[SMM Hydrogen Energy Policy Express] National Energy Administration: Green Electricity Direct Connection Empowers New Energy Development, Helping to Open a New Chapter in Green Electricity Consumption

The report of the Third Plenary Session of the 20th CPC Central Committee clearly states that it is necessary to accelerate the planning and construction of a new-type energy system and improve policy measures for the consumption and regulation of new energy. Under the strategic deployment of China's "dual carbon" goals and the construction of a new-type power system, the scale of new energy development in China ranks first globally, with distributed new energy experiencing rapid growth. To further promote the local development and utilization of new energy and meet the green energy needs of enterprises, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) issued the Notice on Orderly Promoting the Development of Direct Green Electricity Connection (hereinafter referred to as the Notice). By clarifying the scope of application for direct green electricity connection, standardizing planning and management requirements, and improving market pricing mechanisms, the Notice provides clear guidance for actively promoting the construction of direct green electricity connection projects in various regions in the next step.

I. Proposing the Scope of Application and Construction Requirements for Direct Green Electricity Connection

1. Clarifying the definition and connotation of direct green electricity connection. Since the EU issued the EU Batteries and Waste Batteries Regulation and its supporting document, the Draft Rules and Annexes for Calculating the Carbon Footprint of EV Batteries, concepts such as "direct power connection" and "direct green electricity connection" have sparked heated discussions in society. Although the EU's relevant documents have clarified the concept and connotation of direct green electricity connection, China still lacks a clear definition for direct green electricity connection projects. To this end, the Notice clarifies the definition and connotation of direct green electricity connection at the national level for the first time, that is, new energy sources such as wind and solar power are not directly connected to the public power grid but are directly connected to a single power user through dedicated power lines. The new energy sources here can be either distributed or centralized, and after the project is completed, it can choose to operate in either an off-grid or grid-connected mode.

2. Clarifying the construction requirements for project power supplies. Direct green electricity connection enriches the ways for enterprises to achieve clean and green power supply and stimulates the enthusiasm of new energy enterprises for investment and construction. In this context, clarifying the construction requirements for directly connected new energy power supplies is crucial for the orderly development of direct green electricity connection projects. The Notice clarifies four scenarios in which direct green electricity connection can be carried out: Firstly, new loads can achieve direct green electricity connection through the construction of supporting new energy projects; Secondly, for existing loads to carry out direct green electricity connection, certain conditions must be met. On the premise that enterprises' captive power plants fully pay the renewable energy development fund, the power generation space for direct green electricity connection needs to be achieved by reducing the output of captive power plants; Thirdly, export-oriented enterprises can explore the implementation of direct green electricity connection and make full use of surrounding new energy resources; Fourthly, for existing new energy projects, if the construction of power grid connection projects has not yet commenced or if there is insufficient capacity in the local power grid for consumption, direct green electricity connection can also be carried out after fulfilling the necessary change procedures.

Thirdly, it clarifies the project investment and operation model. For a long time, China has required that new energy grid-connection projects be uniformly invested in and constructed by power grid enterprises, or invested in and constructed by new energy enterprises and then repurchased by power grid enterprises, with relevant costs recovered uniformly through the state-approved transmission and distribution electricity prices. To better promote the development of green electricity direct connection, the Notice innovates the investment and construction model for green electricity direct connection power supplies and lines. Power supplies can be invested in by load entities, power generation enterprises, or through joint ventures established by both parties. Direct connection lines are invested in by load and power supply entities. If the power supply and load entities are not the same investor, both parties should sign multi-year power purchase agreements or energy performance contracting agreements. To better adapt to the requirements of safe power grid operation and the construction of a unified national electricity market, the Notice proposes that in regions where the spot market operates continuously, projects can feed electricity back into the power grid to participate in the electricity market. However, the overall focus remains on self-generation and self-consumption. It also clarifies that the proportion of surplus electricity fed into the grid should be determined by each region based on actual conditions. This requires regions to fully consider the local power grid's consumption capacity and the regulatory capacity of green electricity direct connection projects, reasonably set the proportion of surplus electricity fed into the grid, and ensure local self-generation and self-consumption as much as possible without affecting the utilization rate of new energy.

