Exploring the Transformation Mechanism of Ecological Value Realization by Property Right Trading of Rural hydropower

The transformation and upgrading of rural hydropower rely on the property right trading market, and the professional property right trading market serves as the foundation to truly transform lucid waters and lush mountains into mountains of gold and silver. The study believes that by using two means, namely, government regulation and market incentive, water resources can be turned into ecological hydropower resources to finally realize the economic value of green energy through the ecological value transforming mechanism. The transforming mechanism, impelled by green hydropower certification and evaluation and professional property right trading market, has realized the ecological values, which not only promotes the green development of the local economy, but also realizes the transformation and upgrading of the rural hydropower industry. With the hydropower property right trading center, the development of the hydropower industry has encountered historic opportunities. At present, it is necessary to strive to improve the corresponding system, mechanism and cultural environment of the trading center to achieve the predetermined goal, and further standardize and improve the transaction activities. There are in all three figures and three tables.

Published by SCHOLINK INC. had a glittering history, is clean and renewable type of energy. It has promoted clean waters and green mountains by substituting small hydropower for fuel and contributing to the economic development in mountain areas. At present, the national economy has entered a new normal, and rural hydropower should make a demonstration in the practice of the conviction that "lucid waters and lush mountains are invaluable assets". It is necessary to actively explore the mechanism for transforming the ecological value of rural hydropower. The second question is about the institutional innovation to promote the small hydro industry development. The lack of adaptive institutional innovation prevents excellent enterprises in the industry from standing out, thus resulting in primitive development of the industry over long time. Specifically, first, small hydro enterprises are small, and most of them have not established a modern enterprise system; second, rural hydropower investments are scattered, and private and illicit entity transactions are frequent; third, the property right constraint of hydropower stations is ineffective, and the boundary between power generation and ecological protection is not clear. These problems reflect in essence the low asset quality.
The above mentioned two problems are actually the two aspects of one problem that needs to be solved with a mechanism where institutional innovation is applied to help enterprises improve the quality of their assets, make explicit their ecological values, and find a platform to achieve their values.

Innovative Ways of Understanding Problems
It has become the pursuit of our research team to use the existing research results to evaluate and guide actual rural hydropower engineering practices. Over the past two decades, we have studied the history of rural hydropower development in mountainous areas of China, the inheritance gene of ancient water ecological civilization, and the rules of practicing the conviction that "lucid waters and lush mountains are invaluable assets" in Zhejiang, and thus gained a deep understanding of water resource allocation standards. In order to scientifically evaluate the problems related to rural hydropower ecological civilization construction, the research team put forward a research method covering three perspectives, "以人文养水文" 的制度安排  The three-perspective research method proposes that the network and network flow are the inheritance genes of ancient water ecological civilization, and they are specifically implemented through the mechanism featured by "nourishing hydrology by humanities" based on the integration of the three perspectives, that is, to handle the relationship of technology and institution under the guidance of scientific concept. We found this in the study of water ecological civilization, and it has become an important tool for our research. In particular, in a large number of studies on ancient and modern water ecological civilization of China, we discovered the network and network flow as the inheritance gene.
(Over the past decade, the research team has studied the historical evolution of Zhejiang Cao'e River  Vol. 6, No. 3, 2021 Published by SCHOLINK INC.

Problem-Solving Mechanism
Based on the research framework formed by scientific, technological and institutional perspectives as mentioned above, we find that the rural hydropower industry only needs to solve a problem, that is, how to improve asset quality and upgrade ecological value. The solution to the problem is to integrate market mechanism with government regulation to promote institutional innovation. Government regulation means that the government urges small hydropower stations to carry out ecological transformation and conduct green certification in accordance with the requirements; market mechanism refers to the establishment of special trading platform to form interest expectations. The two interweave to promote owners to improve asset quality, increase the ecological connotation of rural hydropower, i.e. renewable energy plus green hydropower plants, and consequently enhance the space for ecological value appreciation, as shown in Figure 2.   The government regulations impel owners to ecologically transform their plants and gain green certification. In this way, an ordinary rural hydropower plant can be changed into a kind of ecological resources, transformed from a general asset into a high-quality asset. This process not only enables the transformation and upgrading of rural hydropower industry, but also promotes the green development of local economy. The market mechanism, giving full play to its incentive function, forms a coercive mechanism with the professional property rights trading market to effectively reach the goals that the government hopes to achieve. Thus the owners are forced by the market trading expectations to solve the problem in three ways. First, effectively restrict property rights by overcoming the current inadequacies, such as the asymmetrical relationship between the internal and external returns and cost asymmetry, lack of motivation among owners to protect or restrain their own behaviors, etc. Second, force the owners to take initiative to standardize their own behaviors which are not explicitly specified in rural hydropower approval procedures. Third, improve the quality and ecological value of hydropower assets, and attach green connotation to them. "Green" here means two things: renewable resources and green power stations, where the former reflects water resources and the latter reflects the development approach and mode.
Both of the two aspects, government regulations on ecological rehabilitation and green certification, and the market mechanism of property right trading, are important. However, more attentions should be paid to the latter, i.e. establishing the property rights trading platform, while the former, ecological rehabilitation and green certification, is the premise. Therefore, exploring the ecological value realization transformation mechanism through property rights trading was initially regarded as the theme of study, and property rights trading and its platform construction are the main research tasks.

