Ni Huan / Senior Adviser of the World Wide Fund for Nature, Master of Development Studies at the University of Cambridge, Full Chevening Scholarship receiver / 2016-02-01
In July, 2014, I had installed in my house what was called then the first CIGC cell home power plant in mainland China. In that same year I bought a vehicle powered by renewable energy and got a charging pole. I even tried my hands on composting kitchen waste to grow organic vegetables, and shared my occasional harvests with my neighbors.
Living under a green lifestyle, I lived through the policies China adopted to promote low-carbon growth and the green transformation, and the way they were rolled out. This article is to share my first-hand experiences.
Read this article in Chinese
A Very Different Kind of User Experience with the Utility Company
I got the idea of installing solar cells in my own house in 2013 after that hottest summer on record. In the spring of 2014, I did some research on household solar power plants and thought I could at least have a solar awning. I learned that as early as in 2006, Professor Zhao Chunjiang from Shanghai University of Electric Power set up a solar power plant on his roof——although what really made him famous was the following 6-year battle he had with the utility company to have his device grid-connected. As a matter of fact it was not until 2012 did professor Zhao manage to persuade the power company to install a two-way electric meter for him to sell electricity back to the grid. Prior to that, all excess electricity generated in the household simply went to waste.
In April, 2014, I applied formally to the State Grid Shanghai Municipal Electric Power Company (the Shanghai branch of State Grid Corporation of China) for my household power plant. Unexpectedly, the whole business with the electricity tiger sailed rather smoothly. I only had to take several documents, including the property deed, a letter of confirmation from the owner committee of my residential complex saying they are OK with the station, and the design plan, to one of the company’s local offices to fill a form, and that was it. In May that same year the Shanghai Municipal Development and Reform Commission released the Procedures of Shanghai Municipality on Supporting Special Funds for the Development of Renewable Energies and New Energies. According to the Procedures, two types of new energy projects, photovoltaic and wind power, would receive subsidies for 5 years. The amounts for solar distributed generation projects are 0.25 yuan per kWh for industrial and commercial users and 0.4 yuan per kWh for household users. I made the order with the supplier the moment I heard of the new policy. It took me two months to persuade my neighbors and the company managing the residential complex that the new system was not a bad idea. The construction was completed on July 22, 2014. On August 3, it was officially delivered and connected to the grid.
My home with a PV power plant and an electric car. Photo by Ni Huan
My dealings with the utility company were also, quite surprisingly, satisfactory. A special hotline was set up for PV users. There were personnel specially assigned to handle the applications at the desks, supervise the delivery upon completion, and settle accounts upon delivery. Grid connection only took 2 weeks even though according to the opinions released by the National Energy Administration on the monitoring of distributed PV power plants, the allowable time allotments for this type of grid connection are 6 months for natural person users and 9 months for legal person users respectively.
The power firm has also been flexible with the metering. Before the new meter for my plant was installed, they used the readings of the inverter as a basis for subsidies. In early 2015, they came back to fix a new meter specially designed for PV devices. Like the previous conversion to two-way electric meters, the installation was free and the meter started working on the day of the installation.
Moreover, starting from the latter half of 2015 subsidies were paid based on the amount of electricity transmitted back to the grid on a monthly basis, instead of on a quarterly basis as was the case previously. This has not only made the payment more timely, but also helped me better monitor my power plant’s capacity.
Tax and Subsidy Policies: Some Corrections
The biggest incentive for getting my own solar power plant is the favorable policy in the form of the Several Opinions of the State Council on Promoting the Healthy Development of the Photovoltaic Industry issued by the National Development and Reform Commission in 2013. The Opinions has specified a 0.42 yuan (tax included) subsidy for every kilowatt-hour produced by distributed PV systems. It has also stipulated that in such a system the part of power generated for self-use is not subject to a number of taxes that come along with utility bills, system reserve capacity fees and other grid connection service fees. In other words, for every kilowatt-hour of electricity produced by my power plant and consumed by my family I am supposed to receive a subsidy of 0.42 yuan, which is scheduled to last for 20 years. In addition, I am also supposed to receive a 0.4 yuan subsidy per kWh from the Shanghai government for 5 years starting from 2015.
Yet in reality, in the first few months, from August to December to be more precise, I was not given the supposed amount. The glitch is, on top of the subsidies above mentioned, the Opinions specified a 17% VAT to be included in the subsidies. Therefore, 17% of the payment was automatically withheld by the utility companies. Consequently people were paid 17% less. This arrangement led to a heated debate in the media and on the internet, a debate I participated as a household user though it was launched by enterprises. The most contentious question asked was: Is it really reasonable to levy a tax on a subsidy extended from Government directly to end users? Soon I noticed in my bill for the first quarter of 2015 that the glitch was fixed: I was refunded all the VAT previously withheld and was paid in full the subsidies for newly increased electricity generation. The tax was revoked. The correction was made rather efficiently, in about a year.
