Recently, the National Development and Reform Commission and the National Energy Administration issued the "Notice on Encouraging Renewable Energy Power Generation Enterprises to Build or Purchase Peak-Shaving Capacity to Increase Grid Connection Scale." This notice encourages power generation enterprises to increase grid-connected renewable energy generation capacity by building or purchasing peak-shaving storage capacity.

According to the document, to guide market entities in increasing renewable energy grid connection through multiple channels, it encourages multiple channels to increase renewable energy grid connection and absorption capacity, encourages power generation enterprises to build their own energy storage or peak-shaving capacity to increase grid connection scale, allows power generation enterprises to purchase energy storage or peak-shaving capacity to increase grid connection scale, and encourages multiple channels to increase peak-shaving resources.

Power grid companies must truly assume primary responsibility for grid construction and development and renewable energy grid connection and absorption, coordinating peak-shaving capacity development and resource utilization. Power grid companies should bear primary responsibility for the annual increase in grid connection and absorption capacity, with power generation companies assuming appropriate responsibility for renewable energy grid connection and absorption. With the advancement of new energy power generation technology, increased efficiency, and reduced system peak-shaving costs, the scale and proportion of power grid companies' capacity consumption will be reduced in an orderly manner.

Regarding matching requirements, to encourage market-based participation in peak-shaving resource development, power generation companies exceeding the grid company's guaranteed grid connection will initially be allocated peak-shaving capacity at a ratio of 15% of power (for a duration of four hours or more, the same below). Those allocated at a ratio of 20% or more will be prioritized for grid connection. The matching ratio will be adjusted as appropriate after 2022 based on actual circumstances and announced annually. Provincial-level competent authorities may adjust the matching ratio based on actual circumstances after organizing grid companies or third-party technical institutions to evaluate and confirm the project's peak-shaving capacity measures and effectiveness.

See the specific document below:

National Development and Reform Commission Notice of the National Energy Administration on Encouraging Renewable Energy Power Generation Enterprises to Build or Purchase Peak-Shaving Capacity to Increase Grid Connection

Development and Reform Commission Operation [2021] No. 1138

To the Development and Reform Commissions, Economic and Information Technology Commissions (Ministry of Industry and Information Technology, Department of Industry and Information Technology), Energy Bureaus of all provinces, autonomous regions, and municipalities directly under the Central Government, Beijing Municipal Urban Management Committee, State Grid Corporation of China, China Southern Power Grid Co., Ltd., China Huaneng Group Co., Ltd., China Datang Corporation, China Huadian Corporation, State Power Investment Corporation, State Energy Investment Corporation, China Development Bank, and China Resources Group:

To strive to achieve the target of nationally determined contributions to address climate change and promote wind power generation, China is vigorously developing and fully absorbing renewable energy, including electricity and solar power generation. In accordance with relevant laws, regulations, and policies on renewable energy, and in accordance with the requirements for the development of energy production, supply, storage, and marketing systems and renewable energy absorption, and with power grid companies assuming the responsibility for ensuring grid connection for renewable energy, power generation companies are encouraged to increase the scale of renewable energy generation capacity connected to the grid by building or purchasing peak-shaving and energy storage capacity. The following notice is hereby issued:

1. Fully Recognize the Importance and Urgency of Increasing the Scale of Renewable Energy Grid Integration

In recent years, my country's renewable energy has experienced rapid growth, but shortcomings and challenges, such as insufficient flexibility and regulation capacity in the power system, have hindered the development of a higher proportion and larger scale of renewable energy. Achieving my country's carbon peak before 2030 and striving for carbon neutrality before 2060 will be a daunting task requiring arduous efforts. The key to achieving carbon peak lies in promoting renewable energy development, which in turn lies in absorption. The key to ensuring renewable energy absorption lies in grid access, peak-shaving, and energy storage. All regions and relevant power companies must fully recognize the equal importance of renewable energy development and consumption, attach great importance to renewable energy grid integration, and simultaneously research and promote renewable energy development, grid integration, and consumption, ensuring that the carbon peak before 2030 and carbon neutrality before 2060 are achieved as scheduled.

