Data Bank
Pricing and affordability of renewable energy in China e A case study of Shandong Province
Xue-liang Yuan a ,*,Jian Zuo b
a School of Energy and Power Engineering,Shandong University,17923Jingshi Road,Jinan 250061,Shandong,China b
School of Natural and Built Environments,University of South Australia,Adelaide 5001,Australia
a r t i c l e i n f o
Article history:
Received 6August 2010
Accepted 14September 2010Available online 13October 2010Keywords:
Renewable energy Pricing
Affordability China
a b s t r a c t
The global warming and climate change have put enormous pressure on both governments and industries to re-think their attitudes and behaviours towards sustainability issues.The past decades have witnessed a number of renewable energy developments across the world.Even though these develop-ments are not issue-free,it is generally recognized that the bene ?ts outweigh disadvantages.However,there is an increasing level of concern on the high initial cost associated with the renewable energies,which was claimed as one of critical barriers to the promotion of its further developments.A case study approach is adopted in this study to investigate the pricing and affordability issues associated with the renewable energy in China.The policy framework and related statistics are critically reviewed in order to discuss these issues from different stakeholders ’perspective in Shandong province,China.It is concluded that the affordability remains a critical issue despite numerous efforts have been made by the Chinese Government and Shandong Provincial Government on renewable power pricing.This study offers a useful reference to pricing and affordability of renewable energy.
ó2010Elsevier Ltd.All rights reserved.
1.Introduction
Climate change is a current phenomenon.According to the Intergovernmental Panel on Climate Change (IPCC),CO 2emission from human activities,such as fossil fuel burning and deforestation is one of biggest contributor to the climate change [1].Globally CO 2emissions from fossil fuels increased 41%between 1990and 2008[2].According to the International Energy Agency,the energy use will drop in 2009as a result of global economics downturn however is projected to gain strong growth due to the govern-ments ’efforts to recover from recession [3].
REN 21’s study found that more than 100countries have set up promotion policies related to renewable energy by early 2010,which nearly doubled up than 5years ago [4].As a result,the renewable energy market has achieved massive growth in recent years.In 2008,renewables account for 19%of global energy consumption where the annual increase rate of the global capacity of renewable energy varies from 10to 60percent in last ?ve years [4].The world ’s wind power capacity grew by 31%in 2009,bringing the total installation capacity up to 157.9GW.A third of these additions were made in China,which experienced yet another year
of over 100%growth [5].Grid-connected solar photovoltaic (PV)continued to be the fastest growing power generation technology,with a 70%increase in 2008.The installed capacity surged to 13GW,a six fold increase since 2004.Similarly,the installed capacity of solar hot water reached 145GWth in 2008[6].
There are a number of social,economic and environmental bene ?ts associated with the development and utilization of renewable energies such as much lower environmental impact than conventional sources.For example,wind energy has been making a signi ?cant contribution to saving CO 2emissions.The installed capacity of wind power globally will produce 340TWh of clean electricity and save 204million tons of CO 2every year [5].
However,the high initial cost associated with the renewable energy development is one of the most signi ?cant barriers to the further development of the sector [7e 9].The renewable energy cost is affected by the expenditure on production,R&D and demonstration [10].It is also subject to the maturity of technologies and government policies [11,12].The high development cost often leads to high sales price of electricity which affects the end users ’decision to go for conventional power such as coal-?red.The purpose of this research is to investigate the pricing and afford-ability issues associated with renewable energy in China.Objectives are:1)to identify major stakeholders related to pricing of elec-tricity generated from renewable sources;2)to review the current
*Corresponding author.Tel.:t8653188399372;fax:t8653188395877.E-mail address:xueliang_yuan@https://www.doczj.com/doc/2915467722.html, (X.-l.
Yuan).Contents lists available at ScienceDirect
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Renewable Energy 36(2011)1111e 1117
legal environment of electricity pricing;3)to investigate afford-ability issues from different stakeholders ’perspectives.