Unfortunately the same cannot be said with regards to another issue. To this day Chinese power firms are waived the 17% VAT for their initial investment, while deplorably, household users are not. I think it is very unreasonable that I have to contribute 17% of my 24,000 yuan of investment, that is 4,080 yuan in total, to the state while big companies do not. The problem is the penetration rate of household solar power plants remains low in China. As a result, few objections have been raised, and few people are paying attention to this issue. The comparison below illustrates the impact of tax breaks on payback period for household users.
My plant has been running for over a year. If you look at the figures:
● Installed capacity: 2400 watts
● First year output: 1922 kWh (lower than the theoretical maximum because of the sundries blocking the sun on the first floor );
● First year consumption: 1750 kWh
● Initial investment: 24,000 yuan (excluding the 7,000 yuan for the charging pile )
● Whole year national subsidy plus Shanghai subsidy 0.82 yuan×1922 kWh= 1,576 yuan (although the full payment was refunded only by January, 2015)
● The family used 328 kWh, thus saving 0.617 yuan×328kWh=202 yuan of utility bills (0.617 being the daytime price of electricity per kWh)
● I sold the remaining 1594 kWh back to the grid, earning 0.45 yuan×1594 kWh=717 yuan (0.45 yuan being the annual average of the floating selling price )
If I receive investment VAT tax breaks, the payback period is:
(24,000-4,080) /(1,576+202+717) =7.98 years
If I do not receive investment VAT tax breaks, the payback period is:
24000 /(1576+202+717) =9.62 years
If I receive neither a subsidy tax rebate nor a investment VAT tax break, then I only receive a subsidy of [(0.42×83%)+0.4]x1,922=1,438.8 yuan a year and the payback period is:
24,000/(1,438.8+202+717)=10.17 years.
It is clear that taxation policies have huge impacts on the payback period for household distributed generation solar power plants.
Moreover, as coal prices in China and global oil prices continue to slump, the desulfurization benchmark price, against which the selling price of electricity from distributed generation systems back to the grid is calculated, is also dropping. This undoubtedly will leave its dent on the payback period.
Personally speaking, given CIGS solar panels on average can run 25 years, I can accept a payback period of 12 years or less.
But still, as smog is becoming more severe and the task of air pollution control more daunting, issues particularly true this winter, I, as an environmentally-conscious homeowner, would hope that all the subsidises and prices could be based on the real cost of running distributed new energy resource systems instead of the prices of coal-fired electricity.
The power firm has been flexible with the metering. The installation of the two-way electric meter was free and the meter started working on the day of the installation.
The charts below give you a better idea of the operation of my solar power plant.
Average monthly daytime electricity consumption. (Unit: kWh)
Average monthly utility bills. (Unit: RMB)
PV output, Grid transmission, Self use (Unit: kWh)
Lack of Construction Standards and the Problems
In the process of building my own solar plant, I received the biggest scruple from the local community. Some residents knew so little about it that they were afraid it was radioactive. The company responsible for managing the residential complex was also quite wary of the new device. Moreover, it seemed to me that the trickiest part of all was to actually build the thing. I pored over the gamut of construction standards issued by the Ministry of Housing and Urban-Rural Development and the China Academy of Building Research, but there was no mentioning of civilian PV solar buildings, such as solar roofs and solar awnings. With no guidebooks to refer to, I simply hand drew a plan of my yard, asked my supplier to come up with a design based on the plan and told them the building had to be able to stand magnitude 10 typhoons and magnitude 8 earthquakes.
The lack of standards could lead to the following problems:
First, if anything goes wrong, the liabilities between the homeowner and the supplier are not clearly defined. In principle, the supplier is only responsible for the supply, installation, testing and maintenance of the power plant parts. And the homeowner has to bear any possible consequences of having a power plant attached to the roof or a stand.
Second, the liabilities between the homeowner and the utility company are also muddy. When the utility company came to inspect my power plant, they only made sure that the construction company had the certificates to do the job and that the plant had the right circuit interfaces for it to be plugged into the grid. State Grid is not even obliged to check if the power plant is installed properly, because the plant is not part of the grid and is a device purchased by homeowners themselves.
Third, the liabilities between the homeowner and the developer or the property management company are ambiguous. Before I had my own power plant I visited a homeowner in the Songjiang District. He wanted to install a solar power plant on the roof. At the time of the construction the builders could not find the developer’s plans and incidentally drilled through the waterproof layer. The homeowner ran into dispute with the property management company when trying to get the leaking roofs repaired.
