Views | Wind power subsidies are quietly changing in 2020

Polaris Wind Power Network News: On February 5, 2020, the Ministry of Finance issued the "Notice on Issuing the Management Measures for the Additional Funds for Renewable Energy Electricity Prices" (Caijian [2020] No. 5), which stipulated the issuance of renewable energy subsidies. The subsidies for wind power projects in 2020 have quietly changed:

1. The total amount of subsidies is determined by revenue

Before March 30 each year, the power grid enterprise or relevant provincial departments shall apply for subsidy funds, and the new project subsidy funds must comply with the principle of determining expenditure based on income. (Article 9)

This article is the most critical article of the "Regulations on the Management of Additional Funds for Renewable Energy Electricity Prices" (hereinafter referred to as the "Measures"). The principle of determining the total annual subsidy funds must be based on revenue and will definitely not cause trouble to the country and users.

Since the current total subsidy is not enough to repay existing historical subsidies, the addition of new projects will become stricter in the subsidy catalog. Article 6 (3) stipulates that the prerequisite for inclusion in the total subsidy amount for that year is that the time for all units to be connected to the grid meets the requirements. Thinking about the idea of connecting to the grid to grab subsidies for some capacity may be difficult to implement.

2. The power grid determines whether the project can receive subsidies

According to the Measures, the total amount of new renewable energy subsidy funds each year is determined by the Ministry of Finance, and the scale ratio of various projects is determined by the Development and Reform Commission and the Energy Bureau, but whether it can be entered into the subsidy catalog will be determined by the power grid company. (Article 4, Paragraph 1, Article 6)

For existing projects, although they still need to be implemented in accordance with the requirements of the national energy authorities, whether they can be included in the subsidy project list must be reviewed and determined by the power grid company. (Article 4, Paragraph 2, Article 6)

Whether it is new projects or existing projects, whether they can get subsidies must be passed by the power grid. Compared with the "Interim Measures for the Management of Renewable Energy Electricity Price Additional Subsidy Funds" issued in 2012 (hereinafter referred to as the "Interim Measures"), the subsidies are approved and determined by the Ministry of Finance, the National Development and Reform Commission and the Energy Bureau. One represents the national credit and the other represents the credit of state-owned enterprises, and the credit rating has been reduced.

In addition, since the game parties for subsidies have changed from the original three parties of ministries, power grids, and power generation companies to the two parties of power grids and power generation companies, it is convenient for the intensification and resolution of contradictions. After all, the power grid company directly manages the grid connection work of power generation companies and has stronger negotiation capabilities.

3. Priority for subsidy payment

3.1 New projects

According to Article 10, the subsidy funds will be fully redeemed for new projects included in the national scale management in that year.

This is the most satisfying sentence in this Measures. However, since the amount must be sufficient, the expenditure must be determined based on revenue, and there is also the incurred subsidies in stock, the inclusion in national scale management will inevitably be a bottleneck for new projects.

Therefore, the premise for inclusion in the total subsidy required by Article 6 (III) is that the time for all units to be connected to the grid meets the requirements, which will become more important. Especially under the dual influence of the rush to install and the epidemic, whether this premise can be met requires power generation companies to judge the risks in advance.

3.2 Stock projects

For existing projects included in the subsidy catalog, the power grid enterprise determines the order of subsidy funds allocated for the projects in the catalog and discloses them to the public in accordance with the project type, grid connection time, technical level and principles determined by relevant departments. Subsidy funds can be redeemed first in participating in green certificate transactions and voluntary conversion to parity projects.

This is very clear. If you want a 20-year book subsidy, you still need a few years of cash subsidy, or self-reliance to sell a green certificate, and the choice is in the hands of the power generation company.

As for the issue of comprehensive verification of the use of subsidy funds mentioned in Article 12, it should be said that photovoltaic projects that apply for subsidies based on capacity have nothing to do with wind power.

4. How much money can you get?

According to Article 8, the amount of subsidy is calculated based on the subsidy price/(1+VAT rate), and the subsidy amount for a single project is determined based on the number of hours of reasonable utilization.

The first half of the sentence is that the subsidy amount is only paid without tax. It is simply to save the project's process of paying value-added tax. However, in fact, according to the "Notice on the Value-added Tax Policy on Comprehensive Utilization of Resources and Other Products" (Financial and Taxation [2008] No. 156), the wind power price income is subject to a policy of 50% withdrawal, so 50% of the value-added tax in the subsidy amount can be left.

Calculated at 13% VAT, the actual income of the subsidy received in accordance with the Measures was reduced by 6.1% compared with the actual income of the subsidy received in accordance with the Measures.

The meaning of the second half is that whether you can get the actual subsidy income mentioned above is 6.1% lower than the original one depends on the so-called reasonable utilization hours. Whether this number of hours is possible to refer to the original guaranteed number of hours in the Three Norths is unknown, but at least it is a direction.

Summarize

After talking for a long time, I just said "no money". The national ministries and commissions have shown their greatest sincerity. Next, it depends on the power generation companies themselves. In the current epidemic situation, subsidies for difficult production and quota pressure continues, and the development ideas of wind power will change.

Off topic

Article 7 of the Interim Measures stipulates that "the project investment and operation and maintenance costs incurred for the connection of renewable energy power generation projects into the power grid system shall be given appropriate subsidies based on the power on-grid power. The subsidy standard is: 1 cent per kilowatt-hour within 50 kilometers, 2 cent per kilowatt-hour within 50-100 kilometers, and 3 cent per kilowatt-hour for 100 kilometers and above."

The "Measures" released this time were removed quietly. Although it was not strictly implemented in some areas before, removing them means that they are completely gone.

This is better. If the disadvantages are, if the power grid company does not allow power generation companies to build their own access systems at all, or is slightly strict when the access system is approved/accepted, it will become another choke problem for wind power project companies, which requires careful consideration.