Trial Measures for the Administration of the Pricing of, and the Sharing of Costs in Connection with, the Generation of Electricity Using Renewable Energy Resources

(Issued by the National Development and Reform Commission on January 4 2006 and effective as of January 1 2006.)

Fa Gai Jia Ge [2006] No.7

PART ONE: GENERAL PROVISIONS

Article 1: These Measures have been formulated pursuant to the PRC Renewable Energy Law and the Pricing Law in order to promote the development of the industry for the generation of electricity using renewable energy resources.

Article 2: These Measures shall apply to the generation of electricity using wind power, biomass (including the generation of electricity through the direct burning or the gasification of agricultural and forestry waste, the generation of electricity through the burning of garbage or the use of landfill gas and the generation of electricity using methane), solar energy, ocean energy and geothermal energy. The pricing of hydroelectricity shall be handled in accordance with current provisions for the time being.

Article 3: Projects that use renewable energy resources to generate electricity in the People's Republic of China whose construction is examined/checked and approved by the competent government departments in or after 2006 shall be subject to these Measures. Those that have been examined/checked and approved for construction from the competent government departments before December 31 2005 shall be subject to relevant current provisions.

Article 4: The rates for the pricing of, and the sharing of costs in connection with, electricity generated using renewable energy resources shall be formulated based on the principles of promoting development, improving efficiency, standardizing administration and fair burden.

Article 5: Tariffs for electricity generated using renewable energy resources shall be subject either to government fixed prices or government guiding prices. Government guiding prices shall be the prices in winning bids as determined from invitations of bids.

The portion of the tariff of electricity generated using renewable energy resources that is above the local benchmark on-grid tariff of desulfurized coal burning generator sets shall be apportioned over the quantity of electricity sold by grids at the provincial level and above nationwide.

PART TWO: DETERMINATION OF ELECTRICITY TARIFFS

Article 6: The on-grid tariffs of electricity generation projects using wind power shall be subject to government guiding prices, and the tariff rates shall be determined by the State Council's pricing department based on the price determined from invitations of bids.

Article 7: Where the on-grid tariffs of electricity generation projects using biomass are subject to government fixed prices, the State Council's pricing department shall set the benchmark tariff by region. The tariff rate shall be composed of the benchmark on-grid tariff of desulfurized coal burning generator sets in the provinces (autonomous regions and municipalities directly under the central government) in 2005 and a tariff subsidy. The subsidy rate shall be Rmb0.25 per kilowatt/hour. An electricity generation project shall be eligible for the tariff subsidy for a period of 15 years commencing from the date it comes into operation. Such subsidy shall be cancelled after the 15th year of operation. Commencing in 2010, the tariff subsidy for electricity generation projects newly approved (after examination/check) each year shall be 2% lower than that for electricity generation projects newly approved (after examination/check) the preceding year. Hybrid electricity generation projects in which conventional energy resources account for more than 20% of the calorific consumption in generating electricity shall be treated as projects using conventional energy resources to generate electricity, be subject to the local benchmark electricity tariffs for coal burning plants and will not be eligible for tariff subsidies.

Article 8: The on-grid tariff of a project using biomass to generate electricity for which an invitation for bids was used to determine the investor(s) subject to government guiding prices, i.e. pricing based on the winning bid, but may not be higher than the benchmark electricity tariff in the region where it is located.

Article 9: The on-grid tariffs of projects using solar energy, ocean energy and geothermal energy to generate electricity shall be subject to government fixed prices, and the tariff rates shall be determined by the State Council's pricing department based on the principle of reasonable costs and profit.

Article 10: The sales tariff to users of public stand alone electric power systems for renewable energy resources shall be subject to the classified electricity sales tariff of the local provincial level grid.

Article 11: Electricity users are encouraged to voluntarily purchase electricity generated using renewable energy resources, in which case the tariff shall be the tariff for the electricity generated using renewable energy resources plus the average transmission and distribution tariff of the grid.

PART THREE: CHARGE PAYMENT AND SHARING

Article 12: The portion of the on-grid tariff of a project using renewable energy resources to generate electricity that is above the local benchmark on-grid tariff of desulfurized coal burning generator sets, the portion of the operating and maintenance expenses of a public stand alone electric power system for renewable energy resources whose construction was invested in or subsidized by the state that is above the average sales tariff for the local provincial level grid, and the grid connection charge for projects using renewable energy resources to generate electricity and such other costs shall be resolved by charging electricity users a tariff surcharge.

Article 13: The renewable energy resource tariff surcharge shall be charged to electricity users within the service area of a grid enterprise at the provincial level or above, including a provincial grid company's wholesale targets, users with their own power plants and large users that purchase electricity directly from power plants. Electricity users of self-supply prefectural and county grids, Tibet, and those engaged in agricultural production shall be exempt from such surcharge for the time being.

Article 14: The renewable energy resource tariff surcharge shall be determined by the State Council's pricing department and charged based on the actual quantity of electricity consumed by an electricity user. A uniform rate shall be applied nationwide.

Article 15: The formula for the calculation of the renewable energy resource tariff surcharge is as follows: renewable energy resource tariff surcharge = total renewable energy resource tariff surcharge ¡Â total renewable energy resource surcharge on marked up electricity sold nationwide = [(tariff for electricity generated using renewable energy resources