Comments on the effectiveness of State Grid's support for incremental power distribution

On March 24, the State Grid Corporation of China released the "State Grid Corporation of China issued an opinion on further supporting and promoting the reform of incremental power distribution business", which was a big boost for the industry, and many people praised the State Grid Corporation of China for its responsibility and commitment. The release of this opinion will undoubtedly play a positive role in promoting the current incremental power distribution work. At the same time, we still cannot be overly optimistic about the effectiveness of this opinion.

The positive impact of this opinion

(1) Promoting a reasonable power distribution price mechanism

Whether the distribution price mechanism can generate reasonable returns is one of the most critical factors affecting social capital investment in incremental distribution projects. Obviously, the release of this opinion will have a positive effect on promoting a reasonable distribution price mechanism. Although the opinions "11. Cooperate with the government to determine the distribution price. In accordance with the incremental distribution network distribution price policy issued by the national price authorities, actively cooperate in the determination of distribution prices, provide the electricity, load and other data required for the price determination in a timely manner, and assist the provincial price authorities in scientifically determining the distribution price" and "12. Provide good electricity bill settlement services. Carefully implement the relevant policy regulations on distribution prices, and the distribution companies shall independently choose the classified settlement electricity price or the comprehensive settlement electricity price for electricity bill settlement. Assist the distribution companies to pay government funds and surcharges to the local financial departments to ensure the effective implementation of the distribution price policy" have provided guidance on the operation of distribution prices, but it is obviously not the most critical.

The most critical is Article 9: "9. Optimize the control model of holding projects. Further implement the requirements of "delegating power, deregulating and serving", establish a management system that is compatible with the requirements of reform and the direction of marketization, mainly based on target management and indicator assessment, supplemented by process control, reduce pre-approval links, and improve decision-making efficiency and response speed. The distribution company operates in accordance with the Company Law and the company's articles of association, operates independently and bears its own profits and losses in a market-oriented manner, and the company's investment units, as shareholders, enjoy the rights of investment income, participation in major decisions, and selection of managers in accordance with the law." The most critical sentence is to operate independently and bear their own profits and losses in a market-oriented manner. In order to ensure the reasonable returns of the company's investment projects, the State Grid Corporation's broad intellectual team will be fully utilized to study the rationality of the distribution price mechanism and the direction of improvement from within the State Grid.

(2) It is conducive to the planning of incremental distribution networks

Planning guidance is an important part of the development of incremental distribution network. In the past, the biggest difficulty in planning work was that it was difficult to obtain relevant information about the power grid. Article 2 of the opinion states, "2. Scientifically formulate power grid planning. Cooperate with local governments to do a good job in incremental distribution network planning, provide the status of local power systems, relevant substation intervals, line channels, open capacity and other planning information in a timely manner as required, and put forward scientific and reasonable planning suggestions to ensure the safety of large power grids and the coordinated development of incremental distribution networks and public power grids." It once again emphasized that timely provision of information such as the status of the power grid, relevant intervals and channels, and open capacity is important for solving the problem of basic data required for planning work.

(3) It is conducive to the access of incremental distribution network

The research work on the access system of the incremental distribution network needs more support from the power grid company than the distribution network planning, because it involves more issues consistent with the technical principles of the local power grid, especially the so-called secondary professional level of protection, automation, communication and other systems. At present, the biggest difficulty in the design and review of the access system of the incremental distribution network is precisely the difficulty in obtaining accurate information related to the power grid.

The opinion "5. Study and propose access opinions. Actively communicate and coordinate with local energy authorities and their entrusted third-party consulting agencies, and promptly provide relevant primary and secondary system data and information of the superior power grid. In accordance with the requirements of local governments and relevant national standards and industry standards, promptly study and propose opinions and suggestions on the access system of the incremental distribution network.", "6. Provide high-quality grid connection services. In accordance with the principles of "internal transfer but not external transfer" and "one port to the outside", the marketing department of the local company shall uniformly accept the grid connection business and organize the signing of grid connection contracts. Establish an efficient internal coordination mechanism, simplify business processes, speed up processing, and improve service efficiency. Strengthen the construction of the superior power grid, ensure that it is put into production simultaneously with the pilot project, and ensure that the incremental distribution network is connected to the grid and operated on time." are all opinions of the power grid company on the access guarantee of incremental distribution.

In addition to requiring the provision of data and information on the primary and secondary systems of the superior power grid, more importantly, it is clarified that the business department is responsible for "the marketing department of the local company shall uniformly accept the grid connection business". In the past, the development and planning department of the power grid company was often responsible for the connection work related to the access system. This time, the marketing department will be responsible for the connection, and the principle of "internal transfer but not external transfer" and "one port to the outside" is emphasized, which plays an important role in improving the efficiency of grid connection work and can greatly reduce the energy loss of pilot projects running between various departments within the power grid company. At the same time, the most important sentence is "strengthen the construction of the superior power grid, ensure that it is put into production simultaneously with the pilot project, and ensure that the incremental distribution network is connected to the grid on time". If this opinion can be implemented, then a big problem encountered by many projects in the past (no capacity, no interval, etc.) will no longer exist.

Problems that may still exist

(1) Local enterprises’ understanding and execution of the opinion. This opinion well reflects the State Grid Corporation’s support for the incremental distribution reform. Unfortunately, this document has not yet publicly stated whether it is an official internal document (document number?). This is actually very important. When a specific project requires the assistance of local enterprises of the State Grid Corporation, the effectiveness of the official document is obviously far greater than “according to news reports”. Many entities involved in incremental distribution should have a deep understanding of this. They are not afraid of not having policy document support, but they are afraid of the local government saying “I did not receive the document”.

(2) What to do with non-pilot projects. The opinion puts forward four major points, namely: "1. Cooperate with governments at all levels to apply for pilot projects", "2. Provide high-quality and efficient grid connection services for pilot projects", "3. Accelerate the implementation of pilot projects in which the company participates", and "4. Support the operation of pilot projects". However, incremental distribution projects are not limited to pilot projects. So can non-pilot projects receive the same support? Or is it necessary to apply for pilot projects in order to obtain support from the State Grid Corporation?

Forecast of the development trend of incremental power distribution

(1) Grid companies will become strong supporters and promoters of the incremental power distribution reform. In the article "Improving long-term mechanisms to reduce the uncertainty risks of incremental power distribution" (published in the 10th issue of "Electric Power Decision-making and Public Opinion Reference" in 2020), the author pointed out that "in the early stage of the reform, the focus of the problems exposed was mainly on the obstruction of relevant stakeholders, but with the further improvement of the understanding of all parties and the further strengthening of government supervision, this problem is gradually being resolved and will eventually disappear." At the same time, in the online open class on March 21, when analyzing the impact of State Grid's accelerated main grid (especially UHV) on incremental power distribution under the background of the COVID-19 epidemic, it was also pointed out that its actions precisely reflected the political awareness of State Grid Corporation.