2.Energy demands and renewable energy in China
The past decades have witnessed the rapid growth of the Chinese economy.As a result,the income per capita has achieved dramatic increase,particularly in urban areas (See Fig.1).
The rapid economic growth creates a massive demand for electricity.As shown in Fig.2,the electricity consumption per capita increased 9.7%on average per year,reaching 301.2kWh in 2008.The investment on electricity related activities reached 755.8billion RMB in 2009,which increased 20%than 2008[13].As shown in Fig.3,the investment on coal power is decreasing since 2005whereas the average increase rate on investment of wind power and nuclear power are 143%and 83%respectively.
The energy consumption in China is still heavily coal oriented.In 2008,electricity consumption from coal-?red power plants accounts for 68.67%of total energy consumption.New and renewable energy reources has gained substantial growth in past 30years,from 3.4%to 8.89%.According to the of ?cial statistics,coal production and consumption has increased ten-fold in China since early 1960s [14].As a result,fossil fuel CO 2emissions increased 79.2%since 2000.Recorded 1.66billion metric tons of carbon emission in 2006,China has surpassed the United States as the world ’s largest emitter of CO 2[15].In order to reduce the CO 2emission,the Chinese Government has taken a series of measures to reduce the energy intensity by 20%by 2010compared to year 2005level [16].Prior to the opening of UN Climate Conference (COP 15)in Copenhagen,the Chinese Government announced that the intensity of carbon dioxide emissions per unit of GDP in 2020is going to be cut by 40e 45percent compared to the level of year 2005[17].Meanwhile,the Chinese Government has set a goal to source 15%of primary energy consumption from non-fossil fuels by
2020.Renewable energy is playing a critical role for energy ef ?-ciency and emission reduction which is largely promoted by the Chinese Government.
China is the second largest consumer of fossil fuels in the world,however is emerging as a renewable energy promoter.At the present the renewable energy accounts for as low as 3%of total energy consumption,however with an annual increase rate of 25%.Annual sales of solar collector in China trebled between 1999and 2006.China was the world ’s largest wind market in 2009,nearly doubling its generation capacity from 12.1GW in 2008e 25.1GW at the end of 2009[5].The energy consumption structure of China is graphically showed in Fig.4.
In China,the projected wind and solar power capacity is 300GW and 18GW by 2020,respectively.The total collector area of solar water heaters will increase to 300million square meters at the same period [18].
3.Research methodology
A qualitative approach is adopted in this study to explore the pricing and affordability issues associated with electricity gener-ated from renewable energies in China.Of ?cial statistics and policy documents are reviewed which is followed by a case study.3.1.Of ?cial statistics review
The of ?cial statistical data was obtained from the China Statis-tical Yearbooks (CSYB 1996e 2009),the China Energy Statistical Yearbooks (CESYB 1996e 2009)and the Shandong Provincial Statistical Yearbooks (SPSYB 1996e
2009).
Fig.1.The income per capita in China 2000e
2008.
Fig.2.The electricity consumption per capita in China 2000e
2008.Fig.3.The increase rate of different energy
sources.
Fig.4.Energy mix of China.
X.-l.Yuan,J.Zuo /Renewable Energy 36(2011)1111e 1117
1112
3.2.Policy documents review
The policy documents include various of?cial reports,policies and regulations released recently by major government authorities including the National Development and Reform Commission(NDRC), State Electricity Regulatory Commission(SERC),State Administration of Taxation(SAT),Ministry of Finance(MOF)and Financial Depart-ment of Shandong Province(FDSP),Shandong Provincial Government (SPG),Energy Conservation Of?ce of Shandong Province(ECOSP), and Construction Department of Shandong Province(CDSP).
3.3.Case study
A case study approach is adopted in order to investigate the renewable energy pricing and affordability issues in a speci?c region of China.Shandong province is selected due to the critical role it plays on the national economy,energy supply and consumption of China.
4.Relevant stakeholders
There are a number of stakeholders to the regulation of renewable energy market in China,particularly to the determina-tion of electricity price.Table1illustrated these stakeholders at two levels,i.e.national level and provincial level.
