National Development and Reform Commission: Reduce the planned electricity of existing coal-fired power generation enterprises year by year

According to the website of the National Development and Reform Commission, the “Notice of the National Development and Reform Commission and the National Energy Administration on the Orderly Release of Power Consumption Plans” was recently issued, requiring the planned electricity of existing coal-fired power generation enterprises to be reduced year by year, and the planned power generation ratio after 2018 will be reduced year by year in line with the progress of power consumption liberalization.

The specific matters related to the orderly release of power consumption plans are as follows:

1. Accelerate the organization of power generation enterprises and power purchase entities to sign power generation and purchase agreements (contracts). All localities should accelerate the promotion of power system reform and gradually expand the scale of market-based trading electricity. From the date of issuance of the document, power generation enterprises, especially coal-fired power generation enterprises, should be organized as soon as possible to sign a three-party power generation and purchase agreement (contract) with power sales enterprises, users and power grid enterprises. The signed power generation and purchase agreement (contract) shall be summarized and confirmed by the power trading agency in accordance with relevant regulations, and the power dispatching agency shall conduct safety verification. As long as the coal-fired power generation enterprise does not exceed the local provincial annual coal-fired unit power generation hours** upper limit, it shall be guaranteed by the power grid enterprise. The maximum annual upper limit of coal-fired generating hours in various regions shall be calculated comprehensively by considering the consumption of renewable energy, grid security, fair competition and healthy development of the industry, and shall be determined by the dispatching agency in consultation with relevant provincial government departments, and reported to the National Development and Reform Commission and the National Energy Administration for filing.
2. Reduce the planned electricity of existing coal-fired power generation enterprises year by year. In 2017, on the basis of giving priority to supporting the electricity that has been traded in the market, the planned electricity of other coal-fired power units shall not exceed 80% of the planned hours of thermal power in the previous year. For energy-saving and environmentally friendly units and enterprises that have signed power purchase and purchase agreements (contracts) on their own and exceeded the planned utilization hours of thermal power in the previous year by 50%, the proportion may be appropriately increased, but not more than 85%. After 2018, the proportion of planned power generation will be reduced year by year in line with the progress of power consumption liberalization. In areas where the planned utilization hours of the previous year are not suitable as the base number, the relevant departments of the provincial government may appropriately adjust and determine the base number in accordance with the relevant spirit of the power system reform. The planned electricity of renewable energy peak-shaving units shall be arranged in accordance with the relevant requirements of the “Trial Measures for Priority Power Generation of Renewable Energy Peak-shaving Units” (Development and Reform Operation [2016] No. 1558). Except for the priority power generation plan, all other electricity is realized through market-based transactions. If the electricity bill settlement profit or loss is generated due to the asynchronous release of power generation and consumption plans, it will be included in the local transmission and distribution price balance account and can be used for policy cross-subsidy, ancillary service fees, etc.
3. Newly approved power generation units actively participate in market transactions. In principle, coal-fired power units approved after the promulgation and implementation of Document No. 9 of the Central Development and Reform Commission [2015] will no longer be arranged for power generation plans, and government pricing will no longer be implemented. After commissioning, they will all be included in market-based transactions and prices will be formed by the market. However, the contracted transaction volume should not exceed the local annual coal-fired unit power generation hours** limit. In addition to arranging **priority power generation plans according to relevant policies, newly approved hydropower, nuclear power and other units should actively participate in power market transactions and let the market form prices.
4. Standardize and improve the price adjustment mechanism for market-based transaction volume. Power generation enterprises sign market-based power generation and purchase agreements (contracts) with power sales enterprises, users and power grid enterprises, encourage the signing of medium- and long-term contracts, and stipulate price adjustment mechanisms in the contracts. The agreement (contract) term of coal-fired power generation enterprises should be linked to the medium- and long-term coal-fired power contracts, and the sales price should establish an adjustment mechanism linked to the coal-fired power price, and the adjustment cycle should fully consider the adjustment cycle of the medium- and long-term coal-fired power contracts; regions with centralized bidding are encouraged to establish a price adjustment mechanism, and the specific adjustment method shall be specified by both parties in the agreement (contract). Market-based electricity other than coal-fired power should also establish a price adjustment mechanism, and encourage the establishment of an adjustment mechanism linked to centralized bidding.
5. Orderly liberalization of inter-provincial and inter-regional power transmission and reception plans. Inter-provincial and inter-regional power transmission and reception will gradually transition to a combination of priority power generation plans and orderly direct transactions, and classified promotion of power transmission and reception plan reforms based on power source planning, power source categories and approved commissioning time.

