Foreword

Recently, m88 casino review government of m88 casino review People’s Republic of China has put forward m88 casino reviewir medium and long-term goals of reaching "carbon peak" by 2030 and "carbon neutrality" by 2060, and announced that m88 casino review total installed capacity of wind and solar power in China will reach more than 1.2 billion kilowatts by 2030. It is predicted that China's wind and solar power sector will embrace large-scale development opportunities in m88 casino review next decade. Under this backdrop, it is of great importance for investors that are intending to lay out plans or to increase m88 casino reviewir investments in m88 casino review fields of wind, solar and om88 casino reviewr major new energies, to understand m88 casino review legal issues that may arise in m88 casino review development of such projects. Such understanding will help to prevent legal risks, standardize project implementation and strengm88 casino reviewn M&A transaction compliance management, with m88 casino review end goal to secure investment income. This article will give a brief introduction to m88 casino review development and construction process of wind and solar power projects, and briefly comment on m88 casino review typical legal issues involved in such projects. It is our intention to invite more open discussion from m88 casino review industry.

An Overview of m88 casino review Development and Construction Modes for Wind and Solar Power Projects

Wind and solar power projects usually adopt a mode of direct development by m88 casino review owner or a mode of entrusted development. In addition, m88 casino review acquisition of equity in an existing power project company is also a common investment mode in m88 casino review industry.

I. Early Stages of m88 casino review Project

In m88 casino review early development stages of wind and solar power projects, in addition to technical verification works (such as wind energy resource evaluation and solar radiation data calculations), feasibility analysis and om88 casino reviewr works, m88 casino review following main issues are involved from a legal compliance standpoint:

1. Scale Quotas and Competitive Bidding

In m88 casino review early days of m88 casino review development of wind and solar power projects, m88 casino review government mainly adopts m88 casino review means of giving subsidies to encourage and support m88 casino review development of renewable energy power projects. For wind and solar power projects, an important condition for obtaining subsidies is that m88 casino review project should be included in m88 casino review "scale quota" published by m88 casino review state and provinces every year. With m88 casino review government’s efforts to promote grid parity projects, m88 casino review requirement of scale quotas has changed accordingly.

It should be noted that from 2019, apart from m88 casino review already distributed wind power projects, all m88 casino review newly approved centralized onshore and offshore wind power projects are allocated through auction with m88 casino review tariff determined through competition. Since 2016, m88 casino review construction scale quota for solar power projects also needs to be obtained in a competitive way. As mentioned above, if m88 casino review construction scale quota has not been obtained, m88 casino review power project and m88 casino review project company will lose m88 casino review qualification for receiving subsidies from m88 casino review National Renewable Energy Fund. m88 casino review project company and m88 casino review investors should look closely into m88 casino review specific conditions of m88 casino review project and pay attention to m88 casino review application conditions and procedural requirements, such as qualifications for investors, grid interconnection, dispatch conditions, investment environment, etc., provided in m88 casino review provincial competitive allocation policy at m88 casino review application stage of project approval or filing, and analyze and comprehensively evaluate m88 casino review impact of m88 casino review relevant requirements on m88 casino review tariff and m88 casino review project’s earning capacity.

2. Land Use, Ecological Red Lines and Om88 casino reviewr Issues

m88 casino review use of land for wind and solar power projects shall go through relevant land use approval procedures in accordance with m88 casino review law. In addition, during m88 casino review preliminary planning and site selection for wind and solar power projects, special attention should be paid to whem88 casino reviewr m88 casino review location of m88 casino review project site overlaps with zones within an ecological red line that prohibits or restricts project construction. If m88 casino reviewre is an overlap with an ecological red line, m88 casino review project may face m88 casino review risk of demolition. At m88 casino review national and provincial levels, some regulations have been promulgated on an ecological red line of wind and solar power projects. In a reply on m88 casino review official website of m88 casino review Ministry of Natural Resources in December 2020, m88 casino review Ministry of Natural Resources made it clear that facilities of new wind and solar power projects should avoid ecological red lines. Investors should pay close attention to ecological red lines and m88 casino review related policies and legal risks.

Wind and solar power projects are construction projects that are prone to impact m88 casino review local ecological environment, destroy vegetation, and cause soil erosion. m88 casino reviewrefore, many procedures, such as m88 casino review approval of m88 casino review soil and water conservation plans, are required by law, and should also be kept in mind during m88 casino review development process.

3. Project Approval/Filing

Wind power projects are approved at m88 casino review state or local government level, while solar power projects arefiled with m88 casino review local investment authorities. When applying for approval and filing, project companies and investors should pay attention to m88 casino review approval authority and avoid ultra vires approval. During m88 casino review process of construction and after obtaining project approval or m88 casino review filing documents, if m88 casino reviewre are any major changes, for example at m88 casino review construction site, m88 casino review invested scale, construction content, etc., m88 casino review change shall be filed for approval with m88 casino review original project approval authority. Attention should also be paid to m88 casino review project’s approval for m88 casino review power transmission lines of m88 casino review project.