II. Improving Safety Operation and Management Requirements for Green Electricity Direct Connection

1. Further clarify safety management responsibilities and boundaries for green electricity direct connection projects. Green electricity direct connection projects feature diversified resource types and investment entities. In addition to load resources, they also include new energy, ESS, and other resources. If various resources are not invested in by the same entity, an aggregated approach is needed to achieve coordinated and optimized operation of various resources, which will bring about internal safety management risks and unclear safety responsibility boundaries with the superior power grid. To strengthen the safety management level of green electricity direct connection projects, the Notice clarifies safety management requirements for green electricity direct connection projects in two aspects. On the one hand, from the perspective of internal management, green electricity direct connection projects should implement various safety production management measures. On the other hand, from the perspective of participating in system operation, grid-connected green electricity direct connection projects should form clear safety responsibility boundaries with the public power grid according to the property rights demarcation point, and reasonably determine their respective responsibilities for safe power supply.

2. Further standardize the dispatching and operation management mechanism for green electricity direct connection projects. As a new business model, green electricity direct connection can possess good regulatory capacity and real-time response characteristics by coordinating and optimizing the operation of internal resources. In the context of the construction of a unified national electricity market, how to align the dispatching management mechanism of green electricity direct connection projects with the market trading mechanism is an important guarantee for enhancing the safe operation of green electricity direct connection projects and the large power grid under market conditions. From the perspective of adapting to system dispatching and management, the Notice proposes that new-type power load management systems or power dispatching automation systems should be connected separately based on the categories of services provided to the system. From the perspective of current policy requirements, green electricity direct connection projects that provide demand response should be connected to the new-type power load management system, while those participating in spot {{spot cargo}} or ancillary services, which have higher real-time requirements, should be connected to the power dispatching automation system. To better leverage the overall regulation capacity of green electricity direct connection projects, the Notice also proposes that dispatching agencies should issue dispatching plans in accordance with the power generation and consumption curves independently arranged by the projects. This means that under normal operating conditions, green electricity direct connection projects will receive dispatching instructions as a unified entity.

III. Improving the Market Trading and Pricing Mechanisms for Green Electricity Direct Connection Projects

1. Clarifying the Market Trading Methods for Green Electricity Direct Connection Projects. Considering the uncertainty and intermittency of new energy output, promoting the participation of green electricity direct connection projects in power market trading plays a crucial role in enhancing the level of new energy consumption and utilization, improving the reliability of power consumption for green electricity direct connection projects, and fully leveraging their flexible regulation capabilities. To this end, the Notice explicitly proposes to promote the participation of green electricity direct connection projects in the market as a whole. Even if the power supply and load do not belong to the same investment entity, they can participate in power market trading in an aggregated form after registration, by referring to the virtual power plant model. At the same time, it is also explicitly stated that the project load should not be purchased on behalf of by power grid enterprises.

2. Clarifying the Price Settlement Mechanism for Green Electricity Direct Connection Projects. As a new model that promotes the local and nearby satisfaction of load demand with new energy, green electricity direct connection projects provide high-quality guarantees for users to achieve clean and low-carbon production and transformation development. However, under this development model, they should not evade their social responsibilities due to the nearby utilization of new energy by the load and the reduction of power purchased from the upper-level power grid. On the contrary, promoting their fair assumption of social responsibilities, just like other users, is more conducive to the orderly and sustainable development of green electricity direct connection projects. The Notice explicitly proposes that green electricity direct connection projects should pay transmission and distribution fees, system operation fees, policy-based cross-subsidies, government funds, and surcharges in accordance with regulations.

(Fan Pengfei, President of the Energy Policy and Market Research Institute, China Electric Power Planning and Engineering Institute)