Abstract
To reach Carbon Peak in 2030 and Carbon Neutrality in 2060, China is developing renewable energy at a fast pace. Renewable energy enterprises will participate in the power market in an all-round way as China gradually improves its electricity market. Signing the Power Purchase Agreement (PPA) helps renewable energy companies to avoid market risk and achieve sustainable development. Therefore, a novel PPA pricing model is proposed in our research. Based on the theory of the Levelized Cost of Energy (LCOE), our model considers system operating costs in China’s dual-track electric power sector, which is both government-guided and market-oriented. First of all, key influencing factors of the PPA agreement are analyzed in view of the developments of the renewable energy and electricity markets in China. Next, the design of pricing strategies for renewable energy power plants to cope with market challenges is presented through a photovoltaic project case study. The results show that when the operating costs of the system are considered and other conditions remain unchanged, the investment payback period of the new energy power station will change from 10.8 years to 13.6 years. Furthermore, correlation degree and sensitivity coefficient (SAF) were introduced to conduct correlation analysis and sensitivity analysis of key elements that affect the pricing of the PPA. Finally, it is concluded that the utilization hours of power generation have the most significant effect on the PPA price, while the system’s operating cost is the least sensitive factor. The study expands the application of LCOE, and provides a decision-making solution for the PPA pricing of renewable energy power enterprises. It is expected to help promote power transactions by renewable energy companies.
Highlights
Last year, China released its strategic goal to reach “carbon peak by 2030 and carbon neutralization by 2060”, and the plan to increase its installed capacity of wind and solar power to more than 1.2 billion kilowatts in 2030 [1]
When applying the Levelized Cost of Energy (LCOE) model to determine the Power Purchase Agreement (PPA) price, some scholars consider factors affecting the cost of renewable energy companies, such as a project’s residual value or tax reductions and exemptions, but ignore the full cost of companies participating in market transactions, especially in China’s dual-track electricity market
Correlation Analysis 1: Investment Cost and PPA Price According to the conditions in and prospects of China’s photovoltaic industry, the average cost of constructing a photovoltaic power plant was between 2100–3100 CNY/kW in 2020, and it is expected to fall to 2100 CNY/kW by 2025
Summary
China released its strategic goal to reach “carbon peak by 2030 and carbon neutralization by 2060”, and the plan to increase its installed capacity of wind and solar power to more than 1.2 billion kilowatts in 2030 [1]. Wang Yongli [31] considered the cost of environmental externalities, Sun Jianmei [32] measured the income per CER unit, and Chang Dunhu [33] introduced policy factors into the LCOE model to analyze the economic sustainability of photovoltaic power generation projects. Many of these scholars have analyzed related issues on longterm PPAs and LCOEs, but their studies lack a systematic analysis of the key elements of PPA pricing adapted to the Chinese electricity market, which is expanding to become wider and greener.
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