China Faces an Uphill Renewable Energy Curtailment Challenge

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China, with the world’s largest power system, faces an uphill struggle in trying to contain double-digit rates of renewable curtailment.

Even though power shedding dropped 1.4 percent in the third quarter, compared to the first half of this year, “whether the curtailment rate will go back up again after new projects start commissioning remains a concern,” said Xiaoyang Li, market analyst at MAKE Consulting.

Oversupply, system inflexibility and transmission bottlenecks mean power generated in China’s northern provinces regularly fails to make it to the load centers near the coast.

According to China’s National Energy Administration (NEA), the renewable energy abandonment rate in the third quarter of this year was 33 percent in Gansu and 29.3 percent in Xinjiang, both in the northwest of the country.

Jilin, Heilongjiang and Inner Mongolia, all on China’s northern border, also had double-digit abandonment rates, NEA figures show. Nationwide, the average rate of curtailment was 12.2 percent in the last quarter, compared to 13.6 percent in the first half of the year.

The level is also down on 2016, when the country threw away 56.2 terawatt-hours of renewable generation and national average curtailment rates were as high as 17 percent for wind and 10 percent for solar.

Nevertheless, the continuing high levels of curtailment are causing problems for China’s independent power producers (IPPs), according to Li.

“IPPs that have projects approved or under construction in provinces with red warnings may face significant financial strain due to the substantial upfront investment already made,” she said.

Limited average wind utilization rates were harming the internal rates of return for many projects, she noted. “Wind power developers are therefore shifting their investment from the northern region to the southern region,” she said. 

Despite this, China “will face serious challenges in the next few years,” according to a report published by Bloomberg New Energy Finance (BNEF) and the ClimateWorks Foundation last month.  

More than two-thirds of China’s record 1,614 gigawatts of generation capacity was built in the last decade, it said, with power capacity growing by an average of 11.5 percent a year between 2005 and 2015. Much of this growth was far from load centers, though.

Upward of 70 percent of China’s utility-scale wind and solar farms have been built in the country’s sparsely populated northern provinces.

At the same time, power demand growth has slowed down over the last half decade, so that by the end of last year China had 35 percent more capacity than it needed. Only Beijing, Jiangsu, Shanghai and Guangdong, all on the coast, had electricity deficits. 

Beijing is taking steps to fix the problem. This month, Reuters reported that the NEA is aiming to stop renewable energy curtailment by 2020, and raise the portion of its renewable and non-fossil-fuel power consumption to 15 percent of total energy mix by 2020 and 20 percent by 2030.

The measures being introduced to combat curtailment include barring further projects in provinces where power-shedding is rife, and an increase in transmission line capacity linking the north and south of the country.

China is also reworking its electricity market, which currently does not take marginal costs into account when prioritizing dispatch, meaning renewable plants are not rewarded over coal.

By 2020, China is planning to build 16 new ultra-high-voltage DC lines, on top of eight already in operation, connecting these provinces to coastal load centers, according to BNEF analysts.

However, “less than half of these lines are designated to transmit renewable electricity,” the report states.

Furthermore, said Li: “The progress of transmission projects is slow and there is no mature regulatory framework to specify the amount and type of power to be transmitted on the line.”

Other measures are “also immature,” she said. “Actual impact will be limited under the immature power market system.”

It could be worse, though. While BNEF estimated there are at least five provinces facing a high wind investment risk for new-build quotas up to 2020, and four for PV, coal project investments could be seriously threatened in no fewer than 14 provinces. 

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