5.Electricity prices
As shown in the Fig.5,there are two levels of electricity prices in China:
On-grid tariff:the price of electricity the power group corpo-rations sell to the grid corporations.It consists of production cost,pro?ts and tax inclusive.
Retail price:the price the end users purchase electricity from the grid corporations.It re?ects the impacts of end users on the cost of electricity supply and transmission.
Both on-grid tariff and retail price of electricity are under rigid control and supervision of government authorities.The interaction between the on-grid tariff and retail price is allowed subject to the approval of the pricing authorities.Similarly,affordability of end users shall be considered in retail price determination,particularly for residential users.
6.Impacts of regulations and government policies on renewable power prices
The national and provincial government policies on pricing of electricity generated from renewable energy sources are reviewed in the following section.
6.1.National level
A number of laws such as Renewable Energy Law(amended in 2009),Circular Economy Promotion Law,Cleaner Production Promotion Law,Energy Conversion Law have been promulgated in last decade.These laws provide overarching guidance for the renewable energy developments and the determination of elec-tricity prices.The strategic renewable energy development plan set up the goal for development of each renewable energy source in a?ve-year period.In the government report Premier Wen Jiabao delivered during the Third Session of the11th National People’s Congress(NPC)in March2010,it is clearly stipulated that the Chinese government devotes to further promote the development of renewable energies and to improve the pricing and cost sharing mechanism[12].
6.1.1.Administration policy
6.1.1.1.Tentative procedures for the administration of on-grid tariff of electricity.Effective at1/5/2005,promulgated by NDRC.
On-grid tariff is determined by the price authorities(Article 5e7).The government encourages competition amongst power plants to negotiate a competitive price with the power grid corporations.This negotiation and competition is under rigid supervision of government authorities.As de?ned in Article23, renewable energy power plants do not need to participate in the market competition.The on-grid tariff and amount of electricity to be purchased by power grid corporations are determined by government authorities.
6.1.1.2.Tentative procedures for the administration of retail price of electricity.Effective at1/5/2005,promulgated by NDRC.
It is clearly stipulated that the retail electricity price is deter-mined and regulated by government authorities.The cost of elec-tricity production,company overhead and grid connection cost are taken into https://www.doczj.com/doc/2915467722.html,ernment funds are also made avail-able to lower the retail price.It is clearly stipulated that afford-ability to consumers should be considered thoroughly and the retail price should remain stable(Article20).For the residential elec-tricity consumption,the interaction between on-grid tariff and retail price is not applicable(Article27).The retail price is deter-mined by the price authorities of each provincial government.
6.1.1.3.Trail measure for administration of renewable energy power generation pricing and expense sharing.Effective at1/2006, promulgated by NDRC.
There are two forms of renewable energy power pricing,i.e. government approved price and government guided price(Article 5).The government guided price is the price determined via the competitive tendering.(Table2)
As de?ned in Article12,the excess between the on-grid tariff of renewable power and the local benchmark tariff of desulfurized coal power,and the grid connection cost shall be subsidized through the renewable energy surcharge levied on end users.
6.1.1.4.Relevant provisions for the administration of the electricity generation from renewable energy resources.Effective at1/2006, promulgated by NDRC.
It is clearly stipulated that the status of renewable energy resources and geographic regions will be taken into consideration during the determination of the on-grid tariff subject to the approval from the pricing authorities(Article7).The excess cost from renewable power distribution and transmission will be levied on the national electricity price.Grid corporations are urged to build and upgrade the infrastructures to ful?ll the guaranteed-purchase requirement stipulated by the Government.
6.1.1.5.Provisional regulation on renewable energy surcharge bal-ancing.Effective at1/2007,promulgated by NDRC.
The renewable energy surcharge is de?ned as the standard surcharging levied on the national electricity price in order to promote the renewable energy developments(Article2).The mechanisms of determination of the amount of surcharging and subsidizing are provided.The procedure for renewable energy surcharge is de?ned.
6.1.1.6.Circular on the improvements to the wind power feed-in pricing policy.Effective at8/2009,promulgated by NDRC.
