China offers policy support for distributed power generation

Mar 06, 2013 12:00 AM

China is stepping up support for distributed generation, after State Grid Corp. of China (SGCC) said it would permit easier access to the power grid for distributed energy resource (DER) projects fuelled by natural gas, wind and solar energy.

China's largest state-run utility pledged last week to introduce more distributed generation into its network by facilitating the connection of DER projects with no more than 6 MW of installed capacity to the power grid.

"[The proposal] still lacks detail, but it at least shows SGCC's positive attitude, which is a good thing," Zeng Jianbin, project manager for China Gas-SK Energy Holdings, told Interfax.

Zeng said his company - a joint venture between China Gas Holdings and South Korean conglomerate SK Group - is working on pre-studies of gas-fired distributed generation, but declined to elaborate.

SGCC - the monopoly grid operator in 26 out of mainland China's 31 administrative regions - has been the subject of some criticism from experts and the DER industry for refusing to integrate more distributed generation into its network.

The utility argued such a move would be expensive and that electricity output from DER projects is unstable.

The company's pledge appears to be geared towards small DER projects, according to Zeng, as small DER schemes fuelled by gas tend to be on site.

"It will have a significant impact on the domestic distributed power generation industry, just like what happened in 1978 in the United States," Han Xiaoping, chief information officer for energy information portal China5e.com, told Interfax.

Han was referring to the passage of the Public Utility Regulatory Policies Act, which paved the way for greater use of distributed generation technologies - particularly those running on gas.

"To some extent, it even has positive implications for the gas supply negotiations with Russia," said Han.

Han explained SGCC's embrace of distributed generation may accelerate the sector's development, which would ease one of Russia's main concerns about the Chinese gas market - the scope of its consumption growth.

China's distributed generation industry is forecast to consume up to 40 billion cubic metres per year of gas by 2015.

Experts elsewhere said SGCC's pledge is unlikely to benefit gas-fired DER schemes. "Solar-powered distributed projects will benefit the most, as distributed power projects fuelled by gas, biomass, geothermal, or oceanic should exceed 6 MW of installed capacity to be economically viable," Hongyuan Securities analyst Wang Jing wrote in a note to clients last week.

Gas-fired DER schemes smaller than 6 MW are commercially viable if they are cogeneration systems, providing cooling and heating as well as power.

China plans to have 1,000 distributed generation projects fuelled by gas, amounting to installed capacity of 15 GW, by 2015.

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