SHP POLICY IN CHINA
A favorable policy framework has facilitated China’s success with small hydropower development.
Through a principle of self-reliance, the so-called “Three-Self Policy” focuses on self-construction, self-management and self-consumption of SHP stations. It is a unique and important feature of SHP policy in China.
Generally, the preferential policies aim to:
- Prioritize SHP stations;
- Give preference to local level ownership of SHP stations;
- Give preference to local industries and productive uses;
- Bring services to rural communities.
Key tenets of the policy framework are as follows:
(i) System of leadership by example. Leaders across all levels of government were mandated to give special consideration to SHP development.
(ii) Establishment of Rural SHP Development Foundation. In SHP supply areas, the central government permits the local government to collect 2 fen/kWh from electricity sales to establish a ‘Foundation for Rural SHP Development’.
(iii) Electricity generates electricity. The profits from SHP stations and local grids are not sent to the local financial bureau; instead profits remain with the county companies or enterprises for construction of new SHP stations and local grid improvements.
(iv) Tax reduction policy. SHP companies enjoy preferential Value Added Tax (VAT) rates and income tax exemptions or reductions.
(v) Tariff policy. The central government allows electricity prices (tariffs) to be determined by the guiding market principle of reasonable profits according to the reasonable payback period (years).
(vi) Loan policy. All national banks have established special soft loan facilities with low interest rates for SHP development.
(vii) Policy to protect SHP supply areas. In order to ensure a reliable market for SHP electricity, SHP local grids are linked to the national grid where possible; in the dry season SHP grids buy electricity from the large grid and in the rainy season are able to sell excess electricity back to the large grid.
In addition to the above policies, China has established three distinct management systems for station connectivity:
1. In eastern China, SHP stations are directly connected to the national grid;
2. In western China, local grids are built in mountainous regions;
3. Some stations operate in isolation.
China’s 13th Five Year Plan
The 13th Five Year Plan (2016 – 2020) outlines key policy targets for small hydropower.
Priority work includes:
- Green standards in place for SHP plants
- Refurbishment of SHP plants to improve capacity
- Ecological restoration of rivers
- Poverty alleviation and farmer assistance through SHP projects
- Improved safety production standards