China’s renewables revolution

 By Nicholas Newman

China has for the last few years, led the world, in terms of exploiting renewables. It has achieved much innovation in the renewable technologies it produces. By 2020, it expects it solar power generating to be producing at least 200 GW in a year and 250 GW of wind power. At the same time, it’s government is encouraging renewables manufacturers to cut solar costs by 2 percent a year, and wind costs by 3 percent to 5 percent annually. In addition, it is heavily investing its generating capacity from hydropower, geothermal and biomass. Not surprisingly, the 22,500 MW Three Gorges Dam project in Hubei province, is the world’s largest dam. Nicholas Newman looks at the story behind China’s quest to be a world leader in renewables…

(Cover Photo: Three Gorges Dam, China)

Investment in the Chinese renewables market hit some $11.8 billion in the first quarter of 2016. China overtook the US and Germany as the world leader in solar generation and its installed wind power capacity of 145 GW, even if not all of it is presently grid-connected, is the largest in the world. China is largely responsible for the worldwide prices of solar modules, which have fallen by as much as 80 percent, since 2009, says IEA’s chief economist Laszlo Varro.

The drive to increase production and reduce costs will continue. By 2020, China’s government expects the country to reach at least 200 GW of solar and 250 GW of wind power and is targeting annual cost reductions of 2 percent for solar and between 3-5 percent for wind. But that is not the whole story since the country is also investing heavily in generating capacity from hydropower, geothermal and biomass. The 22,500 MW Three Gorges Dam project in Hubei province, the largest hydroelectric dam in the world, is the jewel in the crown. Altogether, these developments should help the government meet its target of increasing non-fossil fuels’ contribution to total energy consumption from the current 11 percent to 20 percent by 2030. The compelling rationale for this huge expansion in renewable energy is energy security, with the reduction of air pollution a close second.

Unlike oil, coal and gas, the supplies of which are finite and subject to geopolitical tensions, renewable energy systems can be built and used wherever there is sufficient water, wind and sun.

The renewables sector

Over the last five years, China’s investment in renewables increased from $39 billion to almost $111 billion in 2015, resulting in a 168-fold increase in solar power and a quadrupling of wind power. As of 2014, China leads the world in the production and use of wind and solar photovoltaic power and is generating almost as much power from hydro, wind, and solar as all the power plants of France and Germany combined.

In the case of hydropower, the country has about 300 GW of installed generating capacity, which is expected to reach 350 GW by 2020. According to some industry insiders, it has potential to reach 540 GW by 2050, an amount which could meet at least a fifth of the country’s power needs, and displace 1.3 billion metric tons (1.4 billion short tons) of coal.

However, such an increase in reliance on hydropower is problematic. For instance, in regions like Yunnan, which already have extensive hydropower capacity, additional back-up gas and coal power plants have had to be built in order to maintain power supplies in times of drought. This is curtailing the need for more hydropower. Additionally, increased dam building increases the risk of subsidence in downstream river deltas as well as floods of major cities like Shanghai. Furthermore, new dam building along rivers like the Mekong and Brahmaputra, are likely to increase tensions in neighboring India, Myanmar, Thailand and Vietnam.

In contrast to the rapid expansion in hydropower, China’s exploitation of its geothermal and biomass potential has been relatively slow. While biomass generating capacity has more than doubled, rising from 5.5 GW in 2006 to just 13 GW today, faster progress has been reined in by lack of competitiveness and the absence of clear frameworks to attract private sector involvement, suggests BE Sustainable. However, there is a now a government target for biomass to increase its contribution to 30 GW by 2020.

Likewise, despite enjoying a sixth of world geothermal potential capacity, China has only 660 MW of installed capacity compared to 3500 MW in the US. However, this is set to improve. With government encouragement, geothermal production is expected to contribute at least 9 GW towards China’s power needs by 2020.

The fruits of recent large investment in renewables together with government encouragement has paid off. China’s renewable energy utilization has increased from 8.3 percent in 2010 to 12 percent in 2015, beating the country’s target of 11.4 percent. To meet its Copenhagen pledge of 15 percent by 2020 and set the path towards the 20 percent Paris commitment by 2030, a recent government directive requires regional grid companies to source between 5-13 percent of their electricity from non-hydro renewable sources by 2020. At the same time power companies are required to generate at least 9 percent of their electricity from non-hydro renewables, almost doubling their generation share in five years. To reinforce this trend a Renewable Energy Certificates trading scheme, in which power companies can sell or purchase renewable energy, has been put forward.

