“Selling electricity through walls” breaks the deadlock?

Every change in the "wall-to-wall electricity sales" policy is like a "stone" thrown into a calm lake, which always causes "ripples" in the industry.

On December 9, the Jiangsu Energy Supervision Office issued the "Jiangsu Province Distributed Power Generation Market-based Trading Rules (Trial)", which not only made "wall-to-wall electricity sales" once again the focus of attention in the power market, but also marked the official birth of the country's first provincial-level distributed power generation market-based trading regulatory document.

In fact, this is the third time that "wall-to-wall electricity sales" has achieved a gratifying breakthrough since 2019.

As early as 2017, the National Energy Administration issued the "Notice on the Pilot Program of Distributed Power Generation Market-based Transactions", which clearly stated the "wall-to-wall electricity sales" policy. However, it encountered many obstacles during the formal promotion process, and the distributed market-based pilot transactions, which served as the vanguard, have been delayed.

Fortunately, a turning point finally came in 2019. In May this year, the first batch of grid-parity projects approved 26 distributed market-based trading park pilots, fully affirming the development potential of "wall-to-wall electricity sales".

In September, Jiangsu Province issued the "Jiangsu Province Distributed Power Generation Market-based Trading Rules" (draft for comments). Even though the document is not the final version, it is still "eagerly awaited."

The official release of the "Jiangsu Province Distributed Power Generation Market-based Trading Rules (Trial)", which was upgraded again on the basis of the draft for comments, is regarded by some industry insiders as a "turning point" and some even optimistically believe that the "wall-to-wall electricity sales" has finally ushered in a "breakthrough".

So, what is the "wall-to-wall electricity sales" that has been highly anticipated? Why has the distributed market-oriented pilot transaction been delayed? What is the difference between the document released this time and the draft for comments? Can it break down industry barriers?

“Selling electricity through the wall” is popular

The so-called "sell electricity across the wall" means that distributed energy projects are allowed to sell electricity directly to surrounding energy consumers through the distribution network, rather than having to sell it to the grid at a low price first, and then the users buy it back from the grid at a high price. This model can make energy consumers "production investment consumers", giving them the right to participate in sustainable development, and can also promote the strategic transformation of power grid companies to platform services, which is of great significance.

"Compared with self-generation and self-use projects, users of wall-to-wall electricity sales have flexible choices, which solves the pain point of unstable electricity consumption for users of self-generation and self-use projects; compared with full grid-connected projects, wall-to-wall electricity sales can obtain a relatively high transaction electricity price; and compared with conventional electricity trading, wall-to-wall electricity sales is a model that both buyers and sellers can benefit from, as the exemption from the highest voltage level transmission and distribution fees and the space brought by cross-subsidy reductions allow both buyers and sellers to benefit from it," a senior industry insider told Nengjian.

In order to promote the long-term development of "wall-to-wall electricity sales", relevant state departments have introduced a series of supporting policies since 2017.

In March 2017, the General Office of the National Energy Administration issued a letter of opinion on the Notice on the Pilot Program of Market-based Trading of Distributed Generation, proposing that distributed generation project units can trade electricity with nearby electricity users in the distribution network, and that power grid companies will be responsible for the public services of power transmission and organizing power trading of distributed generation, and charge transmission and distribution fees (grid access fees) according to the standards approved by the government.

At the end of October of the same year, the National Development and Reform Commission and the Energy Bureau jointly issued the "Notice on the Pilot Program of Market-based Transactions of Distributed Power Generation", proposing reform plans for the problems encountered by distributed power generation, such as low level of market-based transactions, lagging public services, and an imperfect management system.

Just over a month later, the General Office of the National Development and Reform Commission and the General Office of the National Energy Administration issued the "Supplementary Notice on the Pilot Program of Market-based Trading of Distributed Power Generation", further clarifying relevant matters regarding the pilot program of market-based trading of distributed power generation.

In April 2018, the National Development and Reform Commission and the National Energy Administration regarded distributed energy wall-to-wall electricity sales as an important breakthrough in implementing the energy revolution, promoting power reform, developing renewable energy and applying new energy technologies.

Kou Wei, the new chairman of the State Grid Corporation of China, also said at the staff representative meeting that the State Grid Corporation of China should be built into a hub-type, platform-type and shared enterprise. It is not only a hub between various power generation and users, but also a hub for various energy exchanges, allowing consumers to become producers.

At this point, the "wall-to-wall electricity sales" that has shouldered a heavy responsibility and has been recognized and supported by all parties seems to be just around the corner.

“Selling electricity through walls” is difficult to implement

However, ideals are beautiful, but reality is disappointing. Two years have passed since the pilot document for market-based trading of distributed generation was released in October 2017, but the pilot has not yet been implemented.

"Upon closer inspection, the difficulties lie mainly in two aspects: 1. Many of the documents required for applying for a pilot program for market-based trading of distributed power generation need to be issued by the power grid company. How can the power grid company issue supporting documents for a project that competes with it? Incomplete documents have become a constraint on the application of pilot projects; 2. The power grid company exerts influence on the price control department, making the transmission fee 'difficult to deliver'. Even in areas where the drafting and research of the transmission fee has been initiated, the power grid company has lobbied the price control department to set extremely high transmission fee standards to reduce the profitability of distributed power generation projects." A senior industry insider told Nengjian.

Fortunately, the "wall-to-wall electricity sales" that has been difficult to implement has seen a turning point in 2019.

In May this year, the first batch of grid-parity projects approved 26 distributed market-based trading parks as pilot projects, which finally brought a glimmer of hope to the stagnant "electricity sales behind the wall". At the same time, it also once again made the industry see the development potential of "electricity sales behind the wall".

Four months later, good news came again. In September this year, Jiangsu Province issued the "Jiangsu Province Distributed Power Generation Market Trading Rules" (draft for comments). According to the document: distributed projects with voltage levels below 35kV and scale ≤20MWp can trade with nearby power users that meet the requirements in the distribution network; the transaction electricity needs to pay: network access fees, government funds and surcharges.

This means that the power generation of distributed projects can be traded on a larger scale. Projects no longer have to be limited to one user, but have multiple options. This can effectively solve the two major problems of renewable energy, especially the stability of distributed photovoltaic owners and the difficulty in collecting electricity bills.

It is worth noting that although the draft for comments released by Jiangsu has made a major breakthrough, the document clearly states that only projects included in the pilot program are allowed to implement this trading rule, and its description of the network access fee is still unclear.

In addition, according to an insider, although the State Grid headquarters has clearly expressed support for the country's various power reform policies in many public meetings, the embarrassing "grid access fee" still makes some regional power grid companies not agree to completely open up the plan to sell electricity through the wall. The insider also revealed that Jiangsu Province, which was the first province to issue the provincial document, is also a major power market province in China, and many of its new power sales projects in some cities have not been approved.

Many uncertainties have made the "selling electricity across walls" that seemed within reach become "confusing" again.

The new policy of "selling electricity through walls" breaks the deadlock

Nearly four months after the draft for comments was released, the long-awaited "Jiangsu Province Distributed Power Generation Market-based Trading Rules (Trial)" was officially released.

In response to the view that the unclear definition of the "grid access fee", which is the most hotly debated issue in the industry, may become an obstacle to "selling electricity across walls", relevant changes have also been made in the official draft.