The existing large-scale hydropower, nuclear power, wind power, solar power and other clean energy power generation within the national plan, as well as local government agreements on grid-to-grid transmission and reception of clean energy, will be given priority protection through priority power generation plans. The power generation plan of priority power generation shall not be lower than the actual level of the previous year or the average level of many years. The price shall be determined by the power transmission and receiving market entities on a voluntary and equal basis and on the premise of implementing the national energy strategy, in accordance with the principle of “sharing risks and sharing benefits” or through market-based transactions. It is encouraged to implement it through the signing of medium- and long-term contracts; the power generation outside the priority power generation plan shall participate in the market-based bidding in the receiving area.

For existing coal-fired power units within the national plan, it is encouraged to sign medium- and long-term agreements (contracts). For power transmission (distribution) by point-to-grid or similar point-to-grid dedicated line transmission, it shall be regarded as a power generation unit in the receiving area, participate in the balance of power and electricity, and promote marketization simultaneously according to the liberalization of power generation and consumption plans of coal-fired power units in the receiving area. For coal-fired power units that have historically formed a unified power distribution, the proportion of power generation plan liberalization is half of the proportion of liberalization in the receiving area.

For clean energy generating units that are included in the national plan and approved after the promulgation and implementation of Document No. 9 of the Central Development [2015], the proportion of the price formed by market-based means should be gradually expanded in the process of implementing the priority power generation plan.

For coal-fired generating units that are included in the national plan and approved after the promulgation and implementation of Document No. 9 of the Central Development [2015], the existing power volume or power distribution ratio will no longer be retained, and the proportion of power generation plan liberalization will be half of the proportion of power receiving areas.

VI. Carefully formulate priority power generation plans. All regions shall formulate priority power generation plans in accordance with the spirit of Document No. 9 of the Central Development [2015] and supporting documents to implement the national energy strategy and ensure the power generation needs of guaranteed power sources such as clean energy and peak-shaving units. The electricity of wind power, solar power, nuclear power and other units within the province (region, city) that are consumed within the guaranteed purchase hours, the priority power generation of hydropower that takes into account resources and other conditions, historical averages and comprehensive utilization requirements, the power generation of cogeneration units during the heating period, and the peak and frequency regulation power shall be determined as priority power generation plans by the relevant departments of the provincial government in accordance with the requirements of the “Implementation Opinions on Orderly Release of Power Generation and Consumption Plans” and the relevant methods formulated by the state, and shall be guaranteed and implemented by power grid companies. The priority power generation plan can be implemented by government pricing or by market-oriented means, and the proportion shall be determined based on factors such as power supply characteristics and supply and demand situations. For areas where there are indeed difficulties in implementing the policy of guaranteed purchase of renewable energy, after consultation with the National Development and Reform Commission and the National Energy Administration, reasonable solutions shall be studied and formulated to ensure that the guaranteed hours of renewable energy power generation increase year by year until the guaranteed purchase annual utilization hours standard formulated by the state are reached. Priority power generation plans for inter-provincial and inter-regional power transmission and reception shall be consumed first in the receiving areas.

