Hunton & Williams Renewable Energy Quarterly, September 2009

Renewable Energy Quarterly
Also of concern for developers is the document that memorializes
the agreement between the developer and the grid
operator with respect to the sale and purchase of power. As
of yet, model power purchase agreements` have not been
published.
Recent Solar Announcements, Proposed Amendments
to the RE Law and Market Outlook
Several key recent announcements have made investment
in solar projects more interesting and indicate that the
government is now turning its attention to solar after its initial
focus on wind power. First, in March 2009, the Ministry of
Finance (“MOF”) announced the government would provide
subsidies of RMB 20 per watt generated during peak hours
by solar projects attached to buildings with capacities of
greater than 50 kW. Then, in July 2009, the MOF announced
that government subsidies would be offered for 50 percent
of the investment in grid-connected solar power projects
and 70 percent of the investment in remote, off-grid solar
power projects. To qualify, the projects must have generating
capacities of more than 300 kW, be completed in one
year and be operative for at least 20 years. 10 Although the
MOF announcements are light on detail and some unanswered
questions remain in respect to the subsidies and
feed-in tariffs for solar PV projects, the September 2009
announcement that U.S. firm First Solar Inc. plans to build
a 2 GW solar power plant complex in Inner Mongolia is a
strong sign that developers are responding to the favorable
investment environment cultivated by the PRC. 11 An NDRC
10
Jim Bai and Leonara Walet. “China Offers Bid Solar Subsidy.”
Reuters. July 21, 2009.
11
“U.S. Firm Says it Will Build China’s Largest Solar Energy Plant.”
China Daily: September 14, 2009.
announcement which addresses outstanding solar PV concerns
is expected sometime before the end of 2009.
The NDRC has recognized the power transmission upgrade
bottleneck which is preventing many projects from being able
to connect to the grid. A draft amendment to the RE Law has
been submitted to the Standing Committee of the National
People’s Congress. The draft has not been disclosed to the
public, but reports indicate that the amendments will focus
on measures designed to directly or indirectly accelerate grid
development, such as (1) establishing a government fund to
support R&D of renewable energy and smart grid technology;
(2) requiring ministries to formulate concrete plans for
meeting China’s medium and long-term renewable energy
development targets; and (3) setting a nationwide annual
purchase quota for renewable energy. 12
Additional areas of concern for developers that could be
further addressed in guidance regulations include tax
incentives, tariff-setting methods for ocean and geothermal
energy, special loan arrangements, grid codes for certain
types of energy and resource assessment methodology.
As legislation continues to be passed, the picture will
become clearer for developers. The enactment of the Energy
Conservation Law on April 1, 2008, the endorsement of
a climate change resolution on August 27, 2009 and the
imminent passage of the new Energy Law, which is under
discussion and expected to be enacted in the near future,
and several other policy and legislative developments do and
will continue to underpin government commitment to renewable
energy development, and developers should certainly
take note.
12
Li Jing. “China Plans for Renewable Energy”. China Daily:
August 25, 2009.
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