REGULATION | Staff Reporter, China

China sets new renewable portfolio standard

This should set minimum levels for renewables consumption in provinces.

China's National Energy Administration issued its final policy paper on the renewable portfolio standard (RPS), which will become effective in 2020 for five years.

According to Moody’s Investors Service, the new RPS should set minimum levels for the consumption of renewable energy for individual provinces. "The RPS should increase consumption of renewable energy and reduce curtailment rates, thus strengthening the operating environment for renewable energy companies," said Ivy Poon, a Moody's vice president and senior analyst.

Curtailment rates for wind and solar power dropped to 7% and 3% in 2018 on supportive government policies, and should fall further as consistency increases across provinces in their dispatch of renewable energy.

"The new policy will also incentivise companies to voluntarily purchase renewable energy through market-driven sales and green certificates, and should help increase investment returns for renewable energy companies through increased utilization," adds Poon.

At the same time, the new policy creates challenges for coal-fired power producers, as intensifying competition from renewable energy companies could result in declining utilization and lower average tariffs, Moody’s added.

China aims to increase the share of non-fossil fuels to 20% of primary energy consumption by 2030. The share was 14.3% in 2018, approaching the country's medium-term target of 15% set in its 13th five-year plan for 2016-2020.

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