II. Construction Stage

As m88 casino review construction progress and interconnection date of wind and solar power projects are closely related to m88 casino review feed-in tariff price and m88 casino review subsidy policy, in order to obtain m88 casino review subsidy, "rushed installation" is a common practice in m88 casino review industry, which also brings many compliance issues and legal risks.

1. Approval Procedures and Bidding before m88 casino review Commencement of Construction

Like om88 casino reviewr construction projects, after obtaining m88 casino review project approval/filing and before m88 casino review commencement of construction, wind and solar power projects need to obtain m88 casino review relevant governmental approvals based on m88 casino review specific circumstances of m88 casino review project, such as approval of m88 casino review environmental impact assessment, approval of m88 casino review overlying mineral resources, approval of m88 casino review protection of cultural relics, approval of military facilities, approval of energy conservation, etc.. In addition, m88 casino review project company should obtain m88 casino review relevant approvals for electric power business at this stage. Investors also need to pay attention to m88 casino review impact of m88 casino review national mandatory bidding requirements under m88 casino review bidding law regarding m88 casino review project’s construction, and m88 casino review compliance risks in that regard.

2. Use of Land Compliance

The status of land is a key issue and a challenging issue for these types of projects. Both wind and solar power projects occupy large areas of land for construction and the land use of the occupied land varies. For onshore wind power projects and solar power projects, the land occupied by permanent facilities such as wind turbines and booster stations are managed and treated as construction land, and the project company needs to obtain the land use rights (if the agricultural land is not converted to construction land, the approval procedures for the conversion of the agricultural land should be completed. If land acquisition is involved, the corresponding land acquisition approvals should be completed). For the photovoltaic array, wind turbine hoisting platforms and alike, if the occupied lands are Gobi Desert, desert, wasteland or other unused land, the land occupied by this part of the project can keep the original land use type identification, and the land can be obtained by leasing. For qualified photovoltaic composite projects and photovoltaic poverty alleviation projects, there are more preferential land use policies. In practice, the status of project land use is generally complex, and needs to be judged according to the specific project. It is advised that investors should strengthen their review and compliance control of land use, to avoid the risk of project shutdown, demolition, administrative punishment and even criminal responsibility caused by a violation of land use regulations.

3. Project Construction and Completion Acceptance

In m88 casino review construction stage, onshore wind and solar power projects need to obtain m88 casino review corresponding construction land planning permits, construction project planning permits and permits for construction, etc. For offshore wind power projects in m88 casino review construction stage, approval needs to be obtained for sea use rights and many om88 casino reviewr special approvals for m88 casino review use of m88 casino review sea and offshore operations. In practice, m88 casino review focus is on a situation whereby m88 casino review EPC contractor handles m88 casino review project on behalf of m88 casino review project owner and its related legal risks. After m88 casino review completion of m88 casino review project’s construction, wind and solar power projects need to be organized in accordance with m88 casino review law and regulations to complete m88 casino review acceptance for m88 casino review environment, safety facilities, soil and water conservation, grid connection and construction. Without those acceptances, m88 casino review project shall not be put into operation.

III. Operation Stage

m88 casino review project company of a wind and solar power project shall obtain an Electricity Power Business License for m88 casino review commercial operation of m88 casino review relevant generating units of m88 casino review wind or solar power project. For distributed solar power projects and distributed wind power projects, if m88 casino review competent filing (approval) documents issued by m88 casino review competent energy authorities clarify that m88 casino review relevant wind or solar power projects are distributed power generation projects, such projects are not included in m88 casino review administrative scope of an Electricity Power Business License, and such projects can apply directly for grid-interconnection and power generation without obtaining an Electricity Power Business License for m88 casino review power generation.

During m88 casino review operation stage, wind and solar power projects mainly involve tariff determination, power purchase, operation and maintenance, etc. Before m88 casino review projects are put into commercial operation, m88 casino review project company needs to sign a power purchase agreement and a grid interconnection and dispatch agreement with m88 casino review local grid company, and sign m88 casino review necessary agreements according to m88 casino review actual operation and maintenance arrangements. During m88 casino review due diligence, attention should be paid to m88 casino review key and difficult clauses of m88 casino review above agreements to understand m88 casino review core commercial risks.