Photovoltaic Plant in Hong Kong

Demand for renewables

China is opting for renewables to serve its national interest for energy security and to ameliorate environmental concerns for domestic political reasons. China’s air pollution, stemming from coal power generation has become a threat to health and prompted public anger and social agitation for enforcement of environmental laws. According to Greenpeace, if just four cities, Beijing, Shanghai, Guangzhou and Hong Kong, had met World Health Organization air quality guidelines, 81 percent of premature deaths and the consequent loss of $875 million could have been avoided. In response, China plans to cap coal use to below 65 percent of total primary energy consumption by 2017, moving towards 50 percent by the middle of the century, with natural gas and renewables filling the gap, reports Reuters.

Energy security continues to be a pressing issue in China. Since March 2014, the country has become the world’s largest net importer of petroleum and other liquid fuels, according to the EIA. Given current trends in demand and falling domestic production, China would have to increase its reliance on fuel supplies from the more unstable parts of the world such as the Middle East.

Renewables problems

Like many other countries including South Africa and the US, China’s power sector is finding it difficult to absorb the rapidly growing supply of renewable power. The national grid is finding it difficult to connect new sources of power, while battling grid congestion and balancing the system at both regional and national levels. This has resulted in 15 percent of wind farms and 31 percent of solar arrays being left idle due to the grid’s inability to accommodate them.

According to the Global Wind Energy Council, in 2015 much of the electricity produced by China’s vast wind farm network was unused. Chinese grid-curtailment of power from wind totaled a staggering 34 billion kilowatt-hours in 2015 — equivalent to the amount needed to power 8.5 million UK households.

In April 2016, China’s National Energy Administration ordered grid operators to connect all operational renewable power installations that meet technical standards, although it has since emerged that this was insufficient to ensure that utilities comply with the law. To boost uptake, the Chinese Wind Energy Association (CWEA) has notified energy ministries in three provinces that it could take legal action, unless the ministries justify local grids’ curbs on the use of available wind power.

There are several possible explanations for this curtailment of renewable power, especially in the cases of wind and solar. Apart from insufficient grid capacity, the other underlying problem arises from the prevalence of coal-fired generation. Where district heating services are supplied by coal, or where coal-fired generators don’t run at full capacity because the economy has slowed, wind power often loses out. For example, in Yunnan province in south-west China, wind providers claim that they were required to compensate coal-fired power plants whose power was not being fully used. As Nick Mabey, the chief executive of the E3G think tank, has said, “China’s inflexible coal power stations means that it wastes 40 percent of the clean wind power it generates in some regions.”

A complicating factor is grid congestion, since China’s grid capability reportedly lags generation capacity by between three to five years, reports Power Engineering International. This is being addressed by the national grid operator State Grid Corporation which is currently building 17 ultra-high voltage long-distance transmission lines to overcome grid capacity issues. This may not be the whole solution, for as environmentalists point out, the emphasis on UHV has side-lined smaller, more efficient projects nearer to population centers.

The fortunes of wind and solar operators in the remote northern and western regions are blighted by their distance, of around 1000 miles (1609 km), from concentrated markets such as Beijing and Shanghai. In addition, there is increasing competition from renewable power plants being constructed in the more populous coastal regions. For the Northern provinces, which feature the largest number of idle wind farms, the government suspended planning approval for any new wind projects this year.

Finally, the Ministry of Finance in Beijing has been slow in paying renewable energy subsidies. As Ying Yuan, a Greenpeace analyst explains, “despatch of the subsidies usually takes one year or even longer. A lot of wind companies can’t afford this delay.”

The story of renewables in China is a move towards self-sufficiency in power, energy security and the erosion of coal power...

China’s renewables manufacturers

China has become a world leading manufacturer of renewable technological hardware and is home to wind turbine maker Goldwind and solar panel manufacturer Yingli Solar. Notwithstanding the impressive increase in production and reduction in costs there are problems with the quality of solar products. In January 2015, Bloomberg reported that 23 percent of panels sampled around the country failed to meet China’s own technical standards and in Jiangsu, the eastern province where much of the glass is made, the rate was as high as 40 percent.

The industry is racked by overcapacity, low profit margins and crushing amounts of debt. This has resulted in some plants standing idle and other companies such as Suntech going bankrupt. In addition, both Europe and the United States have accused China of dumping its technology on world markets and imposed tariffs on China’s renewable hardware.

China seeking to export renewable power

There are proposals to export electricity to neighboring power- hungry markets including Pakistan, India and Myanmar. This would benefit Yunnan’s chain of underutilized hydro-power plants along the upper reaches of the Mekong River next to the border with Southeast Asia. In addition, it has been reported that the State Grid has signed a memorandum of understanding with Korea’s power utility and SoftBank of Japan, to promote an interconnected grid in northeast Asia.

Technological innovation, economies of scale and rapid movement along the experience curve have made China’s solar and wind manufacturers and hydro-project builders pre-eminent. China’s potential in renewables is vast and while progress has been fast it has been uneven, leaving geothermal and biomass to catch up in coming years. The story of renewables in China is a move towards self-sufficiency in power, energy security and the erosion of coal power.

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide.