inspection and supervision by the department responsible for pricing, electric power regulation agency, and the audit department。

Article 21 Those who fail to implement the relevant regulations stated in these Measures and bring about losses to the interests of the enterprise and the state will come under review by the department of the State Council responsible for pricing, the electric power regulation agency, and the audit department, and the main person(s) responsible shall be identified。

Article 22 These Measures will come into effect as of January 1, 2006。

Article 23 Rights of interpretation belong to the National Development and Reform Commission。