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New Clean Energy Buying Option in China: Green Electricity Certificates

Businesses and other organizations in China have a new option for buying renewable energy, thanks to a voluntary trading platform for Green Electricity Certificates (GEC) launched this summer. These certificates allow companies to claim the environmental benefits associated with renewable energy generation, even if the electricity from a renewable power plant does not feed directly into the company’s facilities. Still in its early stages, China’s GECs program is one step in a larger reform of national energy markets aimed at offering more ways for large energy buyers to purchase renewable energy at scale.

As of September 20, China’s GEC trading platform had issued 8 million certificates, corresponding to 8 billion kilowatt hours (kWh) of on-grid wind and solar electricity, equivalent to what Beijing’s residents consume in five months. This initial phase includes certificates only for onshore wind power and ground solar photo-voltaic (PV) projects. So far, 1,552 individuals have purchased 1,900 GECs and 46 businesses and organizations have bought 19,097 GECs. While the number of GECs purchased is still small, it is a market worth tracking as it evolves.

Reforming China’s Renewable Energy Subsidies

China’s GEC program is part of a government push to reform subsidies for renewable energy development. In the past decade, subsidies have supported rapid growth in China’s renewable industry. But the current subsidy mechanism is dependent on fees collected from customers. Because electricity demand is flattening in China, the subsidy fund is shrinking and can no longer support the scale of investment in renewable energy needed to meet China’s goals. If there is no improvement in the current subsidy mechanism, the cumulative renewable energy subsidy funding gap could reach an estimated 200 billion yuan (about $30 million). Developers are hoping that over time, the GEC market will become stronger and less risky than trying to obtain public subsidies, leading to lower financing risk, lower project costs and cheaper renewable power for all consumers.

While the GEC market is currently very small, the Chinese government is evaluating policies to strengthen it over time. A new renewable portfolio standard to mandate that energy portfolios include a certain amount of renewable power is expected in early 2018. This would require power producers, grid companies or provincial governments to promote renewable power generation and consumption, boosting GEC demand.

China’s GEC program is still in its early stages, but WRI and other observers will be watching several indicators in coming months:

  • Is the number of buyers growing?
  • Are buyers increasing their purchases of GECs over time?
  • Is the revenue generated by GEC purchasing helping new projects get built?
  • How do companies rate the program for accessibility and credibility?

Collaborations for Clean Energy Buying in China

Collaboration among power producers, companies and other energy players is essential to grow China renewable energy. In June 2017, the Green Electricity Consumption Cooperative Organization (GECCO) launched with support from WRI and nine leading Chinese and international organizations. GECCO has already enrolled 68 member companies and organizations. The 2017 Renewable Energy Buyers Alliance Summit gathered representatives from large multinational companies that have extensive operations and supply chains in China, and many of these companies joined working sessions on China to explore the best options for purchasing large-scale wind and solar power.

Large energy buyers in China can engage with WRI as we launch pilot programs for green power purchasing and look to a forthcoming guidebook for recommendations on how companies can purchase renewable energy in China’s energy market.

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