Overview of the Policy Instruments for Renewable Energy Development in China

Abstract

The current legal and policy system of renewable energy in China has set up a framework of policy instruments, which provides an important foundation for dealing with climate change and promoting the healthy development of the renewable energy industry with the goal of “carbon neutrality” and “emission peak”. However, the current policy instruments cannot meet the needs for rapid development of the renewable energy industry. This paper investigates, analyzes, and concludes the status of renewable energy development along with related policy instruments in different renewable energy sources by literature and points out the problems of current policy instruments, and puts forward corresponding countermeasures. Moreover, from the perspective of energy consumption market transformation, the authors carried out an analysis of China’s challenges of policy instruments, pointing out that China’s renewable energy policy instruments have the potential to take one step further in the areas of the regulatory system, legal system and legal security system.

1. Introduction

1.1. Background

The impact of energy shortage and environmental pollution on the world economic development is increasingly prominent [1]. On the 5th anniversary of the Paris Agreement, China declared its national goal of achieving “emission peak” by 2030 and “carbon neutrality” by 2060. In terms of China’s current energy consumption structure, fossil energy represented by coal is still the mainstay of current energy utilization. However, traditional fossil energy sources such as coal and oil are being replaced by renewable energy sources such as solar, wind, and nuclear energy [2]. The Chinese government is aware that in order to achieve long-term economic development, it is necessary to properly deal with climate change, energy demand and environmental protection. The development of renewable energy provides an effective solution to these problems [3]. The renewable energy industry needs policy instruments to support it in order to survive in the market in the early stages of development [4]. However, subsidies do not last long. As the renewable energy industry develops, the support and subsidy mechanism will be phased out, and the energy industry will enter the commercialization stage. Finally, a policy system combining government guidance and market mechanism will form [5].

The current legal system of renewable energy in China has set up four policy instruments, which includes (1) Total target planning; (2) Feed-in tariffs; (3) Cost sharing; and (4) Tax preference. Those policy instruments provide an important foundation for promoting the healthy development of renewable energy industry. However, the legal status of renewable energy in China is not optimistic overall. The laws and regulations are not perfect, the legal content needs improvement, and the legal guaranteed mechanism needs to be improved. Therefore, we should start from the above aspects to improve the legal support system for the development of renewable energy industry.

1.2. Literature Reviews

Among different types of new energies, Zhang et al. (2017) introduce the energy structure and the status of renewable energy in China, present the development status of hydropower, wind power, solar power, biomass power and other renewable energy [6]. As for the wind energy, Sahu (2018) argues that the Chinese government provide attractive policies for the wind energy manufacturing firms and presents an overview on current developments of wind energy in China [7]. Karplus et al. (2016) evaluate the potential energy cap designs for fossil energy in China, suggest that a fossil energy cap builds on institutions can offer a viable step toward a CO₂ emissions trading system [8].

Firstly, to figure out the affective factors of the renewable energy, Zhao and Chen (2018) launch an investigation on factors affecting renewable energy development in China, establish a novel driving force model to demonstrate the interaction mechanisms for renewable energy power generation and point that renewable energy power generation has achieved tremendous growth based on various incentive policy instruments [9].

Secondly, as for the policy instrument, Shen and Luo (2015) present renewable energy subsidy policies and their effects according to the data of energy industry in China, argue that subsidy policies have short-term effects and some negative effects are identified [10]. Zhang et al. (2017) analyze the policy instruments of feed-in tariff and renewable portfolio standards for wind power industry in China through scenario analysis method, suggest that the integrate implementation of feed-in tariff and renewable portfolio standards can promote long-term and rapid development of wind power industry [11]. Tu and Mo (2017) construct a partial equilibrium model to explore the interaction between policy instruments including carbon pricing and renewable electricity subsidies, suggest that a mixed policy instruments is necessary to meet the policy targets compared to a single policy instrument, the Chinese government should tight the carbon emission budget to stabilizes the CO₂ prices [12].

By empirical analysis, Hu et al. (2016) examines the problems of renewable energy development in Sichuan province of China through analyzing the underlying causes from the perspectives of environment, market technology and policy. The authors suggest that the local government should improve the pricing mechanism and mandatory share policy for non-hydro renewable energy to resolve the existing problems [13]. Shen et al. (2016) presents the development of building energy-efficiency policy instrument by investigating the practices in seven counties and regions, argue that different countries have made progress by adopting different policy instruments [14]. Shen (2017) investigates the policy community in China’s renewable energy sectors, suggests that influential corporations including wind turbine and solar panel manufacturers and state-owned electricity companies play an important role in the renewable energy policy-making process, moreover, the industrial interest groups who own resources are constraining governments autonomy in the renewable energy policy process [15]. Duan et al. (2018) constructed a stochastic energy-economy-environment integrated model to evaluate China’s energy and climate targets in 2030, indicate that the policy mix of carbon pricing and non-fossil energy subsidies can meet the carbon emission targets [16]. Li et al. (2022) takes the wind energy industry of the technology-push policy as well as the demand-pull policy on innovation in the wind power industry [17].

