China’s Outlook On RE Development The fact that China is facing unprecedented levels of environmental pollution across the country, that by the end of 2013 Chinaâs National Renewable Energy Center (CNREC) reached the conclusion that the energy path pursued in the last decade was unsustainable.
Furthermore, the recognition that future economic growth has to be based on sustainability and environmentally sound solutions.
In this context, renewable energies are indispensable and are expected to play a far more important role than in the past.
Associated with being âclean, green, climate friendly, low-carbon solutions,â the utilisation of locally available renewable energies is of strategic importance in Chinaâs future energy system.
In this context, in an attempt to address Chinaâs nationwide prevailing air pollution in March 2013 the National Development and Reform Commission (NDRC) approved an âAir Pollution Prevention Plan 2014-2017.â Released early May 2014, the focus of this plan is Chinaâs power sector and numerous targets e.g.
emission reduction, grid extension, coal consumption, etc.
among others were set.
Accordingly, this Plan stipulates the following: Today, Chinaâs ambitions are clear to increase the share of renewables in its energy mix in the longer term.
Drivers are manifold â energy security and independence, energy conservation, environmental protection, and reduction of greenhouse gas emissions among others.
Against this background, in the summer of 2014 Chinaâs current president Xi Jinping called for an âenergy revolutionâ and a growing share of renewables is part of that grand strategy.
Early 2017, China announced to invest up to two trillion USD into renewable energies till the end of the ongoing 13th Five-Year-Plan (2016-2020).
Chinaâs National Energy Administration (NEA) officially released its 13th Five-Year-Plan (2016-2020) for Solar Development on December 16, 2016.
The Plan stipulates targets, measures, regulatory issues, challenges, and focal areas and reconfirms e.g.
the 110 GW solar target, split into 105GW of solar PV and 5GW of Concentrating Solar Power (CSP) which was already included in Chinaâs âPower Sector Reform Planâ released later in October 2016.
The Plan re-confirms further that by the end of 2020 the total installed solar PV power generation capacity will exceed 105GW, which therefore is considered a minimum target.
Selected highlights of the Plan are below: 13th Five-Year-Plan (2016-2020) for Solar Development â¢ By 2020: 105 GW (PV) and 5GW (CSP) â No Sub-Target for Distributed Generation â¢ 11 Target Regions identified for âGW â Deploymentâ â¢ 4 Target Regions identified for âGW â Deployment including 13 West-East Transmission Corridorsâ â¢ 2 Target Regions identified for âTransmissionâ â¢ FiT levels expected to drop by more than 50% compared to 2015 levels by 2020, then at Grid Parity â¢ FiT levels for CSP expected to drop from current RMB 1.15/kWh to RMB 0.8/kWh by 2020 â¢ Technology Benchmarks set for Cell (Poly/Mono) Efficiency Levels to be reached by 2020 â¢ Focal Area: Distributed Generation â multiple measures identified to stimulate demand â¢ Focal Area: Top-Runner Programme, Poverty Alleviation Programme, Agro-PV, RE-Hybrid Projects â¢ Focal Area: Solar Thermal for âHot Water, District Heating and Coolingâ 800 Mio m2 by 2020 â¢ Focal Area: Comprehensive Industrial Strengthening â Pursue Go Global Strategy (Up & Downstream) â¢ By 2020 the PV Industry has created 7 Mio jobs The Plan no longer contains a specific target for distributed generation (DG), contrary to the October 2016 announcement where a 60-GW target was communicated.
In light of todayâs ~25GW of DG, a 2.5-fold increase in the coming three years deems feasible.
Overall, DG does enjoy a very prominent position in the released Plan.
In this context, e.g.
no less than 100 DG demonstration zones shall be set up across the country, and within each zone 50% of existing buildings and 80% of all to be built buildings shall deploy roof-top systems.
At the same time new business models shall be created and designed to stimulate demand in the DG segment.
Against this background, China is home to ~1500 so-called âindustrial development zonesâ covering ~10.000 km2 and an earlier conducted investigation estimated the rooftop potential of ~80GW, which from a quantitative perspective is undoubtedly sufficient.
Despite the obvious potential, AECEA learned that on average five to seven commercial/industrial roofs out of 10 investigated by developers are structurally not feasible and therefore will not allow installation of a rooftop system.
Hence, the lead time to successfully identifying a proper roof is significant.
Haugwitz is an independent solar energy consultant known for his insights on the workings of the Chinese solar market.
He is highly regarded as an expert on doing business in China and advises foreign entities on solar market developments there.
Introduced in 2015, the competitive bidding mechanism based âTop-Runner-Programâ expanded from initially 1GW in Datong/Shanxi Province to 5.5GW across multiple provinces last year and 8-10GW in 2017.
As anticipated, the âTop-Runner-Programâ remains a prominent feature of Chinaâs domestic market landscape in future given the results of a number of conducted provincial âTop-Runner-Programâ tender schemes leading to fairly low levels of bids, i.e.
significantly lower than last yearâs FiT.