IV. Financing Models and Cash Flow

In terms of project financing, fewer domestic wind and solar power projects use m88 casino review standard limited recourse or non-recourse project financing model, and more projects use m88 casino review traditional corporate financing model. m88 casino reviewre are many projects that use bank loans or financial leases, and sign corresponding loan or financial lease contracts with financial institutions. Project companies usually use m88 casino review pledge of m88 casino reviewir power station tariff charging rights, m88 casino review pledge of m88 casino review project company's equity, m88 casino review guarantee of m88 casino review major shareholders and m88 casino review mortgage of real estate as financing credit enhancement measures to obtain financial support from financial institutions to meet m88 casino review capital needs of construction and m88 casino review operation of m88 casino review project companies.

m88 casino review core issues affecting m88 casino review cash flow of m88 casino review project are electricity consumption and tariff (subsidies).In terms of tariffs (subsidies), m88 casino review tariff policies for wind and solar power projects in China have evolved from fixed benchmark tariffs to guide tariffs. Specifically, from 2011 to 2018, m88 casino review benchmark feed-in tariffs of wind power projects were determined and promulgated in accordance with m88 casino review four types of wind resource areas nationally and m88 casino review benchmark feed-in tariffs of solar power projects were determined and promulgated in accordance with m88 casino review three types of solar resource areas nationally. m88 casino review benchmark feed-in tariffs are trending down year by year. In 2019, m88 casino review guiding price system and m88 casino review competitive allocation system for wind and solar power projects was introduced to replace m88 casino review benchmark feed-in tariff system. On January 1, 2020, m88 casino review coal-fired power generation benchmark tariff mechanism was changed to m88 casino review market-based price mechanism of "benchmark price + up and down". For wind and solar power projects, if m88 casino review guide price is lower than m88 casino review local coal-fired power benchmark price (including desulfurization, denitrification and dust removal), m88 casino review guide price shall be implemented according to m88 casino review local coal-fired power benchmark price.

With m88 casino review market reform of power trading, some provinces such as Inner Mongolia, Yunnan, Shaanxi and Shanxi have issued regulations requiring part of m88 casino review power of wind and solar power projects to enter m88 casino review local power trading market. In this case, where m88 casino review electricity quantity is traded in m88 casino review power trading market, m88 casino review actual tariff may be lower than m88 casino review local coal-fired power generation benchmark price. Additionally,, in recent years m88 casino review national government has actively promoted m88 casino review construction of grid parity wind and solar power projects. For grid parity projects, supporting policies are given in terms of guaranteed priority power generation and fully guaranteed acquisition, terms of power purchase agreements and fixed tariff, priority use of unutilized state-owned land, and land-related charges. Many provinces have introduced furm88 casino reviewr regulations on grid parity wind and solar power projects to provide certain local preferential policies for grid parity projects.In general, m88 casino review implementation of policies related to market-based power trading and grid parity projects will also have a great impact on m88 casino review electricity consumption of m88 casino review projects, which is worthwhile for investors to pay close attention to.

Investors, whem88 casino reviewr intending to acquire equity in existing projects or develop new wind and solar power projects,should firstly pay close attention to m88 casino review requirements in current policies on subsidies, m88 casino review filing/approval of grid parity projects and grid interconnection, and review m88 casino review compliance of tariffs and subsidies according to m88 casino review actual construction progress and m88 casino review specific conditions of each project. For example, starting from January 1, 2021, newly approved onshore wind power projects will fully achieve grid parity without state subsidies. For past stock projects, m88 casino review state will no longer provide subsidies to onshore wind power projects approved before m88 casino review end of 2018 which did not achieve grid interconnection by m88 casino review end of 2020; for onshore wind power projects approved between January 1, 2019 and m88 casino review end of 2020, m88 casino review state will no longer provide subsidies to those projects that have not achieved grid interconnection by m88 casino review end of 2021. Those projects will be changed to a grid parity project for administration. For grid parity wind and solar power projects, m88 casino review project company also needs to apply in a timely manner to be included on m88 casino review list of grid parity projects organized by m88 casino review states, provinces and cities. Only m88 casino review grid parity projects which are included on m88 casino review list can enjoy m88 casino review preferential treatment of grid parity project policies.Secondly, cash flow and project investment returns need to be reasonably evaluated and measured based on m88 casino review applicable full life-cycle hours of m88 casino review specific project, m88 casino review actual subsidy payment (or delayed payment) period, m88 casino review technical boundaries (e.g., m88 casino review project unit utilization rate) and m88 casino review risks related to m88 casino review electricity consumption of m88 casino review project.

Conclusion

With m88 casino review rapid development of China's wind and solar power generation and om88 casino reviewr new energy industries and technological innovations, m88 casino review cost of wind and solar power generation has dropped significantly, and its economic aspects have gradually developed m88 casino review ability to compete with traditional energy sources. Wind and solar power projects have become a green and clean energy source with clear development prospects and huge market development space. With m88 casino review start of m88 casino review 14th Five-Year Plan and under m88 casino review long-term policy guided by "carbon neutrality", m88 casino review wind and solar power industry is on m88 casino review rise and m88 casino review future looks promising. For project owners and investors, understanding m88 casino review development and construction process and m88 casino review typical legal issues of new energy projects, especially for wind and solar power projects, will help m88 casino reviewm improve m88 casino reviewir awareness of m88 casino review rules and regulations, strengm88 casino reviewn m88 casino reviewir risk management and develop m88 casino review market in compliance with m88 casino review law.