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Here are some brief thoughts on the renewable energy aspects of the new announcement: On 12 December 2020, Chinese President Xi Jinping announced China’s revised targets for its NDC, including changes to carbon intensity of GDP, non-fossil energy share, and capacity of RE.
Even before the Sept announcement that China would pursue carbon neutrality by 2060 and a carbon peak before 2030, China’s 20% target for non-fossil energy by 2030 appeared outdated. (15.3% in 2019.) After the Sept announcement, I was expecting a revision to 25% for 2030.
I’m pleased that change happened, but I expect this will be easy to exceed. 30% is possible with a modest acceleration of renewable energy trends and a slowdown in coal.
China will target 1200 GW of wind and solar in 2030, versus around 415 GW at the end of 2019. This implies 72 GW of combined annual wind and solar installations, which is in-line with the installation rates of the past two years. RE installations would stay flat on a GW basis.
In two recent papers, I laid out why I thought China’s FYP targets would call for flat/stable rate of installations of RE, and this bolsters that.
“The current government work plan calls for “stable growth” of renewable energy, and the policies released so far in 2020 all support this paradigm.” https://www.oxfordenergy.org/wpcms/wp-content/uploads/2020/06/Current-direction-for-renewable-energy-in-China.pdf
“From these signals, it appears unlikely that the 14th Five-Year Plan will shake up the status quo of China’s energy markets.” https://www.energypolicy.columbia.edu/research/commentary/trends-and-contradictions-china-s-renewable-energy-policy
GW is the easiest way to understand wind & PV growth, but efficient policy focuses more on energy output, which is hard in planned systems. In 2016, I wrote that China wd focus more on quality (generation, in GWh) than capacity (in GW): https://chinadialogue.net/en/energy/9455-looking-beyond-the-gigawatts-in-china-s-power-plan/
In 2020, several major policies on RE confirmed this trend. Provincial RE obligation were clarified, and a new clean energy consumption draft called for careful planning by provinces to “constrain” RE to what could be used. Long-term RE ambition/targets take a back seat.
As wind and solar approach and cross 10% of power production, and as the global market for storage takes off, there is a push to reduce wind and solar variability. Several provinces now require storage for up to 20% of wind capacity for new projects.
In our flexibility report just released, we found that this approach is far less economic than improving the overall system flexibility, incl coal plant flexibilization, where China has missed targets in the past. https://www.energypartnership.cn/uk/home/events/quantifying-power-sector-flexibility-in-germany-and-china/
But it matches the conservative approach of the Clean Energy Consumption draft, where provinces calculate “constraints” on their ability to absorb variable RE.
Putting provinces/power sector in charge of calculating the “constraint” on local ability to absorb RE will likely bolster efforts to build new coal plants to meet energy security. Further, the NEA’s Early Warning traffic lights for coal are mostly green now.
Spot markets and carbon ETS continue to slowly evolve/improve. I don’t expect these market forces to play a role in promoting wind and solar in the next two years, even though several studies show that wind and solar are now cost competitive in China without a carbon price.
Instead, planning and finance for coal relative to RE will play the dominant role. In my view, the biggest reform needed is to shift towards more long-term planning for coal and RE. Present planning is geared towards the very short term (2-3 years for the coal Early Warnings).
While European and U.S. examples show the economic and system security viability of high shares of RE, in China these examples are not yet viewed as fully convincing.
In my view, the emphasis on markets and low LCOE by intl experts is actually a turn-off in China, given its current state of market reform and reliance on administrative planning directed by incumbent players (grids, provincial officials, power firms).
Therefore, I am putting more emphasis on the planning-related tools that enabled high shares of RE in Europe and U.S. Calculations of system resource adequacy, loss-of-load-probability, and effective-load-carrying-capacity for RE.
These planning notions might not have the same cool factor as spot markets, demand response, V2G, but they may have more influence on how short-term “constraints” on RE are set.
Getting back to the targets, what do they say about the relative proportion of RE compared to coal?
Let’s say China adds 72 GW of wind and solar annually, made up of 30 GW wind and 42 GW PV. Taking the fairly low China capacity factors from Guo and Davidson (wind 21%, PV 10%), this is 52 TWh wind, 37 TWh PV. (Total 89 TWh.) https://ideas.repec.org/a/eee/enepol/v145y2020ics0301421520304444.html
Compare that to 2019 electricity growth stats: Over 300 TWh demand growth, 40 TWh wind production growth, 47 TWh PV (total 87 TWh). If nuclear and hydro add a combined 100-120 TWh, non-fossil takes 2/3 of incremental demand growth. https://chinaenergyportal.org/en/2019-electricity-other-energy-statistics-preliminary/
This aligns with the target of the Energy Law draft for renewable energy and non-fossil energy to have priority for meeting incremental demand growth. But it also clearly leaves plenty of space for rising coal plant TWh.
My closing thought: New targets in line with my expectations for stable growth in RE, but LT targets are usually set at levels to be exceeded.
ST planning and year-to-year policy changes mainly in the driver's seat right now. But given the importance of planning and targets, more ambitious LT stretch goals would really help. ST planning focus doesn't give accurate investment signal for RE vs new coal.
