CN-20:Demand Side Management Pilot Cities
On July 3, 2012, the Ministry of Finance (MOF) and the National Development and Reform Commission (NDRC) Bureau of Economic Operations Adjustment announced interim management methods for a new central incentive fund in support of comprehensive demand side management (DSM) pilot work plans. Incentives of CNY 100-550 per kW of load reduced will be given to projects in DSM pilot cities that implement permanent load reduction, peak load shifting, or temporary load reduction in support of demand response.
On July 3, 2012, the Ministry of Finance (MOF) and the National Development and Reform Commission (NDRC) Bureau of Economic Operations Adjustment announced interim management methods for a new central incentive fund in support of comprehensive demand side management (DSM) pilot work plans. The new fund is set up as a policy tool to support a number of objectives including the energy and carbon goals of the 12th Five Year Plan at large, the country’s new demand side management regulations, and reliability of electricity supply in general.
The Ministry of Finance is putting forth general guidelines on how the incentive funds will be administered but it is up to local and provincial governments to plan exactly how the funds will be used. The Ministry of Finance has announced the new incentive fund as a form of market mechanism.
The goal of the policy is to support the following developments:
- Establishment of electricity service and management platforms
- Implementation of energy efficiency power plants (EEPP)
- Promotion of peak load shifting technology as related to demand response
- Related scientific research, training and education, verification and evaluation work
Any pilot projects that plan to use EEPP and load shifting technologies to achieve permanent load reductions and peak load shifting will be awarded CNY 400 per kW reduced (eastern provinces) or CNY 550 per kW reduced (central and western provinces). For any pilot projects that lead to temporary reductions in peak load via demand response, there will be a reward of CNY 100 per kW.
Pilot cities have been asked to submit proposed work plans to their provincial financial ministry and electricity operations bureau for validation. After those two parties approve the work plan, they will send it to MOF and NDRC for their approval. Then with the consent of pilot cities and their related provincial bureaus, MOF and NDRC will sign an agreement outlining that pilot’s objectives, investment arrangements, local matching funds, annual work plan, and incentive funding needs.
Funds will be allocated upfront with a review afterwards. The provincial financial ministry and electricity operations bureau will review the use of funds within one month of the pilot project finishing. If performance in relation to the load reduction and peak load shifting targets was less than 80%, then the pilot projects will have to return all of the incentive money they received from MOF.
For any pilot projects that have already received funding from other energy efficiency incentive policies administered by MOF (such as Financial Rewards for Energy Savings Technical Retrofits, funds for ESCOs, or appliance subsidies), the energy savings shall not be double counted for the efforts of permanent load reduction or load shifting. 
On November 1, 2012, the first four pilot cities were officially announced: Beijing, Suzhou (Jiangsu), Tangshan (Hebei), and Foshan (Guangdong).  According to some media sources, Suzhou’s target for permanent load reduction will be 1.2 gigawatts. The city plans to meet it by implementing energy management projects within more than 1000 enterprises that all consume more than 10 GWh of electricity annually. Tangshan, as an industrial city, is said to be focusing on load management for high energy consuming industrial factories, while Foshan is focusing on implementing EEPP.  If the pilot program is successful, China has plans to expand it to 100 cities.
Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.
Policy Instrument Type: Economic, Incentives & Subsidies
Position in the PyramidAbout Us
Start Date: 2012
End Date: 2015
|Supports||Energy and Carbon Intensity Targets of the 12th Five Year Plan||Effort Defining|
|Supports||Demand Side Management Implementation Measures||Supporting Measure|
National Development and Reform Commission
Ministry of Finance
Primary Objective: Energy
To provide permanent electricity load reduction, peak load shifting, and demand response services
Cities, industrial enterprises, and buildings
Driver of energy consumption or emissions affected by policy:
Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.
Quantitative Target? yes
Progress Monitored? yes
Verification Required? yes
Requirements on the Target Group
Each pilot must meet at least 80% of the target agreed on in DSM pilot work plan, for permanent load reduced, peak load shifting, and/or demand response. Each pilot must include a real-time monitoring strategy in its work plan, although the government is currently writing standards measurement and verification protocols for the program.
Support by Government
Permanent load reductions and peak load shifting: CNY 400 per kW reduced (eastern provinces) or CNY 550 per kW reduced (central and western provinces).
Temporary reductions in peak load via demand response: CNY 100 per kW.
Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.
|Impact||Quantitative Estimate||Qualitative Estimate|
|Estimated effect on energy consumption or emissions|
|Estimated costs/benefits for industry|
|Estimated cost for government|
References & Footnotes
 Ministry of Finance, NDRC, Announcement of DSM pilot cities. http://www.gov.cn/zwgk/2012-11/01/content_2255433.htm
 Ministry of Finance, NDRC, Announcement of interim management methods for a new central incentive fund in support of comprehensive demand side management (DSM) pilot work plans http://jjs.mof.gov.cn/zhengwuxinxi/zhengcefagui/201207/t20120710_665194.html
 Climate Change Info Net. DSM Pilots to receive incentive support http://www.ccchina.gov.cn/cn/NewsInfo.asp?NewsId=32830