According to the Plan the FiTs are expected to drop by more than 50% compared to 2015 levels by 2020, thus achieving grid parity.
Taking the recent decision regarding the reduced FiT effective January 1, 2017 into account, the Plan implies that future FiT reductions between 2018 through 2020 will be lesser.
Finally, the wording within the Plan equally suggests that perhaps no FiTs will be granted beyond 2020, if grid parity indeed will have been realised.
In light of Chinaâs concerted efforts to achieve a ârelatively well-off societyâ by 2020, the so-called âPoverty Alleviation Projectsâ featuring 3-5kW of solar PV systems for low-income households (RMB 3000/a) across hundreds of counties witnessed the approval of 5.1GW during summer of 2016 and another 8GW in early 2017.
Demand for such systems is expected to remain strong throughout the 13th FYP period given 2.8 Mio eligible households.
The Plan equally stresses so-called âAgro-PV Projects,â i.e.
greenhouses and fish-ponds using solar PV for power generation and so-called âRenewable Energy Hybrid Systems,â depending on the locally available renewable energy resources to simply combine them.
China is home to a significant number of hydro/PV or wind/PV projects already.
Against this background, Chinaâs State Grain Administration announced to implement the installation of 1GW of rooftop systems on its grain warehouses across the country by 2020.
Home to the largest solar PV manufacturing industry and being the largest PV market, China is aiming at the bigger picture of the solar industry.
In this context, the Plan very prominent features solar thermal applications, i.e.
solar water heaters and commercial/industrial heating and cooling.
According to the Plan, in the remaining three years the combined area for solar thermal applications shall double to 800 Mio m2 by 2020.
Equally bullish is the NEA in promoting the development of an indigenous CSP industry, in order to realise the 5GW target set for 2020.
The promotion of a local CSP industry and the deployment of 5GW is driven by a number of reasons e.g.
using CSP for base load purposes, through scaling-up production capacities to bring down the cost, hence being in the position to create and meet the demand outside of China.
Haugwitz is a frequent speaker at international conferences and has been the Head of Intersolarâs global conference development since 2010.
He is also the elected Vice-Chairman of the Renewable Energy Working Group of the European Chamber of Commerce in China since March 2013.
2016 was the first year of the 13th Five-Year-Plan (2016-2020) period and has witnessed record installations amounting to 34.24GW, representing 126% growth year over year (YoY).
The cumulative installed capacity reached 77.42GW which increased by 81% YoY.
2017, the second year of the 13th Five-Year-Plan, show no signs of slowing down in the Chinese solar PV market dynamics according to AECEA.
In particular, the new FiT reductions between 13-19% ensured demand remained strong until June 30, 2017.
Against this background, according to official data released by Chinaâs National Energy Administration (NEA), in the 1H/2017 in total 24.4GW were added and in July alone another 10.52GW were installed.
Overall, between January and July 2017 China installed 34.92GW, thus exceeding last yearâs 34.54GW by ~380MW.
Consequently, by the end of July, China was home to a total of 112.34GW and therefore already exceeded its 13th Five-Year-Plan (2016-2020) target of 105GW solar PV by ~7GW or ~7%.
According to AECEA, the estimation for 2017 is up to 50GW or possibly even beyond.
Interestingly, if the added solar PV power generation capacities are being compared with nuclear, hydro, wind, and thermal power, respectively 1.09GW, 6.69GW, 7.3GW and 18.84GW were added during January-July 2017, undoubtedly PV with 34.92GW stands out and therefore plays an increasingly significant role in Chinaâs energy mix.
On July 28, 2017 Chinaâs NEA released a detailed âguideâ regarding the implementation of the 13th Five-Year-Plan (2016-2020) for Renewable Energy with an emphasis on the 2017-2020 period.
Accordingly, the annual installation targets for solar PV between 2017 and 2020 are between 22.4GW and 21.1GW and includes an annual 8GW top-runner target as well.
Installation targets have been set for each province for every year until 2020. In total, during the 2017-2020 period ~86.5GW shall be installed, i.e.
by the end of 2020 China could be home to ~190-200GW.
The target of 60GW of distributed solar PV generation stipulated in the 13th Five-Year-Plan for the Power Sector will in, AECEAâs opinion, be realised.
To date, ~25GW are considered distributed solar PV and by the end of 2020, according to AECEAâs estimate, may reach 55-60GW.
Consequently, by 2020 Chinaâs total installed solar PV power generation capacity may reach approximately up to 245-250GW.
Overall, since 2010, the share of renewables in Chinaâs power mix has increased by 8%, while coal decreased by 11%.
Last year, 65% of the Chinaâs power was still generated by burning coal.
However, energy-related emissions have stagnated since 2013. â courtesy of SEDA Malaysia By Frank Haugwitz, Director of Asia Europe Clean Energy (Solar) Advisory Co.