According to the quality of wind resources and construction conditions,all onshore wind power plants are classi?ed into one of
X.-l.Yuan,J.Zuo/Renewable Energy36(2011)1111e11171113
four categories.The feed-in tariff of Class I,II,III and IV wind resource regions are 0.51RMB/kWh,0.54RMB/kWh,0.58RMB/kWh,and 0.61RMB/kWh respectively.
The Circular clari ?ed that:if it is lower than the on-grid tariff of coal-?red power,the feed-in tariff of wind power is covered by the provincial power grid corporation;the gap between the feed-in tariff of wind power and the on-grid tariff of coal-?red power will be subsidized by the National renewable energy surcharge revenue. 6.1.2.Subsidy policies
From time to time,NDRC,together with other authorities issued circulars on subsidy policies and trading schemes.For instance,the Lumingshan Guanting Wind Power Plant (Beijing)received a government subsidy worth of 19.2million RMB for the on-grid electricity amount of 71.42million kWh from January to June 2009[19].Guoneng Juye biomass power plant (Shandong)was subsi-dized 7.38million RMB for the amount of 37.54million kWh in the same period.
Table 1
Stakeholders to the electricity pricing in https://www.doczj.com/doc/2915467722.html,anization
Roles
Notes
National level
National Development and Reform Commission (NDRC)(1)In charge of the approval and veri ?cation of energy related construction projects
(2)Determine and adjust the electricity prices
National Energy Bureau (NEB)(1)Develop the strategic energy development plan
(2)Managing the development and utilization of renewable energies State-owned Assets Supervision and Administration Commission of the State Council (SASAC)
(1)Administrating the reform and restructure of power utilities (2)Administrative appointment and dismissal of power utilities
State Council authorizes SASAC to perform as investor on behalf of the
nation All major power group corporations and grid corporations are under the supervision of SASAC
Ministry of Finance (MOF)Provides ?scal subsidy to those quali ?ed renewable energy manufacturers and developments
State Electricity Regulatory Commission (SERC)
(1)Overall regulation of the national power sector (2)Supervise the power transmission and supply
(3)Review tariff levels of electricity generated from different sources (4)Propose tariffs and adjustments to government pricing authority (5)Participate in formulation of national development plan for the power sector
State Administration of Taxation (SAT)Formulate preferential taxation policies for the utilization and exploitation of renewable energies
Power Group Corporations
Development and operation of af ?liated power plants
Five major power group corporations in China:China Huaneng Group,China Datang Corporation,China Huadian Group,China Guodian Corporation,and China Power Investment Corporation
Power plants
Power production
Grid corporations
(1)Build and operate power grids (2)Power transmission (3)Power supply
Two major grid corporations in China:State Grid Corporation of China:
26provinces,Municipalities and Autonomous Regions
China Southern Power Grid:Guangdong,Guangxi,Yunnan,Guizhou and Hainan
Provincial level
Shandong Development and Reform Commission
(1)Propose the provincial energy development strategic plan (2)Monitor and analyse the energy development status
(3)Propose the provincial policies on energy conservation and renewable energy developments Shandong Economic and Information Technology Commission
(1)Power operation management
(2)Develop and implement the provincial plan for power demands and supply
(3)Participate in formulating provincial policies on major energy developments and electricity pricing
Energy Conversion Of ?ce of the Shandong Government (1)R&D and innovation on renewable energy
(2)Approval and veri ?cation of solar PV power Special Fund (3)Guide the industrial development of renewable energies National Taxation Bureau of Shandong Implement the preferential taxation policies for the
utilization and exploitation of renewable energies in Shandong Shandong Electric Power Corporation
Plan,construction and operation of power grid in Shandong
Shandong Electric Power Corporation is the wholly owned subsidiary of the State Grid Corporation of China
Shandong Price Bureau Determination of on-grid tariff and retail price
Shandong Finance Bureau
Subsidize those quali ?ed renewable energy manufacturers and developments in Shandong
Consumer
Local residents
Purchase electricity from the grid corporation with different prices
Industrial and commercial consumer Rural production consumer
X.-l.Yuan,J.Zuo /Renewable Energy 36(2011)1111e 1117
1114
At the national level,an economic subsidy of600RMB/kW will be paid for the?rst group of50turbines if the enterprises’stand-alone wind turbine capacity is of1500kW(inclusive)or more[20].
