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INSIGHT: China — big just got bigger

China pumped $56.3bn into renewable energy last year, leading the world in PV and wind investment, production and new installations.

It installed more renewables than new nuclear and fossil-fuel capacity for the first time, becoming the global leader in installed wind and trailing only Germany for cumulative PV capacity.

Economic growth, energy security and China’s thirst for low-carbon energy to combat its dire pollution problem have placed renewables at the heart of the government’s current five-year plan. The country is struggling to meet its target of reducing carbon intensity by 17% from 2010 levels by next year, and it may face further binding carbon targets in the next five-year plan.

Under these circumstances, Beijing recently announced new medium-term targets for wind and solar.

The National Development and Reform Commission (NDRC) aims to install 150GW of wind and 70GW of solar by 2017. Previously it had a goal of 104GW of grid-connected wind by the end of next year (99GW of it onshore).

Individual regional wind targets already added up to at more than 142GW of installations by 2015. And with more than 91GW installed at the end of last year, 75.5GW of it grid-connected, 150GW by 2017 looks relatively undemanding, and will easily be overshot, in Insight’s view.

Beijing also aims to install more than 200GW of wind by 2020, including 30GW offshore. This aspiration now looks a little outdated, given the new 2017 target. Based on current projections, the 2020 target will probably be surpassed by 40GW — although the country is unlikely to hit its offshore aspirations of 5GW by 2015 and 30GW by 2020, with less than 2GW and 16GW expected respectively.

However, the local wind industry continues to suffer from grid curtailment and non-connection of installed capacity due to lack of transmission infrastructure.

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Insight believes that 16GW of installations were not connected to the grid at the end of 2013. The government has been trying to manage this number down, so that installations have been proceeding more slowly than grid connections. But minimal progress has been made in the past two years to shrink this gap — in fact, it grew by 2GW last year.

Insight expects the gap to be closed by the end of 2020, but this requires the Chinese to connect, on average, 2.3GW more to the grid per year than they are now installing. In the main, this calls for the build-out of more transmission lines, especially in the country’s huge strategic wind bases.

The National Energy Administration (NEA) plans to build 12 cross-regional transmission lines by the end of 2017 to help tackle the problems of non-connection and curtailment.

But progress remains slow; the lack of transmission capacity may have shaved 3.1GW off the NEA’s full-year wind target in 2013.

Nevertheless, the NDRC’s goal of 150GW of cumulative wind by the end of 2017 appears easily achievable — we expect the actual figure to exceed 170GW. However, the government has reportedly been discussing the possibility of adjusting tariff rates in different parts of the country. This could jeopardise future installations, but it appears unlikely that any changes will be introduced this year.

Although China has dominated PV production for several years, the government has until recently resisted calls to ignite the domestic market until solar’s levelised cost of energy (LCoE) had come down and export markets (largely European) had started to dry up.

However, with China’s LCoE of PV now more attractive — estimated at $120 per MWh — and with some domestic manufacturers struggling, the authorities have been supporting and ramping up local installations in earnest since 2011.

Solar targets have been revised upwards five times, having started life in mid-2011 at 5-10GW by 2015 — a figure that has been increased to 35GW, halfway to the 2017 goal. Having installed about 12GW last year, making it the world’s largest PV market, cumulative installations stood at about 18.6GW.

China intends to install at least a further 14GW of solar this year — 8GW in distributed installations and 6GW coming from utilities.

However, Insight believes that credit availability and an unworkable support mechanism for distributed PV mean this target will be cut to about 10GW.

Solar installations will need to ramp substantially towards 15GW a year to meet the ambitious 70GW goal. That would put it on track to exceed 120GW of solar by 2020 — something that seemed unimaginable at the beginning of this decade, when China had less than 1GW.

Recharge Insight is a new premium subscription service aimed at providing renewables thought leaders and decision-makers with best-in-class analysis of key issues facing the industry. For more information on Recharge Insight, contact Ksenia Burkova at ksenia.burkova@rechargenews.com

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