China is launching a long-anticipated policy in which renewable electricity producers can deliver the resource directly to users, bypassing the public power grid. This approach, named green electricity direct connection, is expected to help export-oriented businesses meet increasing international clean energy requirements.
Under the new national policy, renewable energy power plants can build private lines to supply electricity directly to a single user, such as a factory. This setup allows companies to easily trace the source of their power and prove it is renewable. The policy also allows private companies – excluding grid operators – to invest in and build projects directly connected to the power plants.
Projects must use at least 60% of their total green power output on-site and meet at least 30% of their total electricity needs via the direct supply. Over time, these self-use ratios should increase, the policy stipulates.
Speaking to financial media outlet Yicai, industry experts say the policy will be especially useful for businesses exporting to European Union countries. It helps them avoid emissions-related trade barriers in the EU market, gives them more control over their power use, and could reduce transmission losses.
Some companies are questioning whether the benefits outweigh the costs. They expressed concern at having to pay standard grid charges such as transmission fees and government surcharges despite largely using their own green electricity, Yicai reported. However, most projects will still have to rely on the public grid when the renewable energy supply is unstable, and must therefore share the cost burden of doing so, experts told the outlet.
The exclusion of grid operators prevents confusion about who manages the system and eliminates the possibility of the line being connected to the public grid, Zheng Ying, director of the dual carbon business unit of Beijing Electric Chain Technology, told Yicai.
While the policy provides a clear legal framework, questions remain, creating uncertainty for companies planning future investments. The definition of “local consumption”, a core element of the policy, is still to be decided, as is the fate of direct green energy suppliers if a user project is shut down. These details will be in the hands of provincial governments, according to Yicai.
Read Dialogue Earth’s recent Q&A about how China’s green electricity certificates work.