With 25% Renewable Target for 2025, Solar In China Has a Smooth Run Ahead

China’s national energy regulator NEA has released a consultation paper where it aims to raise the share of wind & Solar power in total power consumption to 11% in 2021 and 16.5% in 2025. Their combined share in 2020 was 9.7%. as we have reported earlier, combined with the long term target to 40 percent share for renewable energy by 2030, this pretty much guarantees an annual capacity creation of 100GW or more. One reason why Chinese manufacturers have gone ahead and committed to major capacity expansions.

Currently, total wind and solar capacity is at 530 GW, which needs to go to 1200 GW or more by 2030 to meet these numbers, based on demand projections for power.

To ensure these numbers do happen, the government is following a multi pronged strategy. A key aspect of these is the Chinese equivalent of India’s RPO or renewable purchase obligations.

provincial quotas for hydro and non-hydro renewable electricity consumption. The new system assigns electricity users, including grid companies, electricity retail companies, and large end-users participating in direct power purchasing a percentage quota of their electricity that needs to come from renewable energy.

Users can prove they have fulfilled the obligations by buying renewable energy certificates (RECs), which are issued to renewable generators for each megawatt-hour (MWh) they produce. The state plans to  establish renewable obligations for hydropower and other renewable energy (wind, solar, biomass) for all major users. Be it states or provinces, and other large consumers. Users with an insufficient number of RECs at the year-end will have  to buy replacement RECs (renewable energy certificates)  at a price proposed by power grid enterprises and filed with the National Development and Reform Commission.

To ensure compliance, a carrot and stick policy has also been planned. Thus, failure to meet obligations could impact ability to trade in REC’s or power trading altogether. Fresh energy capacity in non-renewable categories like coal could also be refused. Long term targets being considered now will place laggard states on a path to renewable energy addition, while giving them time till 2025 to catch up and show serious intent with specific policies to incentivise RE.

India’s stuck Electricity Act (amendment) bill 2020 has some similarities with this approach, in the way it uses the RPO + REC stick to drive states towards more RE. For instance, we had a target of 21 percent from renewables, with 10.5 percent from solar. While the latter has been achieved thanks to Hydropower, the solar target is well behind. Beyond that, central involvement remains too high possibly to ensure easy movement towards those numbers.

Of course, with a much more federal structure, it has also taken aim at state regulators to ensure a more uniform interpretation and application of laws around contracts and PPA’s, one of the reasons many state government’s have been pushing back. However, with coal becoming an increasingly unviable option for states with coal plants located far from pitheads (near the mines), it seems safe to say that many states, especially in North India, will come round to see renewable energy, particularly solar, more favourably. The centrally decided targets of 175 GW by 2022 including 100GW for Solar, or even 450 GW of RE by 2030 will then look far more achievable.