With an international perspective, Hua et al. (2016) compares the renewable energy policies between Australia and China, conclude that both countries set a renewable targets and promulgated legislation to promote the development of renewable energy [18]. Kaime, T. et al. (2015) takes offering incentives and subsidies have proved to be useful in bringing positive changes in the Europe [19]. Lin et al. (2016) applied the Johansen cointegration technique and vector error correction model to investigate the factors influencing renewable electricity consumption in China, argue that renewable energy consumption has a relationship with GDP per capita, trade openness financial development etc., suggest that the Chinese government should pursue policies which can increase the share of renewable energy in total electricity consumption [20]. In Malaysia, Karim et al. (2022) point out the “renewable energy and international legal regime”, but there is no “best model” to govern [21]. Coronas, S. et al. (2022) present Spanish governments launched a highly favorable energy policy combined with strong public incentives during the first decade of the 2000s. However, the Spanish governments implemented retroactive measures during the period 2008–2020. In recent years, the Spain set electricity prices by limiting the costs for the power system [22].

From the above analysis, we can see that the existing literature mainly focuses on macro-level analysis of a variety of renewable energy policy instruments. According to the current legal system of renewable energy in China, this paper analyzes the policy instruments commonly used in different renewable energy sources, constructs an institutional analysis framework, analyzes the problems of current policy instruments, and puts forward corresponding countermeasures. On the one hand, this study is conducive to enriching the theoretical basis of renewable energy law and policy research, on the other hand, it is significant to solving practical problems in the development of renewable energy industry.

2. Main Policy Instruments for Renewable Energy Development in China

2.1. Total Target Planning Policy Instrument

Total target planning is an important policy instrument to promote the development of renewable energy in China, and the development of solar photovoltaic industry is also carried out around this policy. China has developed a series of five-year, medium and long-term plans that set out guidelines and objectives for the promotion of renewable energy [23]. China formulated the total target of renewable energy development through the Fourteenth Five-Year planning and other form. In the 14th Five-Year Plan period, China will accelerate the green transformation of the development mode and promote the high quality of economic development and the high level of ecological environment protection [24]. Total target planning needs to be predictable, coherent, strategic, mandatory and so on.

However, China’s total amount of solar energy development goals were short of forward-looking and lacked full evaluation of the development of the photovoltaic industry, therefore the target was modified several times. Frequent changes are not conducive to maintaining the stability and authority of the total target system. The reason for this phenomenon is the scientific investigation of photovoltaic industry market is missing, and the total target will be divorced from reality without basing on scientific investigation. In addition, the total amount of development of solar photovoltaic industry in China is based on the measure of the installed capacity, rather than the standard of actual power generation. Measures of the design is easy to cause the enterprise blinding production of photovoltaic modules, launch huge installed capacity of the project, but the actual power generation is rare, resulting in vicious competition and waste of resources and enterprises. The total target system needs to be optimized in the measure of the standard.

2.2. Feed-In Tariff Policy Instruments

Feed-in tariff is the policy instrument of mandatory requirements in which the government purchases renewable energy electricity at a specific price from power grid enterprises for encouraging the development of renewable energy power generation industry [25]. Due to the lack of stability and the high cost of power generation, photovoltaic power generation has less competitive advantage in competing with the traditional energy generation. In order to protect the survival of the solar photovoltaic industry, mandatory access to electricity tariff subsidies and the acquisition system is inevitable choices.

“Renewable Energy Law of the People’s Republic of China” (the “Renewable Energy Law”) provided the statutory obligations of power grid enterprises, regulations that power grid enterprises must acquire its full grid coverage of renewable energy generation projects within the scope of power, and to provide the necessary services on the Internet for renewable energy. The State Council also issued a series of documents to support the system of electricity tariff subsidies, and specific rules for the operation of the provisions. In 2006, the national development and Reform Commission promulgated the “Renewable Energy Power Generation Price and Cost Sharing Management Pilot Scheme”, providing the acquisition of electricity price benchmark. The National Energy Administration issued a “Notice on Matters Relating to the Construction of Wind Power and Photovoltaic Power Generation Projects” in 2020 on 5 March 2020, to promote parity projects and projects requiring state financial subsidies.