Other Possible Incentives: Carbon Trading and Progressive Pricing
It is clear based on the quite indisputable metering and billing (indisputable as they are monitored by the state) that my little solar power plant reduces carbon emissions. A rough calculation would show that annually it emits 1.1 ton less carbon dioxide. But currently the reduction cannot be traded on the carbon market. Different materials, venues, sizes and operation modes lead to too high a cost of verifying the carbon emission levels from distributed generation solar power plants, making it uneconomic to trade quotas of this kind.
Yet in China there are tens of thousands of distributed generation solar power plants with installed capacities of several kilowatts or of 20 megawatts or less. Added together, the total amount of emissions reduced would not be negligible figure. So, who should be responsible for collecting, updating and verifying these data? How to prove to the international community that China’s vigorous development of distributed generation solar power plants is really making a difference in the combat against climate change? These are some of the questions being asked within the industry. My one suggestion is that utility companies should take the lead. They are best positioned to pool the scattered emissions reduction figures together on behalf of the individual households, sell the quota as a whole, and then distribute the earnings among the household users according to their respective contributions, which expectedly, are well tracked and recorded. It is only a suggestion, but I think it would do no harm to give the idea some more thought.
Another idea is big users buying cheaper electricity from small users. Let me explain it this way. I have a power plant that produces more electricity than what my family can use. If I can sell my extra power (another type of emission rights) to families that use a lot of electricity, I get financially compensated for my energy-saving efforts. Then what is the incentive for the families who buy from me? In China electricity prices are progressive. Take Shanghai for example. Every year for individual households the price is 0.617 yuan per kWh for the first 3200 kWh. Then the price is raised for the part of power exceeding the 3200 kWh limit but below the second bracket limit. Households are charged 0.99 yuan per kWh for the amount of electricity subject to the third bracket. Thus 3 months into a new year and some families living in large houses may well be paying very expensive utility bills. Now to avoid paying the high bills, they can either install their own power plants, or be offered an opportunity to buy extra electricity from small users at the lowest rates possible
Thus theoretically speaking such a scheme provides incentives both for the families that care about energy saving (financial compensation) and the families that use a lot of electricity (cheaper energy). But there are questions that merit more in-depth and extensive discussion: Is the scheme viable and effective in household energy-saving? If so, what policies are needed for the building of such a scheme? How to design it fairly and transparently?
New Energy Cars and the Benefits
I bought a BYD Qin during the National Day holiday in 2014. Here are some numbers about it.
• List price: 219,800 yuan
• I received a direct subsidy of 63,250 yuan from the Shanghai government and was exempt from the purchase tax, saving another 12,525 yuan
• I was given a Shanghai licence plate (worth approximately 80,000 yuan) for free (Editor’s note: Since 1985 Shanghai adopted a licence plate auction system for private automobiles to ease the traffic jam as a result of rapid transportation development)
• An all-electric range of 70 kilometres; a 50 litre tank.
• Free mobile phone cloud services
It did not take much trouble at all to get the plate. The subsidy payment and the tax waiving procedure were finalised at point-of-sale. During the whole process for the application and installation of the charging pile I received free services from State Grid and the car brand’s 4s store. The meter for the charging pile is separated from the household meter, so it is not going to take up the limited amount of electricity eligible for lower bracket prices. The prices during the daytime and nighttime are also differentiated. So I always charge the car during the night when the price is only half that during the day to reduce my fuel expenditure.
Public Low-Carbon Education
My life has changed tremendously since my green living received extensive media coverage: more and more neighbours and friends ask if they could bring their children and friends to take a visit. I received over 650 visitors and, unavoidably, also saw that much remains to be done to raise public awareness in this aspect.
For a start, despite of the government’s vast investment into industries and public sectors to save energy and cut emissions, and despite of the progress already achieved, the Chinese public has yet to be mobilised to do the same. As early as in March 2014, the National Development and Reform Commission (NDRC) issued the Notification on the Development of Low-Carbon Community Pilot Programmes. Then in February 2015 the NDRC issued the Guidelines for Low-Caron Community Pilot Construction. Yet although the documents provided useful guidance on low-carbon construction, and the methods needed for the evaluation of such efforts, they were most useful only to the public sectors. There was little mentioning as to what incentives are to be put in place to involve the general public to build low-carbon communities.
My little power plant has long served as a window of display. But if there could be more public facilities that can be used to the same purpose, if people could have the access to witness and experience for themselves what a low-carbon living really entails, they would be more effectively educated about the concepts such low-carbon communities and environmental protection. I believe such presentations will be more convincing.
2016 is the year China launches its thirteenth 5-year plan. I hope my green experience will inspire more people to participate in the national endeavours for a greener country.
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