Archive for 6.2.10 Finances and Pricing

Study on Fiscal and Tax Incentive Policies for China’s Wind Power

China’s wind power resources mainly gather in the three northern areas (Northeast China, North China, and Northwest China). The state planned seven wind power bases of 10 million kw at the end of 2008, among which, six were located in remote backward areas of North China, without any superior industry. The development of wind power will become the main way for these areas to develop economy and expand employment. However, the VAT transition policies implemented as of 1 January 2009 allowed enterprises to deduct the input tax included in newly purchased machines and equipment, which reduced the local tax payments of wind farms remarkably. Meanwhile, since the development of wind power belongs to infrastructure project, the preferential enterprise income tax policy of three-year exemption and three-year half reduction accessible reduces the interests available for local government from the development of wind resource in the early stage. In order to benefit from the wind power development, some areas even require wind power development enterprises mandatorily to introduce wind turbine or spare parts manufacturers while developing wind farms locally. This practice has, on the one hand, aroused the local protectionism in wind turbine selection; on the other hand, formed the manufacturing of wind turbines bloomed almost everywhere, and caused the waste of investment and overcapacity. Therefore, in order to develop the wind resource better, research on wind power-related fiscal and tax policies is in urgent need. The constitution of reasonable and effective wind power-related fiscal and tax policies will offer policy guarantee to the massive development of wind power in the future.

6 Renewable Energy, 6.2.0 Wind, 6.2.10 Finances and Pricing

Making Carbon Offsets Work in the Developing World: Lessons from the Chinese Wind Controversy

The Clean Development Mechanism (CDM) is the leading international carbon market and a driving force for sustainable development globally. But the eruption of controversy over offsets from Chinese wind power has exposed cracks at the core of how carbon credits are verified in developing economies. It has become almost impossible to determine whether offsets from Chinese wind are “additional” and that they in fact represent “real” reductions beyond business as usual. Unless this problem can be resolved, it threatens to spread beyond wind in China and could threaten the ability of carbon markets to deliver the mitigation demanded by international climate policy. In 2009 the CDM Executive Board (EB) shocked the carbon market by forcing an unprecedented review of whether multiple Chinese wind projects satisfied UNFCCC additionality requirements. CDM investors reeled as the safest CDM bet became the riskiest; the Chinese government publicly criticized the UN’s oversight of carbon markets; and the CDM EB prepared itself for an unprecedented fight over how carbon offsets could be verified in the world’s largest CDM market. At the center of the controversy is the Chinese power tariff for wind. 

6 Renewable Energy, 6.2.0 Wind, 6.2.10 Finances and Pricing

Four Presentations from the RE Pricing Training

Wind Energy Association (CWEA) held a training on renewable electricity pricing on December 13th, 2010. The international renewable energy expert Mr. Ole Langniss and Associate Professor Ms. SHI Jingli of ERI were invited and contracted by the CWEA for preparing and delivering presentations on international and national experience in the area. The 4 presentations of this training listed below are now available on the Energy Foundation website: 1. Current Status of Renewable Power Pricing Policies in Europe_Ole  (bilingual), 2. Value of Renewable Power_Ole  (bilingual), 3. Adjustment of Tariffs_Ole (bilingual), 4. Chinese RE Pricing Policies_SHI Jingli_CN (Mandarin Only).

6 Renewable Energy, 6.2.0 Wind, 6.2.10 Finances and Pricing

A Study on the Pricing Policy of Wind Power in China

The report “A Study on the Pricing Policy of Wind Power in China” reviews the development of wind power and the pricing system in China. In particular, it looks at the existing wind concession projects and sums up the lessons learned. The report finds that the current tender system for wind pricing needs to be improved in order to build a fair environment for the wind industry competition. Special attention should be paid to restricting the phenomenon of unreasonably low and unreasonably high wind tariffs, to facilitate the long-term development of the Chinese wind industry. One of the leading authors of the report, Li Junfeng, Director of CREIA says “wind power is a new industry and it still needs support. The current pricing policy does not match the goal of supporting wind development, and it has to be changed.” The Chairman of GWEC, Arthouros Zervos also points out, “the price volatility and uncertainty caused by the current regulation harms foreign and domestic private manufacturers and developers, who are discouraged by a pricing pressure they cannot sustain.” The report looks at a number of international practices on wind power pricing policies and put forward 5 principles for the wind pricing policy in China: beneficial for long-term market development of wind power, promoting broader participation, facilitating localization of wind turbine manufacture, encouraging competitiveness of the wind power industry and beneficial for drawing in more investment. Based on these five principles, the report suggests to change the tender system into a feed-in-tariff system for wind power in China. The report also suggests that the prices should be adjusted in a timely fashion, but should always be higher than those for coal-fired power. Moreover, the report encourages self-regulation among wind power companies so that a fair competition environment could be built up. As a major form of alternative energy, wind power has great potential. Currently, coal-fired power accounts for 75% of the Chinese electricity mix and causes huge environmental problems. The massive uptake of renewable energies, such as wind energy, has become the world trend and is exactly what China has to do. Steve Sawyer, the Climate and Energy Policy Advisor of Greenpeace International says, “China is faced with a great opportunity for developing wind power, but the development relies heavily on an enabling pricing system. It is hoped that this report could provide the basis for discussions on the improvement of the pricing policy for wind power in China.”

6 Renewable Energy, 6.2.0 Wind, 6.2.10 Finances and Pricing