Clean energy is competing with coal-fired generating capacity for priority dispatch in the country more than ever before, says Bloomberg New Energy Finance (BNEF). However, the consultancy — which has just released its new China Renewable Curtailment and Coal Stranded Assets Risk Map, in cooperation with the ClimateWorks Foundation — also says that factors such as rapidly rising power demand, hefty clean-energy subsidies and tough industrial competition at the regional level are creating “unprecedented” uncertainty for owners of coal-fired plants.
“The world’s largest power system will face serious challenges in the next few years,” BNEF says. “Renewable power generators face the worst curtailment rates in the world.”
At the national level, the average curtailment rate for solar reached 10% in 2016, as the country’s electricity market was oversupplied by 35% by the end of last December. And the situation remains precarious, as developers are now building about 24 GW of new solar capacity in regions where renewable energy is still being curtailed, as well as 30 GW of wind, according to BNEF.
In addition to losses arising from idled renewables capacity, China stands to lose as much as $237 billion from its threatened coal-fired plants, as more than 120 GW of new coal generation capacity is still being built throughout the country. With its new data-backed risk map, BNEF aims to shine a light on the criteria that Chinese energy regulators are using to guide the transformation of the country’s power market. The map offers a look at the cross-industry, provincial factors that will shape the development of the country’s energy sector through the end of this decade.
BNEF believes that the national curtailment rate will fall nationally in the years to come, as the pace of construction slows and more long-distance transmission capacity is brought online. In particular, it says that curtailment pressure will ease in Gansu province, as well as the Xinjiang and Inner Mongolia regions. However, solar and wind curtailment may start to become an issue in the southern part of the country by the end of the decade, particularly in provinces such as Fujian, Guizhou, Sichuan and Hunan.
That said, BNEF believes that through 2020, coal risk will remain an issue areas in which coal-fired generation is still widespread, such as the Inner Mongolia region, as well as Gansu, Shanxi, Jilin, and Yunnan provinces. “All will see their coal risk worsen or stay high going into 2020,” it argues. “Wholesale market liberalization will have a profound impact on the performance of coal power plants, especially in over-supplied provinces with significant competition from non-coal base-load capacity, such as hydro and nuclear.”
BNEF sees the completion of new long-distance transmission projects, as well as power market reforms, as the key to easing renewable curtailment risks. “Ultra-high voltage transmission lines will help alleviate curtailment risks,” it says. “But the risk mitigation will depend highly on line utilization.”
For example, provinces that might be positioned to bring electricity in from other parts of the country may ultimately decide not to hurt local generators by importing power, it explains.
“Besides technical constraints, China's pre-set allocation dispatch mechanism is one of the most critical causes of renewable curtailment,” BNEF says. “The liberalization of (the) power market will significantly help curtailment alleviation if a spot market and ancillary market are successfully established.”
Despite the ongoing build-out of coal-fired plants, none of the provinces in China actually need to bring any new capacity online, based on the current supply/demand balance, it argues.
“Beijing, Shanghai, Jiangsu and Hebei are the only provinces where local generation fleet, de-rated for availability, is not equal to or higher than the peak demand load,” BNEF says. “However, these provinces can rely on imports as well as cleaner new build (like nuclear) to meet the shortfall. These regions are also severe air pollution control areas, so should not be building more coal-fired capacity for that reason.”
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