How does Chinese government support cogeneration, RCU and biomass power generation?

Cogeneration

As efficient and environmentally friendly power generation, cogeneration plants have been encouraged by the PRC government. A series of incentives are provided to qualified cogeneration plants, such as higher on-grid tariff and exclusive rights to sell steam within the heat zone.

The relevant authorities of the PRC government stipulated clearly in the Notice issued in August 2000 that:

Firstly, the on-grid tariff of cogeneration plants is set by the provincial pricing bureau and the steam tariff of cogeneration plants is set by the local pricing bureau. The pricing bureaus are required to take into full consideration the environment protection and energy conservation benefits of cogeneration plants when they set these tariffs.

Secondly, cogeneration plants’ power dispatch level is determined by the amount of steam supplied, based on a certain heat-to-power ratio.

Thirdly, within the heat zone of a constructed cogeneration plant or a cogeneration plant under plan (a radium of 8 kilometers), there shall be no further construction of any other cogeneration plants or boilers.

As a result, the average on-grid tariff of our coal-fired cogeneration plants in Jiangsu is about 18% higher than those conventional coal-fired power plants. Most of our cogeneration plants also enjoy higher dispatch priority and utilization hours.

Resources comprehensive utilization (RCU)

Resources comprehensive utilization is to use fuels with low heating value, such as coal gangues, coal sludge, municipal solid waste, sludge from sewage disposal, in the power generation process. If more than 60% of a power plant’s total fuel consumed is from low heating value materials, then the power plant is qualified to be approved as a RCU plant.

RCU is promoted by the PRC government. Its amount of power generation is not restricted, and it enjoys special tax treatments such as 50% waiver of VAT.

Currently most of our cogeneration plants use fuels with low heating value, such as coal sludge. Of which, 4 plants are recognized as RCU ones, namely Peixian Cogeneration Plant, Dongtai Cogeneration Plant, Xuzhou Cogeneration Plant and Funing Cogeneration Plant.

Biomass power generation

Biomass power generation is to use agricultural, forestry, industrial and/or municipal waste as fuel in the power generation process. A Plant that fires 80% or more with biomass, in term of heating value, can be certified as a biomass plant.

Biomass power generation is also encouraged by the PRC government. Its amount of power generation is not restricted. A subsidy of RMB0.25 per KWh is added to the standard on-grid tariff for biomass plants for a period of 15 years from the commercial operating date.

Currently we have 2 biomass plants, namely Baoying Cogeneration Plant and Lianyungang Cogeneration Plant.