China's green certificates to lower tariffs for wind, solar producers

But could it help ease curtailment?

Moody's Investors Service says that the introduction of green certificates in China's renewable energy sector will likely lower the tariffs on wind and solar power in the near term, but support the further development of the sector in the longer term by easing curtailment.

The new measures will have no immediate impact on the ratings and outlook of the two wind and solar power producers rated by Moody's, China Longyuan Power Group Corporation Ltd. and United Photovoltaics Group Limited.

Here's more from Moody's:

On 3 February, China's National Development and Reform Commission (NDRC) announced a pilot program for issuance of green certificates to solar and
wind power producers, each certificate representing 1MWh of electricity output.

Power producers can sell the certificates to buyers such as coal-fired power producers, grid operators, and corporates to evidence their use of
clean energy. The price for the certificates will be determined by bilateral negotiation or competitive bidding, and is capped at the level of the subsidy currently received by power producers.

Solar and wind power producers who sell their green certificates will no longer receive government subsidies for the renewable energy generation that is linked to the green certificate.

Wind and solar producers currently receive a benchmark tariff and a subsidy to cover the difference between this higher tariff and the tariff for coal-fired power generation.

However, because renewable energy companies may need to sell the certificates at prices below the current subsidy in order to attract demand, the certificates could effectively result in a tariff reduction.

Nevertheless, price volatility from speculation is unlikely for the green certificates because resale of the certificates will be not permitted.

The scheme will commence on voluntary basis on 1 July, and the NDRC has indicated it may make the scheme mandatory from 2018.