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Despite significant environmental benefits, the station lost 10 to 20 million yuan every year because the residential heating price in Taonan remained at around 27 yuan per sq m, while the cost of generating heat using electricity was much higher, said Zhang Xuezheng, Party secretary of Datang Xiangyang Wind Power Generation Co.

Moreover, the company had to generate heat with electricity purchased from the State Grid Corp at an average price of more than 0.5 yuan per kWh, almost the same as the post-tax price of the company's on-grid wind power.

"The government compensated our company by allowing us to produce more electricity, so the profits from the generation of wind power just about covered the losses we incurred from supplying heat," said Zhang.

He said that only when the government breaks the constraints on the prices of electricity and heating, will renewable energy companies be willing to fully develop public interest projects, such as the use of curtailed wind power to replace coal-fired heating.

Subsidy stalemate

Biomass power plants are also plagued by high costs and low prices. In 2012, the Jilin Gongzhuling biomass project generated more than 200 million kWh of electricity but only made a tiny profit of 0.0133 yuan per kWh. Fuel costs accounted for about 70 percent of the on-grid price for electricity generated from biomass, or 0.75 yuan per kWh, including a benchmark electricity price of 0.41 yuan and a subsidy of 0.34 yuan.

The Ministry of Finance was also tardy with subsidy payments to National Gongzhuling Bio Energy Co Ltd, the project's main investor. National Gongzhuling did not receive the monthly subsidies for 2012 until January this year and is still awaiting the money for April to June. The situation has forced the company to rely on working capital loans to pay local farmers to collect straw, said Du Jiang, deputy general manager of the company.

Because of the oversupply of electricity in Jilin, the Gongzhuling biomass project cut power generation by 13 million kWh between January and July, causing a decline in revenues of 9.75 million yuan.

According to the Renewable Energy Law, power grid enterprises should buy all the grid-connected power generated through renewable energy within the range of their power grids. In practice, however, none of the provincial governments has enforced the law strictly enough, said Zheng from the Jilin provincial energy bureau.

"We don't need government subsidies or policies, but we do want effective enforcement of the renewable energy law," said Zhang of Datang Xiangyang Wind Power Generation Co.

"Given that the law has proved difficult to implement, the National Development and Reform Commission should launch a policy to specify the proportion of power generated with renewable energy - let's say 10 percent of China's total electricity consumption - as soon as possible. In this way, renewable energy will still have plenty of room for further development," said Zheng.