According to the“Solar Roofs Plan”,government will provide subsidies20RMB/Wp for each photovoltaic power generation system if the installed capacity is more than50kW[21].For grid-connected photovoltaic power generation systems,the government will subsidize50%of total project investment if the installed capacity is not less than300kWp and run-time is not less than20 years.For the independent photovoltaic power generation system in remote areas without electricity,the subsidy is70%of the total investment.All photovoltaic power generated electricity will be purchased by the grid corporations with the price equals to the local desulfurized coal-electricity price[22].
6.1.3.Taxation policies
It is clearly stipulated in the Renewable Energy Law that tax incentives shall be made available to those renewable energy developments that are listed in the Renewable Energy Industry Development Guideline Catalogue(Article26).This is re-stated in the Renewable Energy Medium to Long-term development plan that preferential tax policies are applied to the utilization and exploitation of renewable energy resources such as hydropower, biomass power,wind power,solar PV power,geothermal power and ocean power.Corporate tax incentives shall be given to the R&D and manufacturing of renewable energy equipment.For instance, a value-added tax halved policy for wind power has been imple-mented since1/1/2001[23].
6.2.Provincial level
Shandong Province is a coastal province located in eastern China with a total land area of157,100km2and a current population of 94.172million.The gross domestic product(GDP)of Shandong Province was3107.21billion RMB in2008,accounting for10.33%of total GDP of China,ranking the second in the nation[24].The total primary energy consumption was322.25million tce in2008.Coal is the dominant fuel in Shandong which occupies78.1%in the total energy consumption.The renewable energy provides less than1% of Shandong’s energy consumption[24].There is an increasing level of con?icts between energy consumption and energy supply as more much energy demand is created as a result of the rapid economic developments.Promoting renewable energy develop-ments,especially wind energy and solar energy,is currently the most important measure to deal with energy issues in Shandong.
According to the strategic plan,the installed capacity of new energies will reach10million kW by2015,which accounts for10% of the total installed capacity across the Shandong Province[25].
The total wind energy reserve in Shandong is about67million kW,3.68times of the installed capacity of the three gorges.The?rst wind power generator of China was built in Rongcheng,Shandong in1985.There are106grid-connected wind power generators with the total installed capacity92.2thousand kW in Shandong[26].In Shandong,the projected total installed capacity of wind power is1 million kW and4million kW in2010and2020,respectively.
Shandong has rich solar energy resources.Annual sunshine hours are2200e3000and the total annual solar radiation is 120e140?104kcal/cm2.In2008,the production of solar hot water heater surpass10million m2and the cumulative installed collector area of solar water heaters reach20million m2in Shandong[27].
According to the strategic development plan,Shandong will install solar water heaters13.2million m2,solar lighting50thou-sand kW and solar greenhouses300thousand m2before2012for solar energy utilization[28,29](Construction Department of Shandong Province,2008;Shandong Provincial Government, 2009a).In2012,the solar hot water heater coverage will rise to40% in cities and10%in rural areas.
All laws,regulations and policies promulgated by the national authorities apply to renewable energy developments in Shandong province.In addition,the Shandong Provincial Government has promulgated the following policies to further promote the renewable energy developments,particularly from the electricity price perspective.
6.2.1.(1)Circular on subsidies on the renewable power prices
Effective at3/2009,promulgated by Shandong Price Bureau.
Subsidies on the on-grid price of wind power and biomass power are stipulated in the Circular:1)wind power:0.09RMB/ kWht0.61RMB/kWh(as the benchmark on-grid tariff);2) biomass power:0.25RMB/kWhtbenchmark tariff of desulfurized coal power.
