The Foshan branch of FAW-Volkswagen, the joint venture between FAW Group and Volkswagen [VOW:GR], purchased 30,160 green electricity certificates from Hebei Huadian Kangbao Wind Power in a deal on January 18, which corresponded to 30.16m kilowatt-hours (kWh) of non-hydro renewable power in total, as reported by Sina on January 19. This represented the largest-ever single purchase in green electricity certificates in China since the trading scheme was first opened in 2017.

China has begun trialing the renewable energy certificate system from July 2017, aiming to push companies to voluntarily purchase green electricity certificates from eligible wind and solar power producers, in order to qualify for an environmental subsidy. The system was introduced mainly to develop a market-based mechanism for renewable power generation in the country, and to help reduce the existing subsidy gap in the renewable sector. According to Bloomberg, as of mid-2020, China’s renewable energy subsidy hit USD42bn, and the country may not be able to pay down the debt until 2041, unless a new subsidy system is established.

However, the green electricity certificate system has only obtained limited success in China. As of mid-January 2021, China’s green certificate trading platform has listed over 270m certificates for wind and solar electricity output, yet less than 42,000 certificates have been traded in the market, accounting for only around 0.15% of the total volume issued. Citing insider sources, the high price of green certificates was the main reason that discouraged buyers from making purchases. So far, each green certificate costs at least RMB200, far above the ideal price of around RMB50 each.

The Chinese government’s accelerating move towards subsidy-free renewable energy policy could arguably bolster the development of the green electricity certificate market. Subsidies for new offshore wind projects, for example, have been gradually phased out from 2020, and will be fully ended by the end of this year. The subsidy budget for solar power projects in China was also halved in 2020 to RMB1.5bn, down from RMB3bn in 2019. Based on the estimation from Integral Energy, China’s green certificate market size could reach up to RMB45.872bn by 2030. Nevertheless, more policy measures, such as a compulsory green certificate purchasing scheme, should still be introduced to ensure the further development of the renewable energy trading market, as market analysts pointed out.

Sources:

https://finance.sina.com.cn/esg/2021-01-19/doc-ikftpnnx9366443.shtml

https://www.there100.org/sites/re100/files/2020-10/Chinese%20GEC%20Paper_RE100_2020%20FINAL.pdf

https://www.bloomberg.com/news/articles/2020-06-18/china-raises-renewable-power-subsidies-7-5-to-13-billion

http://chuneng.bjx.com.cn/news/20210118/1130286.shtml

http://news.bjx.com.cn/html/20200106/1033889.shtml

https://www.integralnewenergy.com/?p=27702