In joint comments on the recently released “Second Consultation Draft” of a renewable energy quota policy in China, RAP joins the Energy Foundation China and Center for Resource Solutions to suggest areas for increased emphasis, clarification, and policy improvements. Our views on the proposal are preliminary—based on our current understanding of the proposal, our longstanding experience with renewable portfolio standards (RPS) and quota policies internationally, and our ongoing engagement in China on renewable energy policy design and power market reform.
We understand that the proposed renewable quota in China has a more complex set of objectives and constraints than RPS policies implemented elsewhere: namely, that the primary goal in the near term is to increase the consumption of renewable energy by reducing curtailment. And then, over time, the quota should begin to compensate for any “above-market” costs of renewable energy through market mechanisms that do not require the Chinese government to collect and disperse revenue as with the current renewable energy fund. The FiT and, more recently, auction mechanics are being used to support growth in renewable energy, so the quota policy need not serve that purpose alone. At the same time, it is clear that the quota will need to interact effectively with emerging power markets, and with existing and possible new means of supporting the financial viability of renewable energy in those markets. This remains a very complicated set of requirements, making the design and implementation of a quota in China especially challenging. As such, there is no “ideal” design for a quota in China, and any proposal will have advantages and disadvantages, and embed various tradeoffs. We applaud your efforts to work through these complexities so far.
Nonetheless, we encourage greater consideration of several core areas of the design:
- Yearly quota implementation and possible value of additional flexibility and longer-term targets;
- Green certificate price transparency, and the possible value of centrally administered auctions;
- Clarification on the allocation of green certificates associated with feed-in-tariffs (FiT) and auction mechanisms;
- Reducing the risk for purchasers from possible curtailment;
- Challenges associated with provincial implementation, and value of central government guidance on quota design and, over time, multi-provincial green certificate markets;
- Clarifications and rules associated with green certificates from distributed generation and inter-provincial trade of renewable energy;
- Potentially a single, national and lower-priced quota compensation standard to, in part, reduce unnecessary complexity; and
- Clarifications on the relationships between voluntary green power market and the quota.