II. Guiding Market Players to Increase Renewable Energy Grid Integration through Multiple Channels

(I) Increasing Renewable Energy Grid Integration and Consumption Capacity through Multiple Channels. Grid companies must truly assume primary responsibility for grid construction and development, as well as renewable energy grid integration and consumption, and coordinate the development of peak-shaving capacity and resource utilization. Grid companies should bear primary responsibility for the annual increase in renewable energy grid integration and consumption, while power generation companies should assume appropriate responsibility for renewable energy grid integration and consumption. As new energy power generation technology advances, efficiency increases, and system peak-shaving costs decrease, the scale and proportion of consumption undertaken by grid companies will be reduced in an orderly manner.

(II) Encouraging Power Generation Companies to Build Their Own Energy Storage or Peak-Shaving Capacity to Increase Grid Integration. In addition to grid companies assuming the responsibility for ensuring grid integration for renewable energy sources such as wind and solar power, renewable energy power generation companies that are still willing to invest and develop are encouraged to voluntarily build their own energy storage or peak-shaving resources to increase their grid integration. Renewable energy power generation enterprises that require the construction of energy storage or peak-shaving capacity according to prescribed proportions may, after approval by the grid company in accordance with procedures, arrange for the corresponding installed capacity to be connected to the grid.

(3) Power generation enterprises are permitted to purchase energy storage or peak-shaving capacity to increase their grid connection capacity. While grid companies assume the responsibility for ensuring grid connection for renewable energy sources such as wind and solar power, renewable energy power generation enterprises that remain willing to invest and construct these resources may assume peak-shaving responsibilities through market-based transactions with peak-shaving resource market entities, thereby increasing the scale of renewable energy power generation capacity connected to the grid. Renewable energy power generation enterprises are encouraged to sign agreements or contracts with newly added pumped storage and energy storage power plants for increased absorption capacity, clarifying the responsibilities and obligations regarding the construction and operation of market-based peak-shaving resources. Renewable energy power generation enterprises that sign energy storage or peak-shaving capacity contracts may, after approval by the grid company in accordance with procedures, arrange for the corresponding installed capacity to be connected to the grid.

(4) Encourage the expansion of peak-shaving resources through multiple channels. Peak-shaving resources that are responsible for absorbing renewable energy include pumped storage power plants, new energy storage technologies such as chemical energy storage, gas-fired power plants, solar thermal power plants, and coal-fired power plants converted from flexible manufacturing. The above-mentioned peak-shaving resources do not include resources already designated as emergency backup and peak-shaving power sources.

III. Confirmation and Management of Self-Constructed and Co-constructed Peak-Shaving and Energy Storage Capacity

(I) Linkage Requirements for Self-Constructed Peak-Shaving Resources. Self-constructed peak-shaving resources refer to power generation enterprises constructing pumped storage, chemical energy storage power plants, gas-fired power plants, solar thermal power plants, or implementing flexible coal-fired power conversion. To encourage market-based participation in peak-shaving resource construction, power generation enterprises exceeding the guaranteed grid connection requirements of power grid enterprises will initially be allocated peak-shaving capacity at a rate of 15% of power (for a duration of four hours or more, the same below). Those allocated peak-shaving capacity at a rate of 20% or more will be prioritized for grid connection. The allocation rate will be adjusted as appropriate after 2022 based on actual circumstances and announced annually. Provincial-level competent authorities may adjust the allocation rate based on actual circumstances after organizing power grid enterprises or third-party technical institutions to evaluate and confirm the project's peak-shaving capacity measures and effectiveness.

(II) Linkage Requirements for Co-constructed Peak-Shaving Resources Jointly constructed peak-shaving resources refer to power generation companies, based on a specific investment ratio, jointly constructing pumped storage, chemical energy storage power plants, gas-fired power plants, solar thermal power plants, or implementing flexible coal-fired power conversion. After the joint construction of peak-shaving resources is completed, renewable energy generation can be built in accordance with the investment ratio multiplied by the self-constructed peak-shaving resource allocation ratio. To encourage power generation companies to actively participate in the construction of self-constructed peak-shaving resources, the initial investment ratio may be slightly higher than the investment ratio.

(3) Determination of Self-Constructed and Jointly Constructed Peak-Shaving and Energy Storage Capacity. Self-constructed and jointly constructed peak-shaving and energy storage capacity will be determined based on the principles of "company commitment, government filing, process verification, and double penalties for false results." Power generation companies that proactively build or co-build peak-shaving and energy storage capacity must provide documentation supporting the construction of their own peak-shaving and energy storage projects, make clear commitments regarding the project's basic details, peak-shaving capacity, and commissioning time, and submit these to the provincial government department for record. During implementation, the provincial government department will authorize power grid companies or third-party organizations to conduct comprehensive inspections or spot checks of these projects. Companies found to have failed to fulfill their commitments will have their peak-shaving capacity deducted by twice the uncompleted capacity when calculating their capacity. Relevant companies must rectify their problems within a specified timeframe. Companies that fail to do so will be barred from participating in the next year's renewable energy market integration program.

