Green Economy

Green China?

Renewable Energy Challenges in 2019

The world’s biggest investor in renewable energy is shifting gears as the cost of solar and wind power falls below that of coal or natural gas.

A residential compound is seen during a smoggy day in Wujiaqu, Xinjiang Uighur autonomous region. REUTERS/Stringer

The world’s biggest investor in renewable energy is shifting gears as the cost of solar and wind power falls below that of coal or natural gas.

For China, renewable energy must be efficient, market-driven, and, above all, subsidy-free.

China has been driving global investment in renewable energy, at least in terms of absolute volume, for years.
The number of patents for renewable energy-related technology and products far outstrips that of the US or Europe, and its share of renewable energy in its energy mix, at 38%, might not be the highest in the world but is certainly growing rapidly.

In addition, investment beyond its borders is increasing, as President Xi Jinping makes progress on developing the Belt and Road Initiative.

This monumental endeavor, being pursued for the past six years, in theory should create a free trade land route and maritime “belt” to connect China with European markets, reminiscent of the old “Silk Road.”

In July 2019, a report by the NGO Greenpeace found that since 2014 more than 12.6GW of wind and solar power generation capacity received financial support from China as part of the Belt and Road Initiative, from Kazakhstan to Kenya.

Before 2014, only 450MW of renewables had been developed in these territories, the vast majority of which are located in Southeast Asia; quite a difference.

However, despite this, China is far from giving up its coal-based power generation facilities.

Around 60% of the country’s energy is still based on coal, and the country is now launching a new USD30 billion train line with a 200 million-ton carrying capacity.

And while the Belt and Road Initiative has spurred on investment in renewable energy, 67.9 GW of coal power generation capacity has also been added to meet the program’s goals.

Despite these mixed results, there are signs that China is shifting gears to focus on better, not more, investment in renewable energy.

Last year, the Chinese government started to phase out subsidies for renewable energy projects as the price of solar and wind can now finally compete directly with that of coal and gas-based power generation.

Over the last ten years the cost of photovoltaic solar power has fallen by a dramatic 81%.

Since the cuts in subsidies started, the government has announced that onshore wind power will no longer be eligible for subsidies at all, and for new projects to be approved, electricity must be sold at a price equal to or lower than coal.

These decisions have made investment in solar energy drop by about 56% in the second half of 2018, with investors seeing their profit margins cut by the lack of subsidies, by the end of 2018, the country still registered a year-on-year 12% growth in renewable power generation capacity.

The government’s issue with new renewable energy investment is not just about money, although certainly the USD14 billion in subsidy-payment backlog might have something to do with it.

The issue with power generation is that it is not only about how much you can produce, but how much of that production can effectively be transmitted and distributed by the grid it is connected to.

And while officials say the average rate of wasted solar power due to lack of grid capacity has fallen from 3.6% to 2.4% in the first half of this year, several regions across the country like Tibet (25.7%) and Xinjiang (10.6%) still register wastage rates in the two digits.

Which is why in late August, the Chinese government sent out inspectors to every Chinese region to tackle the wastage issue and report on what improvements the grid needs in order to make better use of its renewable energy production.

That is not to say that China is no longer investing in renewables, and, in fact, the government announced earlier this year a plan to develop 20.8 gigawatts of new solar and wind projects. It is just that they should now be market-competitive and have concrete conditions to effectively contribute to the grid.

Better, rather than more.

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