208 G. CHEN
To foster the development of renewable energy resources, differentiated
on-grid electricity tariffs have been adopted to provide incentives for
renewable power producers including wind and solar.
Considering the comparable disadvantage of generating electricity
from renewable sources, China’s Renewable Energy Law (2005)
addressed the core issues of pricing and fee-sharing for on-grid renewable energy through a government-set or government-guided scheme
of feed-in tariffs. With the stipulation that “grid power price of renewable energy power generation projects shall be determined by the price
authorities of the State Council” (PRC Renewable Energy Law 2005,
Article 19), the feed-in tariff imperative requires that on top of benchmark on-grid electricity tariffs of coal-fired power plants, a fixed amount
that varies according to renewable energy types and geographic locations
be added to the selling prices from renewable electricity generators to the
grid companies.
As a financial incentive, the feed-in tariff allows the renewable generator to achieve a positive return on its investment, despite the higher
production cost compared with conventional fuels. When the policy
makers had found that compared to solar energy production, wind power
was more mature at the moment to be widely commercialized with
modest government subsidies needed, they decided to promote the wind
power vigorously as the main renewable source while deemed subsidization of solar generation as too costly and inefficient. In 2006 the cost of
electricity generated from solar power was some 3 yuan per kWh, while
that from a typical coal-fired power plant was only around 0.22 yuan per
kWh, and that from a wind power plant was averaged at about 0.6 yuan
per kWh (Li 2007).
Under China’s differentiated on-grid pricing system, which essentially maintains the cost-accounting approach, nuclear power plants are
rewarded with higher on-grid tariffs than coal-burning stations, most
of which follow the benchmark prices that are higher than hydropower
tariffs, while wind power prices are even higher than nuclear and solar
power prices the highest. In 2009, the on-grid thermal tariff averaged
about 0.35 yuan per kWh in China, higher than the hydro tariff averaged at 0.26 yuan/kWh but lower than nuclear price ranging between
0.39 and 0.49 yuan, and wind price from 0.51 to 0.61 yuan. There was
no unified on-grid tariff for solar PV until 2011, when the government
formally announced a feed-in tariff of 1 yuan/kWh for solar PV projects
to be completed after 2011 and another tariff of 1.15 yuan/kWh for
To foster the development of renewable energy resources, differentiated
on-grid electricity tariffs have been adopted to provide incentives for
renewable power producers including wind and solar.
Considering the comparable disadvantage of generating electricity
from renewable sources, China’s Renewable Energy Law (2005)
addressed the core issues of pricing and fee-sharing for on-grid renewable energy through a government-set or government-guided scheme
of feed-in tariffs. With the stipulation that “grid power price of renewable energy power generation projects shall be determined by the price
authorities of the State Council” (PRC Renewable Energy Law 2005,
Article 19), the feed-in tariff imperative requires that on top of benchmark on-grid electricity tariffs of coal-fired power plants, a fixed amount
that varies according to renewable energy types and geographic locations
be added to the selling prices from renewable electricity generators to the
grid companies.
As a financial incentive, the feed-in tariff allows the renewable generator to achieve a positive return on its investment, despite the higher
production cost compared with conventional fuels. When the policy
makers had found that compared to solar energy production, wind power
was more mature at the moment to be widely commercialized with
modest government subsidies needed, they decided to promote the wind
power vigorously as the main renewable source while deemed subsidization of solar generation as too costly and inefficient. In 2006 the cost of
electricity generated from solar power was some 3 yuan per kWh, while
that from a typical coal-fired power plant was only around 0.22 yuan per
kWh, and that from a wind power plant was averaged at about 0.6 yuan
per kWh (Li 2007).
Under China’s differentiated on-grid pricing system, which essentially maintains the cost-accounting approach, nuclear power plants are
rewarded with higher on-grid tariffs than coal-burning stations, most
of which follow the benchmark prices that are higher than hydropower
tariffs, while wind power prices are even higher than nuclear and solar
power prices the highest. In 2009, the on-grid thermal tariff averaged
about 0.35 yuan per kWh in China, higher than the hydro tariff averaged at 0.26 yuan/kWh but lower than nuclear price ranging between
0.39 and 0.49 yuan, and wind price from 0.51 to 0.61 yuan. There was
no unified on-grid tariff for solar PV until 2011, when the government
formally announced a feed-in tariff of 1 yuan/kWh for solar PV projects
to be completed after 2011 and another tariff of 1.15 yuan/kWh for