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China could exceed renewables generation target of 33% by 2025

Highlights

Renewables likely to reach 36% of electricity consumption by 2025

China's renewable resources concentrate in north and west regions

Cross-provincial trading key to boost nationwide renewable consumption

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.

Cross-provincial trading

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

Provinces*
Renewables' share in electricity consumption -- Actual
Renewables' share in electricity consumption -- Government target
Met target?
Sichuan
80.4%
74.0%
Yes
Yunnan
77.5%
75.0%
Yes
Qinghai
77.1%
69.5%
Yes
Gansu
46.9%
49.5%
No
Hunan
46.4%
45.0%
Yes
Chongqing
45.5%
43.5%
Yes
Guangxi
43.1%
43.0%
Yes
Hubei
41.5%
37.0%
Yes
Guizhou
36.1%
35.5%
Yes
Shanghai
31.9%
31.5%
Yes
Jilin
29.9%
28.0%
Yes
Jiangxi
29.3%
26.5%
Yes
Henan
29.0%
21.5%
Yes
Guangdong
29.0%
29.0%
Yes
Ningxia
28.8%
24.0%
Yes
Shaanxi
26.7%
25.0%
Yes
Shanxi
24.9%
20.0%
Yes
Inner Mongolia
24.1%
20.5%
Yes
Heilongjiang
23.3%
22.0%
Yes
Xinjiang
20.2%
22.0%
No
Beijing
19.8%
18.0%
Yes
Tianjin
19.5%
17.0%
Yes
Anhui
19.3%
16.0%
Yes
Liaoning
19.1%
15.5%
Yes
Fujian
19.0%
19.0%
Yes
Zhejiang
18.9%
18.5%
Yes
Jiangsu
18.6%
16.5%
Yes
Hebei
17.6%
16.5%
Yes
Hainan
17.5%
16.0%
Yes
Shandong
15.8%
13.0%
Yes

Source: National Energy Administration of China

*Note: No renewable energy target for Tibet

TABLE 2: Cross-provincial lines and their transmission volumes

No.
Origin
Destination
Transmission volume
(terawatt-hours)
Renewables' share in
transmission volume
1
Xiangjiaba (cross Yunnan, Sichuan)
Shanghai
28.3
100.0%
2
Jinping, Sichuan
South Jiangsu
36.19
100.0%
3
Xiluodu, Sichuan
Jinhua, Zhejiang
27.16
99.9%
4
Hami, Xinjiang
Zhengzhou, Henan
44.61
35.8%
5
Lingzhou, Ningxia
Shaoxing, Zhejiang
50.41
23.1%
6
Gansu
Hunan
27.19
26.1%
7
Shanxi
Jiangsu
28.57
17.6%
8
Xilingol, Inner Mongolia
Taizhou, Jiangsu
18.59
22.4%
9
Tongliao, Inner Mongolia
Qingzhou, Shandong
26.54
38.0%
10
Shanghaimiao, Inner Mongolia
Linyi, Shandong
31.96
33.7%
11
Changji, Xinjiang
Guquan, Anhui
55.06
31.4%
12
Qinghai
Henan
15.15
98.3%
13
Yazhong, Sichuan
Poyanghu, Jiangxi
15.05
97.0%
14
Chuxiong, Yunnan
Zengcheng, Guangdong
21.76
100.0%
15
Puer, Yunnan
Jiangmen, Guangdong
15.62
100.0%
16
Dali, Yunnan
Shenzhen, Guangdong
23.79
100.0%
17
Kunming, Yunnan
Longmen, Guangdong
22.71
100.0%

Source: National Energy Administration of China

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