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China's blistering solar power development encounters grid blocks

China's breakneck buildout of solar power, sustained by rockbottom equipment prices and policy support, is slowing as grid bottlenecks pile up, market reforms increase unpredictability for generators, and the best roof area runs short.

Last year, China broadened its solar fleet by 55%. The momentum continued through the very first two months of 2024, however in March brand-new solar construct fell 32% year-on-year to the most affordable level in 16 months, main information and computations show.

The country's solar power growth is slowing due to tighter curbs on providing excess power from roof solar into the grid and modifications in electrical energy pricing that are denting the economics of new solar jobs.

Projections show China's solar build this year will be heavily outmatched by development in its photovoltaic (PV) module manufacturing capability, raising the possibility the country will export more solar panels in spite of a trade backlash in Europe and the U.S.

. The main aspect slowing the expansion of distributed solar - setups developed near the point of usage, mostly on rooftops - is that there is insufficient storage or transmission capacity to soak up the excess power generated when the sun is shining.

That in turn is leading regulators to remove some of the rate support that resulted in the fast development of dispersed solar.

In the next number of years, this is going to be a huge problem that all provinces will deal with as grids are oversaturated, the facilities is overwhelmed, said Cosimo Ries, an analyst with Trivium China, a policy research group.

The problem has hit several regions that were heavy adopters of distributed solar, that made up 42% of the national solar fleet last year, however is particularly intense in provinces such as Shandong in the north.

State broadcaster CCTV said up to 50-70% of dispersed solar generation is being reduced in Shandong, which indicates grid managers have actually needed to stop that quantity of supply entering the grid in order to keep balances with demand.

China has attempted to limit curtailment of renewable energy to 5%, in line with rates of 1.5-4% in most huge markets, according to the International Energy Firm.

However in a study of 6 provinces' capability to take in distributed solar, China's energy regulator in 2015 found 5 expected to have to enforce limitations on new projects in 2024.

Hebei and Henan provinces - 2 of the 3 huge drivers of dispersed solar together with Shandong - have already seen an outright collapse in installations, Ries said. These. 2 provinces are extremely worrying.

In November, Henan province directed business and regional. regulators to come up with action plans to increase grid. capacity to support the healthy development of distributed. solar.

State planner the National Development and Reform Commission. did not react to a faxed ask for remark, and its Henan. and Hebei workplaces could not be reached. The North China Energy. Regulatory Bureau decreased to comment and the Henan energy. regulator did not react.

FORECASTS DIVERGE

China's rapid solar rollout has actually put it on track to meet its. eco-friendly goals years ahead of schedule, with installed solar. capacity of 655 gigawatts (GW) since March, the most in the. world without a doubt, well ahead of second-placed United States with. upwards of 179 GW at the end of 2023.

However projections for the solar rollout this year vary greatly. S&P Global Commodity Insights expects new setups to increase. 4% in 2024 from 217 GW in 2015, saying first-quarter additions. were stronger than anticipated even with the March drop-off, while. Rystad analysts see a 6% increase.

On the other hand, the China Electricity Council anticipates brand-new. installations to stop by 20% this year, while a Chinese PV. market association in February projection they could fall 12%.

Lagging grid financial investment and uncertainty produced by continuous. electrical energy market reforms loom as challenges, said Holly Hu,. S&P Global Commodity Insight's principal expert for clean. energy tech.

The country's solar rise was assisted in by government. assistance that motivated a surge in devices production. that has crushed international solar panel rates, triggering complaints. from trading partners.

For this year, experts anticipate China to include 500-600 GW. of PV module production capacity, a 60-70% boost, well above. development in solar jobs.

That would require producers to export even more to. markets such as Europe and the U.S., which doubled tariffs on. cells utilized to make solar panels from 25% to 50%.

PRICING CHANGE FALLOUT

Eco-friendly generators previously took pleasure in a warranty that. grid operators would purchase almost all of their power at a rate. tied to the coal index. That warranty was raised on April 1 and. worked previously in some locations, 3 industry specialists stated.

Now, renewable generation is increasingly subject to less. favourable market prices.

Shenhua Energy, a state-run coal and power company, stated in its. 2023 annual report that costs for its solar power fell 34.2%. year-on-year to 283 yuan per kilowatt-hour (kWh), while its coal. power prices fell just 2.4% to 406 yuan per kWh.

Wang Xiuqiang, a researcher at consultancy Beijing Linghang,. attributed the lower solar prices and profitability to a higher. percentage of market-based rates.

At the exact same time, grid companies are dialling back the 5%. curtailment limit, creating the risk for job owners that. their generation may not be bought, stated David Fishman of. Shanghai-based energy consultancy the Lantau Group.

Curtailment for Huaneng Power International, a significant. state-owned generator, increased to 7.7% in the very first quarter from. 3.1% a year earlier, Jefferies analysts stated in a customer note,. citing Huaneng management.

In an additional challenge, the easiest-to-site projects have. already been largely developed, said Shi Lida, research supervisor. at Yongan Guofu Property Management. At sites still offered,. roofs may require to be reinforced, grid connections might be. minimal, or hours of sunshine might be brief.

If your costs do not continue to fall, the financial investment will. not be cost reliable, Shi stated.

(source: Reuters)