(IV) Strengthen the operational management of self-built or co-built peak-shaving and energy storage projects. After completion and commissioning of self-built or co-built peak-shaving and energy storage projects, companies may choose to operate the projects independently or hand them over to local power grid companies for dispatch and management. Power generation companies operating their own peak-shaving and energy storage projects may participate in the electricity market as independent market entities and earn revenue in accordance with relevant national policies. For peak-shaving and energy storage projects that are handed over to power grid companies for dispatch and management, power grid dispatching agencies will conduct dispatch and management of the projects based on the grid's peak-shaving needs, and the projects will earn revenue in accordance with relevant pricing policies. To ensure the availability of project peak-shaving and energy storage capacity, grid dispatching agencies conduct regular dispatching tests on relevant projects.

IV. Confirmation and Management of Purchased Peak-Shaving and Energy Storage Capacity

(I) Main Methods for Purchasing Peak-Shaving Resources. Purchasing peak-shaving resources refers to power generation companies purchasing peak-shaving capacity through market transactions from market entities such as pumped hydropower storage, chemical energy storage power plants, gas-fired power plants, solar thermal power plants, or thermal power plants undergoing flexibility transformation. This includes purchasing peak-shaving energy storage projects and purchasing peak-shaving energy storage services. To ensure that the peak-shaving resources purchased by power generation companies do not occupy the system absorption capacity overseen by the grid company, only newly built peak-shaving resources are purchased from these entities this year.

(II) Requirements for the Linkage Ratio for Peak-Shaving Resource Purchases. For projects exceeding the grid company's guaranteed grid connection requirements, a 15% linkage ratio will be applied to the purchase of peak-shaving capacity initially, with a 20% or higher linkage ratio encouraged. The linkage ratio will be adjusted as appropriate after 2022 and will be announced annually. Provincial-level competent authorities may adjust the linkage ratio based on actual circumstances after organizing grid companies or third-party technical institutions to evaluate and confirm the project's peak-shaving capacity measures and effectiveness. (3) Determination of Purchased Peak-Shaving and Energy Storage Capacity. For peak-shaving and energy storage projects, the purchasing enterprise shall make a commitment and provide a purchase contract to the provincial government department in charge. Peak-shaving capacity will be determined based on the peak-shaving capacity specified in the purchase contract. During implementation, the purchasing enterprise shall be responsible for urging the selling enterprise to ensure project implementation. The provincial government department shall entrust the power grid company or a third-party agency to conduct a comprehensive review or spot check of the projects in the purchase contract. Enterprises found to have failed to fulfill their construction responsibilities as promised will have their peak-shaving capacity deducted by twice the uncompleted capacity when calculating peak-shaving capacity. Relevant enterprises shall be required to rectify their construction within a specified period. Enterprises that fail to do so within the specified period shall not be permitted to participate in the renewable energy market grid connection program in the following year. (4) Strengthening the Operational Management of Purchased Peak-Shaving and Energy Storage Projects. After the completion and operation of purchased peak-shaving and energy storage projects, the purchased peak-shaving energy storage project shall be treated as a self-built project and shall be managed accordingly. For peak-shaving energy storage services, the power generation enterprise and the peak-shaving energy storage project enterprise shall sign a peak-shaving service binding agreement or contract, stipulating the rights and responsibilities of both parties and the distribution of benefits. Long-term agreements or contracts of more than 10 years are encouraged. To ensure the availability of the project's peak-shaving and energy storage capacity, grid dispatching agencies conduct dispatching tests on relevant projects from time to time.

V. Quantity Standards and Dynamic Adjustment of Self-Built or Purchased Peak-Shaving and Energy Storage Capacity

(1) Determination of Peak-Shaving Capacity for Pumped Storage, Electrochemical Energy Storage, and Concentrated Solar Power Plants. For pumped storage, electrochemical energy storage, and concentrated solar power plants, peak-shaving capacity is determined based on installed capacity.

