Let new energy follow the power grid, adding some worries to new energy companies

China Energy Storage Network: Following the internal issuance of the "Notice on Further Strict Control of Grid Investment" (State Grid Office [2019] No. 826) by the State Grid Corporation of China, the China Southern Power Grid Corporation also officially issued the "Measures for Optimizing Investment and Cost Control (2019 Edition)" recently. The two major power grid companies have clearly released the signal of "strictly controlling investment".

Different from the specific suspension of grid-side energy storage, pumped storage and other projects, what impact will the strict control of investment by the two major power grids have on renewable energy fields represented by wind power and photovoltaics?

(Source: WeChat public account "China Energy News" ID: cnenergy Author: Yao Jinnan)

▍When will the new energy grid connection project be repurchased?

"It has been delayed for so many years, and the power grid did not repurchase on time even when there was a clear time requirement. Now, the power grid itself has to control investment, which means that they are restricted from spending money on themselves, let alone paying money to settle old debts and buy lines built by others? Anyway, the deadline for repurchase has passed for a year, and 'too many lice don't itch, and too much debt doesn't worry.'" Under the trend of "strict investment control" by the power grid, relevant persons in charge of some new energy companies "don't even have any hope" for the repurchase of grid-connected lines.

According to the "Notice on Reducing the Burden on Enterprises in the Renewable Energy Sector" issued by the National Energy Administration in April 2018, power grid companies must complete the repurchase of related grid connection and other power transmission and distribution projects constructed by renewable energy power generation project units before the end of 2018 in accordance with the agreement or the investment amount confirmed by third-party evaluation.

The repurchase deadline required by the state has already passed for nearly a year, but the repurchase of new energy grid connection projects has not only failed to be completed as scheduled, but the progress has been slow. Some power grid companies have not even formulated a basic repurchase plan.

"Around 2013, the power grid company proposed to repurchase the power, but there was no follow-up and there is no movement now." Wu Yijun, director of the production and technology department of CEC Suqian Biomass Power Generation Co., Ltd., told reporters that the company had built a grid-connected line with a total length of about 3.3 kilometers in 2006, with a total investment of about 7.1 million yuan. Although the deadline of "end of 2018" has passed, the power grid company has not yet repurchased the line.

Chen, a person in charge of a regional regulatory agency sent by the National Energy Administration, said that similar situations are not isolated cases, and the current grid connection repurchase work in his province is still progressing very slowly. However, Chen also pointed out that whether the grid connection line can eventually enter the cost range of the transmission and distribution price may be the key to whether the power grid will actively repurchase. "The more assets there are, the higher the transmission and distribution price may be. If these assets can be included in the cost range of the transmission and distribution price of the provincial power grid, then the power grid should still try to repurchase them."

▍Can the subsidy advance payment continue?

In addition to the repurchase of grid connection projects, the industry is even more worried about whether the grid's advance payment of subsidies for renewable energy electricity will be affected.

According to the "Notice on Changes in the Electricity Fee Settlement Method for Non-Natural Person Distributed Photovoltaic Projects" issued by the State Grid Corporation in September this year, natural person distributed projects are no longer managed according to the catalog system, and projects can enjoy subsidies based on the amount of electricity after they are connected to the grid. Non-natural person distributed projects are still managed according to the catalog system, and the review principle is projects that were put into operation and connected to the grid before the end of February 2015. For this reason, according to the requirements of the State Grid Corporation, the advance payment of 0.42 yuan/kWh of renewable energy subsidy funds for non-natural person distributed projects that were put into operation and connected to the grid after March 2015 will be suspended, and only the benchmark electricity price portion will be settled. Non-natural person projects that were put into operation before the end of February 2015 will not be affected.

In other words, currently, the electricity subsidies for household photovoltaic power generation projects have always been paid by the power grid companies. However, according to the reporter's understanding, some provinces and regions have already defaulted on subsidies for household photovoltaic projects connected to the grid after May 31, 2018. For some household projects connected to the grid at the beginning of this year, the owners have not received a subsidy of 0.18 yuan per kWh so far.

"Before October 2015, subsidies for all types of distributed photovoltaic projects were advanced by the grid companies as long as they were within the jurisdiction of the State Grid. As the scale of distributed power expanded, in October 2015, the State Grid Corporation issued a notice clarifying that it would only advance payments for distributed photovoltaic projects of the "self-generation for own use, surplus power to the grid" type, and would not advance payments for fully grid-connected projects. Later, it only advanced payments for household use, and now even household use cannot be fully advanced." Wang Shujuan, deputy general manager of Beijing Xianjian Energy Consulting Co., Ltd., pointed out that the scope of advance payments of subsidies for distributed photovoltaic projects by grid companies has been gradually reduced. With the introduction of strict investment control orders, when local grid companies suffer losses, grid companies may find it difficult to have the financial resources to advance payments of hundreds of millions of distributed photovoltaic subsidies each year.

▍“Let new energy follow the power grid”

According to the State Grid Corporation's "Notice on Further Strict Control of Grid Investment", it is strictly forbidden to expand the investment interface and exceed the standard construction without authorization, it is strictly forbidden to arrange investment beyond the approved investment scale and scope, it is strictly forbidden to excessively pursue "icing on the cake" projects with high reliability, inefficient and ineffective investment must be eliminated, and it is not allowed to arrange the leasing of transmission and transformation assets outside the investment plan.

Which projects are "helping when the time is right"? And how do we define "icing on the cake"?

According to insiders, the State Grid Corporation of China has stated in private that it will change the relationship between the power grid and the development of new energy. "In the past, the power grid followed the pace of new energy. Wherever a new energy project was built, it had to be connected to the grid and have transmission lines built. But in the future, this mindset must be changed and new energy must follow the pace of the power grid."