VII. Allow conditional market transfer of priority power generation plan indicators. For priority power generation plans that form prices in a market-based manner, if the contract cannot be signed, the quota can be transferred to other priority power generation units in a market-based manner. The market-based transfer of priority power generation plan quotas can be carried out locally or across provinces and regions. If the quota cannot be transferred, the power grid company will purchase it based on the average power purchase price of the same type of units in the region, and the resulting settlement surplus will be included in the local transmission and distribution price balance account. Renewable energy sources such as wind power and solar power generation that are outside the plan or do not comply with the national procedures are not allowed to be connected to the grid according to regulations. Whether renewable energy sources such as wind power and solar power generation comply with the plan and the national procedures shall be verified by the local energy authorities in conjunction with the dispatched agencies of the Energy Bureau. Units that are determined to be illegal during the verification shall also be included in the credit supervision blacklist of the power industry.

VIII. Guide other power purchase entities to participate in market transactions on the basis of ensuring normal power consumption for users without bargaining power. All localities should clarify the scope of priority power purchases in accordance with the spirit of Document No. 9 of the Central Development and Reform Commission [2015] and supporting documents, formulate priority power purchase plans, and ensure the power needs of users without bargaining power. The priority power purchase plan implements government pricing and is guaranteed by the power grid company. All regions should speed up the liberalization of power purchasers other than users without bargaining power to participate in market transactions, and guide the power generation side to match the scale of liberalization with the demand side. In principle, power purchasers participating in direct transactions should participate in market transactions with the power volume of electricity. For the power volume of market-based transactions, the relevant government departments will no longer issue power consumption plans. Regions with conditions can expand the scope of power users, without being restricted by voltage levels. Actively cultivate power sales market entities, and power sales companies can be regarded as large users and power generation companies to conduct direct power transactions. If small and medium-sized users cannot participate in direct power transactions, they can be represented by power sales companies. In principle, new large industrial users should ensure power supply by signing direct power transaction agreements (contracts), and encourage other new users to participate in direct power transactions and sign medium- and long-term agreements (contracts). It is necessary to strengthen the cultivation of power users’ awareness of participating in the market, vigorously develop the power service industry, help users understand the power consumption curve, and improve market awareness. Strive to achieve the initial real-time correspondence between the power generation and power consumption curves of both parties in direct power transactions within two years.

IX. Power users participating in market transactions will no longer implement the catalog electricity price. All power users participating in power market transactions will no longer implement the corresponding catalogue electricity prices. In addition to the electricity corresponding to priority purchase of electricity and priority power generation, the prices of other on-grid electricity of power generation enterprises are mainly determined by users, power sales entities and power generation enterprises through independent negotiation, market bidding and other methods. When the power market system is relatively sound, the sales electricity prices other than on-grid electricity prices and public welfare electricity will be liberalized. For users who have participated in market transactions and withdraw, the power grid enterprises shall bear the responsibility of guaranteed power supply before purchasing electricity through power sales companies or participating in market transactions again. The guaranteed price for transactions between power grid enterprises and power users is based on the transmission and distribution price paid by power users, and is implemented at 1.2-2 times the residential electricity price approved by the government. The specific level of the guaranteed price shall be determined by the price authorities of each province (autonomous region, municipality) in accordance with the above principles determined by the state.

10. Take practical measures to implement the priority power generation and priority purchase of electricity system. Starting from 2017, all localities shall, in accordance with the requirements, calculate the scope of priority power generation and priority power purchase in their regions at the end of the previous year in combination with the actual power production and consumption, and report to the National Development and Reform Commission the priority power generation and priority power purchase plan suggestions for their regions in the current year; State Grid Corporation of China and China Southern Power Grid Corporation shall, in accordance with the requirements, report to the National Development and Reform Commission the priority power generation plan suggestions for the next year for inter-provincial and inter-regional power transmission and reception. Based on the reported situation, the National Development and Reform Commission shall consult with relevant departments, local governments and power companies to determine the annual priority power generation and priority power purchase plans for various regions and inter-provincial and inter-regional power transmission and reception, include them in the annual development plans for basic industries, emerging industries and some key areas, and make appropriate adjustments based on actual supply and demand. The National Development and Reform Commission and the National Energy Administration will continue to improve the management measures for priority power generation and priority power purchase together with relevant departments.