China implemented mandatory price subsidy policy instruments by force to solar power and other renewable energy power, providing power companies must purchase provisions within the grid coverage of renewable energy power and purchasing power at a certain price, thus encouraging Internet sales and profit of renewable energy power generation. This system solves the problem of photovoltaic power companies’ difficult to a certain extent. However, limited by the current low level of technology, grid enterprises need to bear the high cost of connection and transmission costs for grid connected photovoltaic power generation. Even if the “Renewable Energy Law” stipulates that generated related costs of the power grid enterprises for the acquisition of renewable energy power generation of electricity can be included in the transmission cost of power grid enterprises and recovered from the sale price of electricity, but in the actual operation, the cost price recovery is not enough to bear the expenses of grid enterprises for the acquisition of renewable energy power generation of electricity, thereby affecting the enthusiasm of the grid connected photovoltaic power grid enterprise acquisition.

For the generation of solar photovoltaic power generation, China is currently implementing in the classification of electric power policy instruments. Article 19 and chapter 5 of the “Renewable Energy Law” of China provided implementing classification of the price of electricity, which means in the framework of the law ensuring the main market objects’ return on investment according to the specific investment cost and the corresponding tariff provisions in different periods in different regions. The policy promoted the investment enthusiasm of main market players on photovoltaic power generation projects in different areas and different time to a certain extent, but restricted the healthy competition of enterprises, and caused restricted effect with the development of photovoltaic industry.

2.3. Cost Sharing Policy Instrument

Cost allocation refers to the policy instrument to solve the problem of low price gap between the higher price of solar photovoltaic power generation and conventional power generation, and the price difference will be added to the sales price [26]. The system is conducive to encouraging investment in the main increase in the investment of solar photovoltaic industry. the “Renewable Energy Law” stipulates that the grid enterprises can share the cost generated by purchasing renewable energy power. The cost of production included reasonable installation costs and infrastructure construction costs.

Cost sharing refers to demand electricity consumers assuming the additional cost generated by the renewable energy, thereby promoting the large-scale development of renewable energy. This policy solves the problem of additional cost of photovoltaic power generation project but exists issues such as single source of compensation funds and long capital compensation cycle length. According to the “Renewable Energy Law”, China’s cost sharing funds came from the electricity price, cannot narrow the gap between the cost of solar photovoltaic power generation costs and the cost of traditional energy. At the same time, China’s whole network sharing policy instrument cannot effectively motivate producers and consumers to develop clean energy.

Renewable energy development fund is a powerful measure to promote the development of photovoltaic industry with public investment, and it is widely used in the world. The state finance established the renewable energy development fund, supported renewable energy development and utilization of science and technology research, standards development and demonstration projects, and energy resources exploration, evaluation and construction of relevant information systems. As a new energy industry, PV industry needs to have sufficient financial support to develop healthily in the early stages of development. The “Renewable Energy Law” does a special provision on the establishment of renewable energy development fund. The financial department of the state established special funds for renewable energy development, supporting research and demonstration projects, supporting domestic photovoltaic power generation project in rural, pastoral and island areas, supporting the construction of investigation of the renewable energy and evaluation system, and supporting the program of localizing the photovoltaic industry equipment. In order to coordinate the implement of law, on 3 July 2020, the Ministry of Finance issued a “Notice on Matters Relating to the Construction of Wind Power and Photovoltaic Power Generation Projects”, specifying a total national renewable energy tariff subsidy funds budget of about 92.4 billion yuan in 2020, of which PV projects received about 47.3 billion yuan, accounting for about 51%. However, the provisions of the renewable energy made by the “Renewable Energy Law” are still vague and there is no clear source of funding, which cannot fundamentally solve the problem of the lack of funds in the development of solar photovoltaic industry, and the problem of PV subsidy arrears is expected to be solved only in 2040 [27].

2.4. Tax Preference Policy Instrument

For China’s solar photovoltaic industry, tax incentives are reflected in the tariff, VAT (Value-Added Tax) and corporate income tax, the specific form of tax cuts and exemptions. The “Renewable Energy Law” stipulates that the state gives preferential tax policies to the projects listed in the development of renewable energy industry. According to China’s Renewable Energy Law, governments can use tax credits to promote the development and adoption of renewable energy [28]. The state adopts preferential policies of deducing the collection of value-added tax to photovoltaic equipment manufacturers.

