In recent months, the Chinese government has issued several high-profile policy statements directed toward the twin challenges of renewable energy curtailment and runaway investment in coal-fired capacity. These new policies appear to signal policymaker interest in dealing with these problems and might have some success in the near term. However, they rely on blunt mechanisms—guaranteed numbers of annual operating hours for wind and solar generators and limits on coal-fired power plant construction. As such, these policies do little to address underlying problems, particularly the need for increased flexibility and the need for reform of generator compensation.
Meanwhile, a less-discussed policy, issued by China’s National Energy Administration in June, may ultimately be more important for dealing with these challenges. This document, with the innocuous name Power Sector Planning Regulation (Chinese), sets out a broad framework for a transition of the Chinese power sector away from a model in which meeting rapid demand growth is the prime consideration—and toward a model based on careful consideration of complex trade-offs and multiple targets, including China’s goals for renewable energy, environmental quality, affordability, and reliability.
(Source: RAP)
