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On 22 June 2021, Guangdong kicked off its first round of
renewable bilateral transactions. Specifically, 10,480 MWh was sold
from four renewable developers to seven retailers and power users
through the annual contracts at an average price of 18.78 yuan per
MWh higher than the local coal-fired power on-grid tariff of 453
yuan per MWh. Such transactions largely stem from the demand from
corporate buyers who have the decarbonization targets. This round
of transactions was following the release of Guangdong's renewable
transaction rules for the mid- to long-term power trading market in
April 2021, namely Trial Rules of Guangdong Renewable
Transaction.
A few months earlier, in November 2020, the Zhejiang Power
Exchange Center, the provincial power trading platform, issued
Zhejiang green power certificates to a textile corporation located
in Ningbo that needs to meet the sustainability goal for its export
products. This measure symbolized the first renewable transaction
deal closed in Zhejiang. In this transaction, 20,000 MWh of wind
power has been procured with a price premium to the coal benchmark
price to reflect the green attributes. Following this successful
trial transaction, on 16 June 2021, Zhejiang released the Notice to
Start the 2021 Green Power Transaction Pilot, calling for more
participation in green power transactions and encouraging
developers to invest in storage facilities.
Although not identical, both provincial pilot renewable
transaction rules were announced as part of implementation policies
for the mandatory renewable portfolio standard (RPS) target
fulfillment in each province. The provincial targets have been
further allocated to the grid, retailers, and power users, and
renewable direct power purchase (DPP) became one of the main
mechanisms for fulfillment, which also enabled local power
consumers to use clean power use to help meet their corporate-level
climate goals, if any.
Before the allocation of RPS targets, renewable DPPs were mainly
available in renewable-rich western and northern provinces where
the renewable generation hours exceed the guaranteed procurement
hours. In those provinces, price discounts are usually offered by
renewable developers through a market mechanism, to help renewable
integration and reduce curtailment.
In Gansu, the thermal power DPP price for 2020 is 20-35 yuan per
MWh lower than the local coal-fired power on-grid tariff, while the
renewable transaction price during the same period is 200-220 yuan
per MWh lower than the local coal-fired power benchmark tariff. In
this case, renewable procurement is not just a clean but also a
cheap option for local power users and energy importing
provinces.
However, in the coastal region where renewables are fully
procured by the grid at the coal-fired power benchmark tariff,
developers do not have strong incentives for DPP transactions
unless an extra green price premium is secured. The average price
for Guangdong's 2021 renewable transaction is 18.78 yuan per MWh
higher than the coal-fired power on-grid tariff and 70 yuan per MWh
higher than 2021 thermal DPP prices.
At this stage, the renewable transactions in those coastal load
centers will still be mainly driven by noneconomic incentives with
three type of buyers, including corporations with the internal
decarbonization targets or supply chain compliance requirement,
industry buyers seeking to expand the production while constrained
by the energy intensity targets, and power users who have gaps to
meet RPS targets.
