/8th March 2017, IEA, RENEWABLE MARKET WATCHTM/, China has experienced a marked increase in electricity demand over the past decade, requiring rapid and large investments in the power sector. This has provided an opportunity for streamlining system integration with the expansion of overall electricity infrastructure. However, this opportunity has not been fully realised and investments have predominantly been in coal-fired capacity. The dominance of coal in the power sector has translated into growing concerns over local air pollution and CO2 emissions. To address these issues, China is ramping up the deployment of renewable energy resources and putting in place measures to effectively limit increases in coal-fired capacity.
In recent years, wind and solar PV deployment have gathered significant momentum. In 2015, renewables represented over 50% of net additions to power capacity. Grid-connected onshore wind capacity increased by over 32 gigawatts (GW) in 2015, the highest rate of installation to date. China installed 15 GW of solar PV in 2015 according to government estimates. Overall cumulative capacity reached over 43 GW, with over 80% from utility-scale projects. China proposed more ambitious renewable energy targets under the 13th Five-Year Plan: nearly doubling land-based wind capacities from 128 GW in 2015 to 250 GW by 2020, and tripling solar PV capacity from 43 GW in 2015 to 150 GW by 2020.
The ramp-up of renewables capacity is complemented by measures to limit the construction of new coal-fired capacity. The National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) issued special emergency guidance, requiring local governments and companies to suspend or cancel the permitting and construction of coal-fired power plants. Against the background of slowing economic growth and restructuring of the Chinese economy away from heavy manufacturing, growth in power demand has been slowing dramatically. In 2015, China’s power demand grew by only 0.5%, the lowest since 1998. In a growing number of regions of the country, the issue is no longer how to rapidly meet growing power demand.
Rather, the question has become how to scale down coal generation in line with the expansion of renewable energy. This raises issues both within the power sector but also for the Chinese economy more widely, in particular how to deal with the possible negative impacts on employment and economic growth in coal-mining regions.
China is moving quickly from a dynamic power system context to a stable one – this is reflected in the growing issue of wind curtailment. The highest curtailment rates are observed in provinces where large coal-fired generation capacity is located or where a lack of transmission capacity prevents the dispatch of surplus wind power to demand centres. Gansu Province led the curtailment with 39% followed by Jilin (32%) and Xinjiang (32%).
In this context, the most central challenges relate to operating the power system in a more flexible manner, while deploying new wind and solar PV capacity in a system-friendly manner. The three provinces of Liaoning, Jilin and Heilongjiang (collectively referred to as North-East China is this publication) have been selected for a closer analysis of current operating practices.
They are part of the same synchronous system, but each province is balanced separately. With regard to system operations, the greatest barriers to increased use of wind are the contractual arrangements for the purchase of electricity and the resulting constraints on full-load hours for thermal power plants. This leads to monthly, weekly and day-ahead scheduling for thermal generation, leaving little room for adjustment. In addition, once a power plant has been switched off, it is required to remain shut down for one week and unit start-up has a lead time of approximately 12 hours.
These issues are further exacerbated by the presence of heat-driven cogeneration power plants, which are particularly constrained by the nature of their operation. This creates challenges to the effective use of increasingly mature renewable energy forecast data. In addition, generators’ KPIs include overall electricity generation above and beyond generated revenue. This can create perverse incentives to generate power even when it is not needed. A further operational challenge is the use of interconnection capacity. Currently, flows over interconnectors linking different provinces are fixed for 12-hour periods, a lost opportunity for using this flexible resource. The improved use of interconnections would by itself already make a substantial contribution to reducing curtailment of VRE in North-East China.
Both of these challenges have been recognised by system operators and policymakers in China. In North-East China a pilot project has been put in place to remunerate thermal generation for also providing flexibility (ramping) in order to incentivise a more flexible operation. In addition, making co-generation more flexible has been identified as an important priority.
Considering the system-friendly deployment, there still appears to be a tendency to focus on large scale projects in resource-rich areas, far away from load centres. However, next-generation wind and solar PV technology allow for more flexible deployment, which could alleviate some of the current grid integration issues.
China already has tools available to diversify deployment. For example, FIT levels are differentiated according to resource endowment. In addition, beginning with the 12th Five-Year Plan, deployment of new wind and solar power is coordinated at the national level.
More information about solar PV power market in China you may read here: Asia Photovoltaic (Solar PV) Power Market Outlook 2016 – 2015