Locating Property Right Trading Center
In order to realize the ecological value transforming mechanism, it is necessary to choose the appropriate location to settle in the hydropower property right trading platform. After thorough investigation and scientific verification, Lishui City has finally been selected as the first choice for setting up the trading center in consideration of its five unique advantages.
First, Lishui has a good political environment to practice the conviction that lucid waters and lush    households and encourage river right trading. These reforms have provided many experiences for the construction of Lishui small and medium-sized hydropower property right trading center.

Positioning and Goal Setting of the Trading Center
The goal of the trading center is to build itself a booster for Lishui to practice the conviction of lucid waters and lush mountains as invaluable assets, and to become an important platform to realize the ecological value of hydropower resources. A three-step approach was adopted.  Figure 3. This is an effective way to improve the overall management level of the rural hydropower industry, enhance the industrial competitiveness and practice the two mountains theory.
The trading platform was successfully inaugurated on 28 December 2017 as planned, and 4 plants were transacted between March and April 2019, proving that the original vision was feasible and practical.

Preliminary Preparation
In 2015 Before its opening, it has been fully prepared for the standardized transaction operation, substantial service content, and equipped with professionals and related equipment and venues, committed to the development and construction of the hydropower trading and the reform of the hydropower equity and property rights in the city. In 2018-2019, 58 hydro plants in Lishui passed green hydropower certification, accounting for 17% of the national total.

Essential Transactions
In  Table 3.

Verification of the Theory by Transactions
(1) The trading platform has been functioning in four ways, namely, gathering information, discovering price, incenting competition and providing intermediary service. Each transaction was made open, fair and just, fully marketized. More than 40 bidders participated, and the final buyers and sellers both recognized and praised the transaction process. The hydropower property rights transfer platform explored the ecological value of the hydropower assets by market means. Finally, the transfer price was generally higher than the expected price, with the average premium reaching 45%, which was significantly higher than the hydropower property rights transaction price premium conducted by the Beijing Property Rights Exchange, reflecting the advantages of the professional market.
(2) The transaction price partly reflected the ecological value of green hydropower. Although only four samples were studied, not sufficient to make a comprehensive analysis of the ecological value realization mechanism, they have partially proved the fact. For example, the old power plants put into operation before 2000 had a higher premium, reaching 53.68% and 61.54% respectively, showing to some extent that these old plants were of more ecological value than the new one put into operation after 2000. The in-grid tariff reform started in 2000 in Zhejiang Province was the watershed of price formation mechanism. The government-led "one station, one price" policy was replaced by market-led tri-price policy based on the commissioning time. This reform unexpectedly resulted in a public welfare transactions, and promoting industry management.
(4) The transaction process dispelled the four major concerns of the research team. The four concerns were as follows. First, the substandard construction procedures in the approval process of hydropower plants would lead to the difficulty of defining property rights. Second, the complex process of property rights trading would affect the willingness to trade. Third, the premium of property right transactions would be not enough to cover the tax required so as to affect transaction willingness. Fourth, the policy differences in different administrative regions would hinder property rights transactions. The transactions conducted, nevertheless, proved that although the above concerns were not completely settled, the interest-driven market mechanism showed its incentive to solve these problems.

Institutional Innovation Needed to Form an Institutional Environment
The proposal, research, exploration and practices of Lishui Hydropower Property Right (Stock Share) Trading Center made a good start in 2019. However, it was just the beginning. To fully play its role of ecological value transformation mechanism and enhance the industrial transformation and development, it is necessary to create a good institutional environment through institutional innovation.

