It is not an exaggeration to describe the impact of the "531 New Policy" on the photovoltaic industry as "misery everywhere". On June 6, the New Energy Department of the National Energy Administration and some enterprise representatives of the Photovoltaic Industry Association held a symposium and put forward six opinions on the healthy development of the photovoltaic industry. "Intensifying the reform of the power system and effectively promoting the pilot of market-based trading of distributed power generation" is a very important measure that the industry is looking forward to. Some industry insiders even regard market-based trading as a new spring for the photovoltaic industry. In the cruel background of subsidy elimination, the mood of injecting a shot of adrenaline into the market is understandable, but rational analysis shows that the role of market-based trading of distributed power generation in improving the rate of return of photovoltaic projects is really limited and phased. In the long run, there is still a long way to go for photovoltaics to fully participate in the future power market and have competitiveness with traditional energy.

Director of Smart Energy Office, System Planning Research Center, East China Institute of China Electric Power Engineering

Original article published in China Energy News on June 18, 2018, titled: Market trading is unlikely to be a life-saving straw for photovoltaics

Distributed power generation market-based trading has limited effect on improving photovoltaic revenue

Under the new policy, the subsidy loss amount for projects with indicators is 0.05 yuan/kWh, and the subsidy loss amount for projects without indicators is 0.37 yuan/kWh (i.e., considering no subsidy). The role of distributed power generation trading in improving photovoltaic revenue is mainly reflected in the following aspects: First, it can be sold to nearby industrial and commercial users at a higher price than the benchmark on-grid electricity price; second, local transactions do not need to consider the transmission and distribution prices outside the transaction scope, reducing transaction costs, but still need to consider the "grid access fee" within the transaction scope.

Under this logic, it is easy to calculate the loss of "subsidy reduction" made up by distributed power generation market-based trading. How much loss can be recovered through distributed power generation trading depends mainly on the amount of electricity involved in the transaction, the transaction price and the "grid access fee". For distributed projects that are completely self-consumed, since there is no surplus electricity to participate in the transaction, they cannot enjoy the dividends brought by market-based transactions. In other words, such projects cannot make up for the losses caused by "reduction and subsidy" through market-based transactions.

Fortunately, under the existing rules, photovoltaics participating in distributed power generation transactions do not need to assess the deviation electricity and transaction curve, and the "grid access fee" is relatively low under the existing transmission and distribution price mechanism. However, even so, the benefits of the project through distributed transactions are very limited and cannot completely offset the loss of income caused by "reduction and subsidy".

Photovoltaic market-based transactions in the future power market environment

Will face more cruel facts

Overall, my country's power system reform is still in its infancy, and the trading rules are still relatively simple. The importance of the auxiliary service market for power transactions and the reward and punishment mechanism are still to be reflected, and the rationality of the transmission and distribution price mechanism is also to be improved. However, when my country truly completes the construction of the power market, photovoltaics participating in distributed power generation transactions in the future will face more cruel facts.

First, the "interrogation fee" for the electricity volume participating in the transaction is likely to be higher than the current price, and the transaction cost of this part will be further raised after considering the cross-subsidy factor. my country's power system reform is not an isolated reform of a certain content. Transmission and distribution prices, power market, distribution and sales of electricity are all coordinated and integrated reforms. Today, when the photovoltaic industry is complaining, the incremental distribution network, another main force of power reform, has long been crying out for injustice. A major problem facing the incremental distribution reform is the reasonable reflection of the distribution cost by the existing transmission and distribution price mechanism. Once it is found through the benchmarking of the incremental distribution business that the "grid fee" of the distribution part should be raised, distributed photovoltaics will also pay higher transaction costs.

The second is the problem of deviation assessment and power generation curve. Deviation assessment and power generation curve are a hurdle that photovoltaics cannot bypass in the future power market environment. As we all know, the power generation curve of photovoltaics is uncontrollable, so it is necessary to solve this problem by purchasing ancillary services. With the improvement of the ancillary service market. This is definitely a considerable cost, which will also lead to a further increase in the transaction cost of photovoltaics participating in distributed power generation in the future. And once photovoltaics participate in the spot market, these problems will become more prominent.

It is more important to recognize the situation than to have blind expectations

At present, China's power system reform has just started, and many rules are not perfect. However, for photovoltaic projects to participate in distributed power generation transactions, it also gives the photovoltaic industry a buffer period to adapt to the power market. Under the background of "reducing subsidies" and the existing distributed power generation transaction rules, even with the reduction of photovoltaic costs. Photovoltaic projects can achieve considerable returns through distributed power generation transactions, but the industry must also recognize the situation and have a sense of crisis about the future power market environment.

There is no doubt that green energy represented by photovoltaics will be the main force of the future energy system. However, the future energy system must not be a system in which energy types and market mechanisms exist in isolation, but a complex system in which different energy types and market mechanisms are coupled. Similarly, for photovoltaic investment, the future consideration is not only how photovoltaics themselves can benefit from participating in market-based transactions, but how to combine distribution networks, energy storage, etc. to form a complementary and sustainable integrated energy system, and this type of integrated energy system will truly have the competitiveness of future market-based transactions.