6.2.2.(2)Circular on promoting the development of renewable energy sector
Effective at12/2009,promulgated by Shandong Provincial
Government.
Fig.5.Electricity pricing in China.
Table2
The pricing mechanism of renewable power.
Renewable energies On-grid tariff determination Notes
Wind power(1)Before1/8/2009:government guided price
(2)Since1/8/2009:government approved price Government guided price was approved by the pricing authority of State Council
Four government approved prices,0.51,0.54,0.58and0.61 RMB per kWh,for different wind source regions
Biomass power Government approved price The benchmark tariff is determined by the pricing authority
?benchmark price of desulfurized coal power price of each
provincetsubsidy
Subsidy:0.25RMB per kWh within15years since the operation
Solar PV power,ocean power,geothermal power Government approved price Approved by the pricing authority of State Council
?reasonable production costtreasonable pro?t X.-l.Yuan,J.Zuo/Renewable Energy36(2011)1111e11171115
It is stipulated that the on-grid tariff for wind power and biomass power(2010e2012)will be0.7RMB/kWh.The installed capacity of renewable energies will reach4million kw by year 2012,accounting for5%of total installed capacity province wide. The New Energy Development Special Fund is set up to support the production,R&D,innovation and popularization of renewable energies by means of subsidies and awards.A total of1.2billion RMB will be made available in next three years.
6.2.3.(3)Circular on promoting the utilization of solar PV systems
Effective at10/2009,promulgated by Shandong Provincial Government.
The Provincial Government Energy Conversation Special Fund is set up to support the R&D of solar PV technologies and populari-zation of related products.Subsidies are provided to solar PV
manufacturers.
6.2.4.(4)Provisional administrative measures on subsidizing the solar heating systems
Amended in August2009,promulgated by Shandong Depart-ment of Finance.
Subsidies are available to hotels and schools to install solar heating systems.30%of the total investment of solar heating system will be subsidized.The maximum amount of subsidy for each development is1.5million RMB.
6.2.5.(5)Provisional administrative measures on the utilization of energy and water conservation special fund
Effective at8/2009,promulgated by Shandong Department of Finance.
It is stipulated that the renewable energy developments qualify for the energy and water conservation special fund.
6.2.6.(6)Opinions on further promoting the development of biogas power in rural areas
Effective at10/2006,promulgated by Shandong Provincial Government.
Special Fund is made available to support the biogas power developments in rural areas.
In order to accelerate the development of renewable energy,the Shandong provincial government have set up a package of economic incentives.In addition to the preferential policies stipu-lated by the state,there are extra subsidy policies in Shandong-Province.The provincial government will fund a special foundation with1.2billion RMB to support the development of renewable energy by interest payments on loans,subsidies,incentives and tax rebate[25].For wind power electricity,the subsidy price is 0.7RMB/kWh,which is higher than the national level[27].The local government will subsidize50%of project investment for newly built solar collector system in all three-star(or above)hotels and schools.The maximum subsidy for each project is1.5million RMB[30].The price of grid-connected wind power electricity is 0.61RMB in Shandong[31].
7.Affordability of renewable power
As shown in Fig.6,there are interactions between the income per capita,retail price and on-grid tariff of electricity generated from renewable sources in China:
Government authorities are in charge of determining the retail price.Income per capita is taken into consideration when determining the retail price to ensure the affordability from the consumers’perspective.This is particularly the case for resi-dential users.
Government authorities aim to minimize the gap between the on-grid tariff and retail price to ensure the affordability from the grid corporations’and power group corporations’perspective,e.g.to cover the reasonable cost and to allow for reasonable pro?ts for future developments.The on-grid tariff varies from power plant to power plant.For instance,on-grid tariff of four solar PV power plants in Ningxia are determined as1.15RMB/kWh(tax inclusive)[32].The gap between this tariff and benchmarking on-grid tariff of coal-?red power plants will be subsidized.The on-grid tariff of Zhongdian Huanyu Biomass Power Plant is determined as0.594RMB/kWh plus0.01RMB/kWh for grid connection fee[33].The Govern-ment recognizes the extra cost incurred during connecting the renewable power to the existing power grid.This cost will be shared by national electricity users.