At present, China’s renewable energy development and utilization of existing tax concessions mainly include the following. “Notice of the Ministry of Finance and the State Administration of Taxation on value-added tax policy for photovoltaic power generation” (fiscal 2013 No. 66) regulates implementing the 50% VAT refund policy to solar power products produced by the taxpayer for sale.

China’s preferential tax policies for solar photovoltaic products are less, and most of the tax preferential policies are formulated by the State Council departments, and has single form and are short of stability. The form of tax preference is relatively single, and the preferential amount is not high, which does not have a system of tax incentives to the investment business of photovoltaic power generation projects. Nonetheless, it has been pointed out that the power plants of most companies refuse to pay additional taxes for renewable energy, to which the “Renewable Energy Law” provides no specific penalties.

3. The Legal Challenges of Renewable Energy Policy Instruments

Many countries have formulated legal systems to support the construction and use of their renewable energy industries, facilitating the rapid growth of this industry [29]. Admittedly, China has established a relatively complete renewable energy law and policy system to promote renewable energy development. On 28 February 2005, the “Renewable Energy Law” was passed by the National People’s Congress, marking a new stage of renewable energy development in China. Since the “Renewable Energy Law” was introduced, a number of supporting regulations and guidelines have been put into place to implement the law [30].

However, compared with other states, China’s renewable energy laws and policies have some disadvantages to be improved [31]. For example, there is a mismatch between the existing laws and industrial development needs, which restricts the future development of photovoltaic power generation in China [32]. As a conclusion, the current legal system of renewable energy provides an important foundation for promoting the healthy development of the renewable energy, but there are still many problems to be solved in terms of the legal system, the content of the system and the safeguard mechanism.

3.1. The Legal System Is Not Reasonable

First, the classification legislation is incomplete. The “Renewable Energy Law” is the only one specialized renewable energy law in China at present. Relevant departments of the State Council introduced some provisions involved in wind energy, biomass energy, solar energy and so on which is incomplete. Some provisions are too scattered to meet the inherent needs of the development and utilization of the renewable energy industry. For solar energy legislation, only the “Renewable Energy Law” involves solar energy development and utilization of the law; part of the principal provisions is only provided in the “The Solar Photovoltaic Building Application Financial Subsidies Provisional Measures” and other departmental regulations, without special administrative regulations. In addition, the implementation of solar energy development and utilization of the implementation of the rules are not balanced, and more focused on solar thermal requirements, in some areas such as photovoltaic power generation, only part of the electricity price and other renewable energy power generation jointly adjusted by the relevant law. The use of this form of photovoltaic power itself, both sectoral regulations and industry standards, are still a gap. At the same time, the implementation details of solar energy development and utilization do not reflect the core technology support. Basic on different types of renewable energy, development and utilization of technology, the characteristics and conditions of surgery, as well as regional endowments and other resources, personality characteristics, the development of classification legislation in the specialized area of renewable energy became an urgent need.

Second, supporting regulations need to be improved. Although there are dozens of supporting regulations and rules related to renewable energy in our country at present. Therefore, the legislation of important fields such as financial subsidies for renewable energy and preferential tax credit, investigation of renewable energy resources, development of technical standards for renewable energy integration and so on has been delayed.

Third, the local legislation needs to be strengthened. With a vast territory, our country has its own characteristics of reserves, structure, and consumption of energy resources. However, some major provinces that use renewable energies have not formulated corresponding local legislation. Some provinces that have formulated relevant laws and legislations have only limited development and utilization activities and their legal regulation to a certain status.

3.2. The Legal System Is Imperfect

Renewable energy quotas, green electricity prices, government green procurement system plays a prominent role in the renewable energy law, but it needs improvement. However, the renewable energy quota system has so far failed to be fully implemented in our country. The green electricity tariff system is also not clearly stipulated in the law, and some regulations and regulations are not binding. In November 2006, China formally incorporated environmental criteria into government procurement. However, due to the lack of experience and the lack of sound laws and supporting laws and regulations, there are still some problems such as the non-uniform procurement standards, the limited procurement scope and the limited scale, and the related information construction lag, the lack of high-quality procurement of specialized personnel and other issues.

As for the pricing mechanism, there are still some problems such as low implementation, unrealistic practices and lack of flexibility. Taking the price of wind power as an example, the offshore wind power generation basically uses the concession bidding price. The bidding price of the first round of bidding projects ranges from 0.62 yuan/kWh to 0.74 yuan/kWh, which is close to the highest on-grid electricity price of onshore wind power [33]. Some land-based wind power resources in four areas of the benchmark feed-in tariffs, due to various types of resource areas covering a wider area, the regional division is not fine, resulting in electricity prices chaos. In addition, as far as the current price of about 0.5 yuan/kWh coal price, the photovoltaic Internet benchmark price of 1 yuan/kWh is still high enough.