Institutional Innovation for the Trading Platform Itself
Lishui Hydropower Property Right (Stock Share) Trading Center has achieved initial success, but compared with the original design positioning and trading process, there still exsits some insufficiencies as it has just started its operation. In April 2019, the Center suspended its trading activities, not because of the lack of trading demand, but because of the need of refinement. At present, there are more than 70 hydropower enterprises registered in the trading center for transference transactions, with heavy workload in the future and technical difficulties to deal with. The following issues also need to be taken seriously. First, to further clarify the development positioning of the trading center in a larger scale, transformation and upgrading of the regional economy should be considered.
Second, it is necessary to clarify the system mechanism of the trading center, including trading places, staffing, institution and others. Third, for the four transactions that have been completed, experts should be organized to study the cases and find out common features so as to make policy and institutional improvements to particularly help and serve hydro enterprises. Fourth, it is necessary to establish a decision-making mechanism to deal with relevant problems. If these issues are not taken seriously, there will be great risks.

Institutional Innovation for the Local Government
For the local government, the purpose of establishing such a small and medium-sized hydropower trading center was to attract more idle rural assets and ecological resources Through the platform, the intrinsic value of hydropower and other resource enterprises would be appropriately evaluated, and their financial attributes would be endued, so that the transformation and upgrading of the local economy would be effectively promoted ecologically and financially. The center has become the first model in China to successfully realize the ecological and financial transformation of hydropower resources. For Lishui municipal Party Committee and municipal government, the work to be further done include the followings. Firstly, improve the framework of leadership system. Although the leading group of the trading center has been set up, mainly consisting of administrative leaders, it needs to be adjusted and improved due to the change of municipal leaders. Secondly, the system mechanism of the trading center should be straightened out. Coordination with relevant administrative bureaus of water resources, finance, legal system, taxation, etc., should be taken to ensure that professional people undertake their due diligence. Thirdly, the guiding principles of the Fourth Plenary Session of the 19th CPC Central Committee should be implemented to strengthen the state governance system and capacity building. A sound institutional system should be established for the trading center. What's more, preferential policies of taxation, finance, and evaluation services should be provided in the initial stage. First, study and explore the patterns of realizing the ecological value with transforming mechanism.
Green hydropower certification will be continued, and the requirements of ecological flow and other relevant rigid indicators should be met. For the hydro plants without ecological certification, the risk rating assessment shall be carried out. The property rights trading should be promoted through the certification appraisal in the trading market. The hydropower industry associations shall establish a rigorous evaluation system with a strong evaluation team as soon as possible. Only by accurately evaluating the green hydropower assets and making the transaction prices significantly higher than that of ordinary hydropower, can the mechanism of realizing the transformation of ecological value be made prominent. At the same time, big data shall be used to carry out smart hydropower construction and incorporate the whole city's hydro plants into a system for management.

Zhejiang in this area and the Comprehensive International Small Hydro Service Platform introduced by
Hangzhou Lide Technology Co., Ltd.
Third, set up a rural hydropower think tank compatible with the trading center. Lishui Ecological Hydropower Research Association to be established will play the role of think tanks, to study the mechanism for the realization of hydropower ecological value transformation. The research association will not only strive to study various practical problems encountered in policy implementation and trading center, but also work as a standing body responsible for establishing a national information platform for the hydropower industry, creating a website, publishing magazines, timely reporting the relevant information of the trading center, and publicizing new state policies.

Conclusion
The planning, researching, designing, unveiling and operating of Lishui Hydropower Property Right (Stock Share) Trading Center all aim at one goal: exploring transforming mechanism for realizing the ecological value of rural hydropower to promote the transformation and upgrading of the industry. All relevant parties of the trading center have reached the consensus that it is completely feasible to explore the ecological value realization mechanism through the ecological resource property rights trading.
Property rights trading has formed a coercive mechanism to turn the common scattered and low-quality resources into ecological, concentrated and high-quality resources through integration. Three expectations have finally been realized: the transformation and upgrading of rural hydropower industry, the promotion of the green development of local economy, and improvement of rural hydropower industry management. It is an inevitable historical development for the rural hydropower industry to innovate institutionally with property right trading mechanism. The continuous promotion and improvement of the institutional innovation will mark the mature development of the industry.