Government does consider the affordability issue from its own perspective.Both the national government and Shandong Provincial government has set up special fund from its?scal revenue to subsidize the renewable energy developments.
However,the limitation of this approach is recognized so that the renewable energy surcharge has been approved by the State Council to be levied on end users of electricity nation-wide.The small amount of surcharge per kWh is accumulated to a signi?cant fund,playing a critical role to improve the affordability of renewable power.
Government does take the bene?ts of power utilities and grid corporations into account during the determination of elec-tricity prices.For instance,electricity prices were adjusted twice in2008in order to relieve the pressure of power groups and grid corporations due to the escalation of coal and desul-furization cost and to promote the renewable energy devel-opment.The on-grid tariff was increased0.0414RMB/kWh on average and the retail price was increased0.0261RMB/kWh on average[34].The price gap between coal and electricity is in?uential to the affordability from the power group’s perspective.
Currently,the on-grid tariff of coal power,wind power,biomass power,solar PV power and the retail price in Shandong province are 0.3974RMB/kWh,0.61RMB/kWh,0.594RMB/kWh,1.15RMB/kWh and0.5469RMB/kWh respectively.The average retail price for residential users is0.54RMB/kWh in2009[13].
At the national level,the average on-grid tariff is0.36RMB/kWh (wind power:0.542RMB/kWh,nuclear power:0.449RMB/kWh, coal power:0.354RMB/kWh,hydropower:0.266RMB/kWh,solar PV and biomass power:0.764RMB/kWh)and the average retail price for residential users is0.469RMB/kWh in2008[34].In 2009,the average on-grid tariff and retail price are0.367RMB/kWh and0.497RMB/kWh respectively,increasing5.84%and5.97%than that of2008[13].
Renewable energy
subsidies
Fig.6.Interactions between the income per capita,retail price and on-grid tariff of electricity in China.
X.-l.Yuan,J.Zuo/Renewable Energy36(2011)1111e1117 1116
The standard renewable energy surcharge was set as0.001RMB/ kWh in July2008and0.004RMB/kWh in November2009[13].The national average of the government foundation and renewable surcharge is0.029RMB/kWh,5.56%of the retail price[34].For Shandong province,this?gure is0.021RMB/kWh.
Two measures are selected in this paper to measure the affordability of renewable power from different stakeholders’perspective.
A?(On-grid price e retail price)/on-grid price.
B?(Retail price*electricity consumption per capita per year)/ annual income per capita.
As shown in Table3,the electricity cost accounts for as low as1% and3.1%of annual income per capita in Shandong province.It appears the renewable power is affordable in Shandong.However, the indicator A shows that there is signi?cant gap between on-grid tariff and retail prices of renewable power.In particular,retail price of solar PV power is less than half of on-grid tariff.The affordability from the perspectives of power groups,grids corporations and governments are in doubt.
8.Conclusion
There are a number of advantages associated with renewable energies,such as less pollution and less greenhouse gas emission. However,the high initial cost associated with renewable energy developments is one of critical barriers for the further development of the sector.This study adopted a case study approach to investi-gate the pricing and affordability issues associated with renewable power in Shandong province,which is one of largest producers and consumers in China.This study shows that the pricing mechanism plays a critical role for improving the affordability of renewable power.Both the national government and the Shandong provincial government have made a lot of efforts to regulate the renewable energy market and to improve the affordability of renewable power.It is concluded that renewable power is affordable from residential users’perspective as the Government provides suf?-cient subsidy and rigid regulation.However,it is in doubt whether or not it is affordable from other stakeholders’perspective such as the governments,power groups and grid corporations.A more scienti?c pricing mechanism is required and technological inno-vation should be encouraged to make the renewable power more affordable.
Acknowledgements
This research is?nancially supported by Independent Innova-tion Foundation of Shandong University and Humanities and Social Sciences Project,Ministry of Education.
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