3.3. The Safeguard Mechanism Is Not Sound

First, the threshold is too high and only supporting a narrow range. Loan discount interest is mainly used for inclusion in the National Renewable Energy Industry Development Guidance Catalog and the projects which are in accordance with the credit conditions of renewable energy development and utilization. Only when the bank loans are in place and the project undertaking entities or individuals have already paid interest can be arranged discount interest. in most cases, only listed companies that have a leading position in renewable energy and strong research and development capabilities will be able to obtain “The Development Fund”. Additional subsidies for renewable energy tariffs are mainly determined by the Ministry of Finance, the National Development and Reform Commission, and the National Energy Administration through the promulgation of a list of supplemental subsidies for renewable energy tariffs. So far, the State Grid has announced 14 batches of renewable energy subsidy lists. Among them, 24,142 solar power projects with capacity of 73.84 GW; 455 wind power projects with capacity of 32.69 GW; 204 biomass power projects with capacity of 3.88 GW. However, the main beneficiaries are large state-owned enterprises.

Second, lack of funds and financial support. Although the state has set up a renewable energy development fund, the total amount of investment in renewable energy by the fiscal authorities is not sufficient. At the central level of China, the cost of tackling renewable energy science and technology projects arranged annually by the government is insufficient, and most of them are occupied by the operation of institutions and personnel resources, with even fewer investments by local governments and industries. In addition, renewable energy investment and financing channels are relatively simple, which is lack of private capital and international capital absorption capacity.

Third, technological development lags behind and research and development capabilities are weak. China’s renewable energy technology innovation is not high, high-tech basically relies on imports, and the localization of key equipment is low. At the same time, the integrated application of renewable energy technology is relatively weak, the economic and environmental benefits brought by the development are not obvious, and it is difficult to have a large demonstration effect. Another more serious problem is that less investment in scientific research, scientific research institutions and commercial cooperation is not active, leading to the development of basic technology behind the low level of system technology.

Fourth, lagging grid construction and difficulties in Internet access. The geographical distribution of wind power and solar energy resources in our country does not match with the existing power load, and lags behind the construction of power grids. There is no net connection for a large number of wind power generation. The direct consequence is the equipment outage and the loss of enterprises. According to statistics, From January to September in 2021, the national abandoned wind power was about 14.78 billion kWh. A large amount of power generation cannot access the Internet, making the wind power enterprises that are already heavily invested in the earlier stage facing the challenge of survival [34]. Although our country is actively building a smart grid, there are difficulties in R&D, safety and security, technical standards and profitability modes of new technologies, which require a long period of research and development and practical exploration.

Finally, the supporting service system is not perfect. Due to the lack of long-term capital and technical input, China’s manufacturers of renewable energy products have not formed a specialized manufacturing industry. They have a small scale of production, low level of intensification, backward manufacturing processes, unstable product quality, low localization manufacturing rate, so it’s difficult to reduce manufacturing costs and providing the required units and spare parts timely [35]. In the meantime, the unit manufacturers have not invested enough in the quality and after-sales service of the existing products, the resource utilization efficiency is low. Take wind energy as an example. Some of the wind power equipment in the same batch of wind power supply projects have adopted a variety of products from different manufacturers for their internal electrical components and control systems. This has resulted in the spare parts storage of the wind farm put into operation difficult. If after-sales service, for large wind farms that operate hundreds of fans at the same time, the pre-generation efficiency will be directly affected by the maintenance speed [36].

4. Policy Implications for Improving the Legal System of Renewable Energy

To solve the above problems, we should start from the legal system and the security system. Improve the legal system should be focused on improving renewable Energy Law, special legislation, and supporting regulations, while strengthening local legislation.

On the one hand, to improve the legal system, the most important thing is to establish a renewable energy quota system, the green electricity system, the government green procurement system, improve the pricing mechanism. On the other hand, to strengthen the security system, efforts should be made to perfect the economic incentive mechanism, promote scientific research and technological innovation, and at the same time, strengthen the planning and construction management of power grids.

