China is on track to meet its 33% electricity consumption target from renewables by 2025 and could comfortably exceed it amid ongoing efforts to debottleneck the power grid to accommodate more renewables, analysts and clean energy project developers said.
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China's energy regulator National Energy Administration, or NEA, Sept. 16 published its 2021 annual evaluation report for renewable power development under which it stated that renewable electricity consumption totaled 2,444.6 terawatt-hours in 2021, accounting for 29.4% of total electricity consumption.
This is already close to China's 14th Five-Year Plan target of requiring 33% of electricity consumption to come from renewables by 2025 that has generally been considered a conservative target by market participants. The five-year plan was unique in that its renewable energy target was consumption based, instead of generation based, which improves the likelihood of increasing actual clean energy consumption and changing demand-side behavior.
"We forecast renewable energy's share could reach 36% by 2025. The [33%] target is certainly achievable considering current solar and wind development momentum," Caroline Zhu, senior analyst of low-carbon electricity at S&P Global Commodity Insights, said.
She also pointed out that in the 14th Five-Year Plan, one of the priorities is to enhance and expand the current ultra-high voltage power transmission networks, addressing the disparity of renewable resources in different provinces across the nation that also causes huge differences in renewable energy consumption.
The NEA's evaluation report showed, as of 2021, renewables occupy about 80% of the electricity consumption mix in three west provinces -- Sichuan, Yunnan, and Qinghai. In contrast, renewables' shares are below 20% in the consumption mix of most east coastal provinces, like Shandong, Jiangsu, and Zhejiang.
As such, building up power transmission network across provinces and establishing the respective market mechanisms will pave the way for China to realize its blueprint of a nationwide, renewable-dominant power system.
According to the NEA report, China's installed renewable generation capacity totaled 1,063 GW in 2021, accounting for 44.8% of the nation's total generation capacity. There is typically a difference in installed capacity and actual power generation due to the intermittency of renewables.
Enforcing provincial targets
One of the key factors in meeting renewable energy targets will be enabling electricity supply from regions with excess renewables to high consumption and densely populated provinces on the back of a power market reform.
Beijing has set a renewables target as a share of its electricity consumption mix for each province based on the resource availability, economic development status, and energy demand.
Among all 31 provinces with government targets, only Gansu and Xinjiang in northwest China failed to meet their targets in 2021, falling behind by 2.6% and 1.8%, respectively, the NEA's report showed. It also revealed that the nationwide wind power utilization rate improved slightly by 0.4% year on year, while the solar power utilization rate remained unchanged.
The provincial scorecards revealed that Qinghai and west Inner Mongolia saw significant drops in wind power utilization rates year on year in 2021 by 6% and 1.9%, respectively. Qinghai's solar power utilization rate also decreased 5.8% year on year.
The numbers indicate that besides pursuing generation capacity expansions, the government's focus must now shift to improving connectivity of renewables to the grid and delivery to the end-user. Experts have noted that changes will also be needed in China's power trading and dispatch that has a top-down approach and is mainly conducted within individual provinces, which makes it difficult to resolve supply-demand imbalances across the nation.
Besides technical challenges of transporting electricity, commercial solutions need to overcome the local protectionism mindset, according to analysts. For a province, importing renewables-based electricity instead of using local coal-fired generators can mean losing revenues to the clean energy exporting province.
The clean energy exporting province may in turn reserve renewable supplies to attract companies to invest and build manufacturing bases within the province. For instance, Sichuan, with cheap and clean hydropower supplies, attracted lots of solar photovoltaic and battery suppliers to set up production bases.
The provinces in west China (e.g., Gansu, Qinghai, Inner Mongolia, and Xinjiang) are expected to see a wider build out of wind and solar capacity due to the availability of large swathes of land. Due to their distance from areas of consumption, it is crucial to expand the current power transmission networks. This will also allow coast provinces in the east to increase the share of renewables in their coal-dominant electricity mix.
In 2021, 58.7% of China's total transmitted electricity volume was renewables-based electricity, according to NEA's report that disclosed the performance for each ultra-high voltage, direct current cross-provincial transmission lines.
In particular, seven out of 17 transmission lines transmitted nearly 100% renewables-based electricity, bringing hydropower supplies from Sichuan and Yunnan to provinces in east and southeast coastal areas, including Shanghai, Zhejiang, Jiangsu, and Guangdong.
Nevertheless, for transmission lines originating from Inner Mongolia and Xinjiang, transmission of solar and wind power was still below 40% of the total volume.
The Chinese government has initiated a plan to utilize the desert area in north and west China to build up centralized, large-scale solar and wind generation capacities. Besides direct trading and transmission of electricity, the central government also allows the transfer of "renewable energy consumption quotas" between provincial governments.
For instance, Yunnan had 4.9 billion kilowatt-hours of "surplus" renewable electricity consumption beyond the government target, which was transferred to help the highly industrialized Guangdong province to meet its target. In future, a comprehensive market mechanism should also be established to facilitate all types of trading between provinces, including renewable electricity, renewable consumption quota, as well as other products like renewable energy credits and emission allowances, according to analysts.
TABLE 1: Renewables' share in electricity consumption: Actual versus government target
Source: National Energy Administration of China
*Note: No renewable energy target for Tibet
TABLE 2: Cross-provincial lines and their transmission volumes
Source: National Energy Administration of China
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