(2) Determination of Peak-Shaving Capacity for Gas-fired Power Plants. For gas-fired power plants, peak-shaving capacity is determined based on the unit's designed output. In cases where power generation output is limited due to factors such as gas sources and weather, peak-shaving capacity is determined based on the actual maximum output.

(3) Determination of Peak-Shaving Capacity for Coal-fired Power Plants with Flexible Manufacturing Retrofits. For coal-fired power plants undergoing flexible manufacturing retrofits, peak-shaving capacity is determined based on the difference between the adjustable output range after the manufacturing retrofit and the adjustable output range before the retrofit or the average adjustable output range.

(4) Coordinated Scheduling of the Construction and Commissioning of Power Generation and Peak-Shaving Projects. Taking into account the construction cycle of new peak-shaving resource projects, local governments should ensure that power generation projects are completed and connected to the grid simultaneously with newly added peak-shaving projects. The proportion of peak-shaving energy storage to be installed will be based on the standards for the year in which renewable energy power generation projects were approved (or filed).

(5) Establish a dynamic adjustment mechanism for peak-shaving and energy storage capacity standards and construction ratios. As the scale and proportion of renewable energy grid connection continue to expand, and as peak-shaving energy storage technology advances and costs decrease, local governments should balance enterprise enthusiasm with system peak-shaving needs. Dynamic adjustments to peak-shaving and energy storage capacity standards and construction ratios may be made based on local conditions.

VI. Operation and Supervision of Peak-Shaving and Energy Storage Trading Mechanisms

(1) Unused peak-shaving resources may be traded to other market entities. Power generation enterprises that implement peak-shaving resources through self-construction or joint construction, if their renewable energy generation capacity installed in a given year falls below the prescribed proportion, will not be allowed to carry over to the next year for continued use. Instead, they may trade them to other power generation enterprises through market-based means.

(2) Quota trading must be coordinated within the province. To ensure that newly added peak-shaving capacity effectively promotes renewable energy consumption, power generation companies must coordinate efforts within their respective provinces (autonomous regions, and municipalities) when self-building, co-building, purchasing, or trading peak-shaving resources.

(3) Strengthening Operational Supervision. Local government departments, in conjunction with power grid companies, will strengthen oversight of power generation companies' commitments to self-build, co-build, or purchase peak-shaving projects. After projects go into operation, dispatch agencies will periodically conduct dispatch operations based on the peak-shaving capacity promised by the companies to ensure that the peak-shaving capacity is authentic, reliable, and operational. Companies that falsely promise peak-shaving capacity will be disqualified from independently assuming renewable energy consumption responsibilities in the following year.

VII. Safeguard Measures

(1) Strengthening Organizational Leadership. The National Development and Reform Commission and the National Energy Administration will coordinate efforts nationwide to increase the grid-connected scale of renewable energy power generation companies' self-built or purchased peak-shaving capacity. They will comprehensively monitor the implementation progress of all regions and companies and coordinate the resolution of major issues encountered during implementation. The Development and Reform Commissions and Energy Bureaus of all provinces (autonomous regions, and municipalities directly under the Central Government), in conjunction with relevant provincial-level departments, will, based on local power development realities, encourage local power generation companies to independently assume responsibility for renewable energy consumption. This work should be effectively coordinated with grid companies' guaranteed grid connection, emergency standby, and peak-shaving unit construction efforts to avoid duplication of project counts.

(2) Grid companies should effectively fulfill their supervisory and grid connection responsibilities. State Grid Corporation of China and China Southern Power Grid Corporation should organize local grid companies and cooperate with local government departments to strengthen effective oversight of power generation companies' self-built, co-built, and purchased peak-shaving energy storage projects, ensuring the smooth progress and operational viability of these projects. For companies that complete the construction of peak-shaving energy storage capacity as required, they should diligently ensure the grid connection of correspondingly scaled renewable energy resources.

(3) Improve and perfect reward and punishment and evaluation mechanisms. The National Development and Reform Commission and the National Energy Administration will improve and enhance the reward and punishment and evaluation mechanisms. Regions where renewable energy power generation companies have made significant progress in building or purchasing peak-shaving capacity to increase grid connection will be commended, and regions where progress has lagged behind will be interviewed. As this work progresses, third-party assessments and other methods will be used as appropriate to conduct comprehensive evaluations of renewable energy power generation companies' efforts to build or purchase peak-shaving capacity to increase grid connection.

National Development and Reform Commission

National Energy Administratio