4.1. Improve the Renewable Energy Regulatory System

First, improve the “Renewable Energy Law”. The law was intended to achieve five overriding goals: (1) establish the importance of renewable energy in China’s national energy strategy; (2) remove market barriers; (3) create markets for renewable energy; (4) establish a financial guarantee system; and (5) create awareness, skills, and understanding [37]. The development and utilization of renewable energy as a basic way to deal with climate change and develop a low-carbon economy, which should be made clear in the legislative purpose of the “Renewable Energy Law”. Important legal systems such as renewable energy quotas, green tariffs, and green procurement should be clearly defined in the Renewable Energy Law. In addition, the “Renewable Energy Law” should also strengthen the planning of heat and fuel and make corresponding provisions on the prevention and control of ecological and environmental problems that may arise from the utilization of renewable energy.

Second, improve the special legislation. We should put the development of wind energy, solar energy, biomass energy and other special energy legislation targeted. For example, feed-in tariffs must provide adequate financial incentives to project developers, but not overly generous profits this can be a careful balancing act [37]. In further legislation, the government will focus on the investment subsidy system, improve the quota system of renewable energy, clarify the prices under certain conditions (such as feed-in tariffs) and fiscal and tax incentives. At the same time, we should provide provisions for encouraging the development of renewable energy technologies. Special legislation should also pay special attention to supporting measures, such as strengthening the protection of renewable energy technology innovation and intellectual property rights, protecting the smooth flow of financing channels and so on.

Once again, this will improve supporting regulations. The validity of legal norms is a problem rooted in the legal process, which needs the timely introduction of appropriate national laws and regulations to be protected. Therefore, it is necessary to formulate the regulations and rules which is compatible with the “Renewable Energy Law” and the development and utilization of various types of renewable energy as soon as possible. In particular, the pricing policies, fiscal and taxation incentives and grid-connected technical standards should be improved as soon as possible to improve the on-grid electricity price of offshore wind farms Policy, formulate “Management Measures for Renewable Energy Quota System”, “Management Measures of Renewable Energy Development Fund” and “Implementation Rules of Full Guaranteed Acquisition of Renewable Energy Sources”.

Finally, strengthen local legislation. The development and utilization of renewable energy needs to be tailored to local conditions. For example, it is necessary to develop wind energy in the northwest region and develop marine tidal power in the southeastern coastal areas. All localities should formulate a special development and utilization plan in line with the province’s conditions and implement it through local legislation in accordance with the national industrial development plan and the basic provisions of the “Renewable Energy Law”. It should be emphasized that local legislation should be in line with the current situation of the development of renewable energy industry in our country and give full consideration to the connection with the relevant legislation and system, avoid making state-owned provisions similar to climate resources. For details, see Article 3, Paragraph 1 of the “Regulations for the Detection and Protection of Climatic Resources in Heilongjiang Province”. In fact, such provisions are not conducive to the healthy development of the renewable energy industry.

4.2. Improve the Legal System of Renewable Energy

4.2.1. Renewable Energy Quota System

Renewable energy quota system refers to the legal form of renewable energy power generation in the share of electricity supply mandatory set of measures. Setting a target for percentage of renewable energy to be met over a period of time. Implementing a mechanism to buy renewable electricity from others through self-built renewable energy power generation equipment and purchasing from green power markets renewable energy certificates to complete the quota obligations in ways.

The renewable energy quota system is generally applicable to renewable energy sources that are technically feasible, optimistic about the economic prospects and have environmental and social benefits. Considering China’s renewable energy resources and technology development potential, China’s renewable energy quota system can give priority to the development of small hydropower 25 MW or less, wind power, solar energy, geothermal energy, biomass energy and tidal power generation. However, there is controversy over whether to include hydroelectricity in the academic community. In theory, water can also be a clean, low-carbon, renewable energy source, but large hydropower development often has a greater impact on the ecological environment near hydropower stations, while small hydropower has less impact on the environment and has a larger social benefit. Therefore, small hydropower of a certain scale (such as within 25 MW) is generally included in the scope of renewable energy.

