Polaris Transformer Network News: Over the past few years, China's investment in renewable energy power generation industry and its installed capacity of power generation ranked first in the world. In fact, from 2010 to 2015, China's investment in the industry was as high as 377 billion U.S. dollars, more than the sum of its investments in the United States and Germany in the second and third places. Currently, China has installed 150GW of wind power and 77GW of installed capacity of solar PV, which is larger than those two countries (80GW and 35GW respectively) such as the United States.

In the World Bank's RISE study, China performed far better than the global average and became a leader in East Asia, in many ways comparable to those of the OECD countries in many ways. Many OECD countries have significantly lower investment and installed capacity than China but have scored higher on many renewable energy targets than China.

So why is this difference?

The results of the World Bank's Sustainable Energy Regulatory Indicator (RISE) research can partly reveal the reasons.

RISE research was released in February 2017. It is actually a policy scoring system with no precedent in breadth and depth, scoring 111 countries from energy accessibility, energy efficiency and renewable energy. The system focuses on the regulatory frameworks in these countries and the measures taken within the direct responsibility of policy makers. Scoring results are based on data provided to the indicator system team by the end of 2015 and are fully and rigorously validated. The RISE study found that some of the problems China faces are beyond the control and interpretation of energy policies. As the second largest economy in the world, China's vastly increasing electricity demand has created various opportunities. The large number of skilled labor and large supply chains have created the conditions for the local construction of cost-effective wind farms and solar power plants. In addition, the Chinese government has taken important measures to attract social investment in all walks of life.

If part of the policy framework can be strengthened, it is possible to make further use of China's renewable resources. In 2016, the national average abandonment rate was 17%, which means that 17% of the wind power was not delivered to the end consumers and was thus wasted.

China can reinforce the following in its renewable energy regulatory framework:

1, a unified power generation and transmission planning framework. We find that there is neither a plan to scale up the power sector in China nor a plan to increase the transmission of renewable energy. However, this finding did not take into account the forthcoming "13th Five-Year Plan". The plan will systematically address generation and transmission planning and renewable energy development issues. In addition, the planning departments (NDRC, NEA, MIIT and MEP) in the energy sector still need to coordinate to identify the regions or industries with the most power needs. Like other Chinese policies, the key lies in the effective implementation of planning and planning at all levels of the localities.

2, give priority to renewable energy generation. Although renewable energy power plants enjoy preferential access to the Internet, power generation is not scheduled on the basis of operating costs (ie, economic dispatch patterns). China still implements the "evenly distributed generation capacity" scheduling model, which allocates the same running hours (hours) to all power plants annually, regardless of actual operating costs. In addition, as the utility company does not have to pay any compensation for any form of discarded electricity or the required sales infrastructure has not been completed in time, the risks are entirely borne by the project owner. Although this situation is not sufficient to constrain the total investment, it may lead to increased uncertainty and a decrease in financially viable projects.

3, regional electricity trading and grid. Power trading between provinces is still limited because of a lack of an electricity market that can power generation together and facilitate transactions between the provinces. This is important because increasing the grid-connected proportion of renewable power generation will reduce the fluctuation of electricity supply. Expanding the scope of power co-ordination helps increase system stability. In addition, administrative barriers and competition among provinces in China have also hindered electricity trading.

What can China do to close these gaps and more efficiently deliver clean power to end-users?

The latest round of power sector reform in China aims to confront this challenge. The general idea is to make the market play a decisive role in the allocation of resources. With the slowdown in GDP growth and electricity demand growth, the key is to shift our thinking from increasing installed capacity to providing consumers with clean energy. The following measures, if strengthened, can help provide more green electricity to Chinese consumers to further reduce their carbon dioxide emissions:

1. Let go of the wholesale and retail electricity markets and adopt the economic dispatch model. Doing so helps provide more clean energy as it helps to prioritize renewable electricity with marginal lowest cost of marginal power generation.

2. To strengthen regional co-ordination system to enhance grid management flexibility. As intermittent renewable energy sources become more connected to the grid, expanding the pool of electricity can help increase system stability.

3. Developing a viable reduction target and schedule will help end-users to spend more on clean energy. Provinces with relatively low rates of abandonment should start to set such targets first. For example, it will be more difficult for Xinjiang to reduce its abandonment rate from 40% to 10% in three years than it is for Hebei to decline from 9% to 3%.

4. Decoupled grid company revenue from electricity sales, allowing them to charge a fixed grid usage fee and maintenance fee. In the past, the revenue of China Power Grid Corporation was linked to its sales volume. Decoupling the two could encourage China's powerful utility companies to gradually shift their focus toward end-users' use of clean energy, energy efficiency and distribution of renewable energy. Pilot projects in Shenzhen are seen as an example of China's further development of the renewable energy power generation industry.

As more renewable energy power enters the grid system, many challenges and opportunities will co-exist. The more electricity used by renewable energy, the lower the price of electricity from other energy sources. It will be wise for Chinese planners and regulators to seize this momentum already in parts of Europe and the United States.