Chinese officials have dispatched inspectors across the country as part of a renewed effort to prevent wind and solar power from being wasted.
The inspectors will also be monitoring the roll-out of the country’s new solar policies, which are a stepping stone to truly subsidy-free renewables in the country.
A combination of factors, from mismatched supply and demand to insufficient grid capacity, can result in what the industry refers to as curtailment. Essentially, it amounts to shunting generating renewable energy plants offline until such time as that power is needed again or there is somewhere for it to go.
An employee walks past photovoltaic panels at a solar power station operated by Huanghe Hydropower Development Co., a unit of State Power Investment Corp., at the Golmud Solar Park on the outskirts of Golmud, Qinghai province, China, on Tuesday, July 24, 2018. Photographer: Qilai Shen/Bloomberg
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Last May, Beijing scrapped subsidy support for solar power, eventually holding the first round of a new replacement scheme earlier this year.
Many companies including manufacturers of solar panels and other equipment, supplement their revenue by developing projects. But with curtailment rates commonly in the double digits, those and the pure-play developers are seeing their profits curtailed too.
That may have been sustainable in the days of generous subsidy but the new support mechanism requires projects to operate on a cost per unit of electricity close to the price of coal. Would-be developers took part in a reverse auction bidding for a premium over and above the regional benchmark price for electricity. The margins are now slimmer.
The new support is also contingent on projects being able to demonstrate that the provinces where they are built have sufficient grid capacity to absorb their power.
In July a total of 23GW of solar capacity was awarded to the winners. Among the ten biggest winners were the world’s largest panel manufacturer Jinko Solar and the second-largest inverter manufacturer Sungrow.
The inspectors will likely find themselves spending a lot of their time in China’s northern deserts where curtailment has previously been a challenge. At the start of 2017, the country’s National Energy Administration reported curtailments rates of 39% in Xinjiang province and 19% in Gansu province. The latest figure for Xinjiang, released last week, is 10.6%, a sign that the policy of halting new capacity and reinforcing the grid is making an impact.
At the start of 2019 the State Grid Corporation announced plans for five new pumped hydro energy storage facilities as part of an effort to tackle the curtailment challenge.
The inspectors will also be tasked with ensuring local governments are playing their part in promoting the purchase of renewable energy. A renewable energy certificate scheme, similar to those in the U.S. and Europe, is also being established as an additional method of incentivizing investment in wind and solar power without a direct subsidy.