The main difference between the quota system and the full protection of the acquisition system is the quota system to solve the supply of renewable energy power generation issues, and full protection of the acquisition system focuses on renewable energy power generation sales. Renewable energy quota system requires grid operators and provincial governments to obtain up to certain fraction of their energy from non-hydro renewable sources [38]. The quota system commonly used in renewable energy in the mid-term of development, the full-scale guaranteed acquisition system is commonly used in the early stage of renewable energy development. The quota system stimulates power generation enterprises to reduce costs through market mechanisms. The full-scale guaranteed acquisition system mainly relies on administrative regulations and the extra costs through sales sharing. The quota system helps to ensure the output, but it has the risks of price, power consumption and investment, and the returns are uncertain. However, the price of the full-scale guaranteed acquisition system is fixed, and the expected return is obvious. Based on the advantages and disadvantages of each of the two systems and in combination with the current status of renewable energy power, technology development and market structure, the combination of a quota system and a full-scale guaranteed acquisition system will help to more effectively address the supply of renewable energy and sales issues. The full protection of the acquisition system due to the smaller risk for China’s power transmission market in the current situation, contribute to the early renewable energy market stable and market-oriented development. As the well-developed industrial system such as small hydropower, geothermal power generation and tidal power generation, wind power, solar photovoltaic power generation and biomass power generation have been rapidly developed, it is imperative to gradually establish and improve a quota system, which is based on the requirements of mandatory laws and regulations, take a gradual introduction of market mechanisms to achieve supply and sales linkage mechanism.

4.2.2. Green Electricity System

The green tariff system is a set of measures that users voluntarily pay higher electricity prices for renewable energy electricity. The experience of implementing the green electricity tariff system in Shanghai shows that a sound green electricity tariff mechanism can not only rely on consumers’ voluntary actions, but should comprehensively use such means as administration, law and economy. On the one hand, attention should be paid to the regulation of the packaging design of green electricity products and green prices, green channels and green promotion. Follow the example of the Netherlands to establish and perfect a green certification system, and at the same time, design separate packaging and identification of renewable electricity products for identification [39]. To meet and influence consumers’ green needs and buying behaviors in diversified forms, such as establishing green donation channels, purchasing green installed products, granting honorary certificates, medals or green power signs to consumers who purchase green electricity.

Through green electricity certification and green certification mark, establishment of a green brand of enterprises can be a unique packaging design for power companies to promote and identify users, used to smoothly access green electricity purchase channels to promote green electricity marketing and announce a list of green power users to attract consumers’ attention and increase the market subscription of green power. On the other hand, public participation should be implemented. Through joint efforts of governments, social organizations, consumers and enterprises, green electricity markets should be broadened, and new contents should be injected into deepening demand-side management.

4.2.3. Government Green Procurement System

Government green procurement means that the government gives priority to purchasing products that have a negative impact on the environment and promotes which models the society. First of all, improve the relevant government green procurement legislation to develop relevant standards. Formulate green procurement standards and regulatory procedures, which is included in the “Government Procurement Law” timely. Introduce special government green procurement lower-level legislation as soon as possible. Second, improve the green list, government green procurement standard system and the environmental labeling system. The government green procurement list should cover more green products that comply with the concept of low-carbon and environmental protection, based on certified environmental labeling products, supplemented by energy-saving products. Put both attention to mandatory and priority procurement. Third, establish a green information disclosure system. Establish green procurement information network, improve information disclosure, timely release environmental impact information of green products, government green procurement policy information and the actual implementation. To be specific, green information includes green business information, green product environmental information, the government’s green regulatory information, the implementation of government green procurement and so on.

4.2.4. Pricing Mechanism

Economic pricing mechanism is an important factor to ensure the sustainable development of renewable energy. Too low or too high price will affect the healthy development of the entire industrial chain. Therefore, on the one hand, the pricing mechanism should be adjusted flexibly as time goes by. The introduction of the competitive pricing mechanism improves social welfare [40]. For example, in the wind power industry, to further refine grid-connected benchmark prices, prompting more small and medium enterprises and micro-users into the wind power industry, the existing benchmark tariff system for onshore wind power can be based on the cost of power generation, technological level, market potential, Equipment capacity and other differences. At the same time, drawing on German experience, according to industrial technology and equipment running time, timely adjust to the classification of guaranteed purchase price, improve the benchmark price adjustment mechanism. On the other hand, for bidding and pricing of the large-scale offshore wind farm project included in the state’s plan, the convention that bidder with the lowest online electricity price can be the successful bidder shall be changed. the proportion of the price factor shall be reduced, and other non-price factors such as operating plans, technical solution and design plan of the project investment should be emphasized and implemented through the signing of fixed-term contracts concluded at the winning bid price.

4.3. Strengthen the Legal Security System

Long-term stability and attractive support mechanism is essential, which is the necessary guarantee for the sustainable development of the industry. Economic incentives, scientific research, technological innovation, and infrastructure construction are all important factors that influence and restrict the healthy development of the renewable energy industry.

As for improving the economic incentive mechanism, the development of the fund system and continuous and reliable financial support for the development of renewable energy by appropriately raising the additional levying standards for renewable energy tariffs and levying special environmental taxes and fees such as pollution taxes or pollution charges firstly. Making clear provision by providing financial support based on the targets and scope of subsidies and their standards and management, along with establishing and improving the legal system of financial subsidies for renewable energy, will help with this matter.

Second, tax incentives should be implemented. For enterprise income tax, production tax credits, tax holidays and tax exemption rates are set. Exempt import tariffs on renewable energy equipment and import value-added tax. Exempt an appropriate percentage of the pre-tax deduction for the individual tax personal production and consumption of renewable energy high-tech industries invested by individuals. For import tariffs, the same treatment is applied to foreign companies that import domestic foreign renewable energy equipment using domestic funds, and are exempt from tariffs and import VAT. At the same time, establish and improve other taxes and improve the green taxation system. For example, levying land-based pollution taxes and carbon taxes and expanding the scope of taxation of resource taxes, include forests, lakes, pastures, land, sea and water. In addition, some flexible measures can be taken, such as appropriate tariffs on the import of complete sets of machinery that can already be produced domestically and with relatively mature equipment and technologies.

Third, we should improve the investment and financing measures, pay attention to market-oriented industrial investment. We will actively encourage commercial banks to invest in loans, guide private capital and venture capital and other private capital inputs, set up venture capital funds and encourage the issuance of bonds, stock financing, capital market financing and foreign direct investment. In credit building, special loans can be set up and low-interest loans or discount loans can be implemented. In addition, it can also provide financing support for renewable energy production projects by establishing a special renewable energy SME credit guarantee institution.

In terms of promoting scientific research and technological innovation, Lack of scientific research and lack of innovation is the biggest obstacle to the development of renewable energy industry. The UK, which provides electricity for waste-to-energy combustion through the State Department for Environment, Food and Rural Affairs, has pledged £30 million to establish a new waste-treatment technology demonstration project to help reduce the risks associated with new technologies [41]. The construction of research institutes should be strengthened, the original innovation ability, integrated innovation ability, import, digestion, absorption and recreation ability should be enhanced, the protection of independent intellectual property rights should be strengthened, and the localization of equipment manufacturing should be promoted. Establish an independent technological innovation system that combines enterprises and research institutes as the main body, market-oriented, production, learning and researching. At the same time, we should also strengthen the linkage between government and enterprises and form a joint attack and tackling mechanism on important projects. We can also explore the establishment of energy technology cooperation mechanism with developed countries to jointly research and develop renewable energy technologies and improve the scientific and technological innovation mechanism through the use of comprehensive measures such as science and technology and education.

Thirdly, strengthen power grid planning and construction management. The healthy development of the renewable energy industry needs the matching power grid conditions. In the case of wind power, some US wind energy promoters have long pointed out that for the long-term development of wind energy, the construction of power grid facilities is far more important than the improvement of wind turbine design. We should make a good connection between renewable energy development plan and power grid construction plan, timely raise enough funds for power grid construction compensation, strengthen grid dispatching control and operation technology, build a smart grid featuring information, automation and interaction. Promote grid access, solve the problem of grid-connected operation and scheduling management of renewable energy, improve the operation control of large-capacity, volatile power sources and the whole power system, and realize flexible access, transmission, consumption, and regulation of renewable energy and so on. On the one hand, we will implement the “Fourteenth Five-Year Plan” of smart grid planning on the development goals and key construction projects in the next five years as soon as possible to build a new type of smart grid which is a combination of centralized and distributed renewable energy sources. On the other hand, establish a unified and complete smart grid norms and standards system as well as the comprehensive knowledge support system for power grids, so as to effectively solve the problem of renewable energy power generation access to the electricity grid.

5. Conclusions

Total target planning is an important policy instrument, feed-in tariff is the mandatory requirement, with cost sharing policy and tax preference policy to promote the development of renewable energy in China. However, listed challenges are still existing. The legal system is unreasonable and imperfect, and the safeguard mechanism is not sound. Thus, focusing on the legal system and security system, the most important policies are suggested. Firstly, the “Renewable Energy Law”, the special legislation, the supporting regulation and local legislation should be strengthened to improve the renewable energy regulatory system. Secondly, to improve the legal system of renewable energy is divided into renewable energy quota system, green electricity system, government green procurement system and pricing mechanism. Thirdly, to strengthen the legal security system, including the economic incentive mechanism, “scientific research and technological innovation”, and “power grid planning and construction management”.

Energy is considered as a “strategic commodity”, as uncertainty in its supply may disrupt proper economic functioning [20]. In essence, adjusting the existing policy instrument for renewable energy development is the key to transforming the world into a better one for the future generation.