The deployment of renewable energies in China is driven by an ambitious political will. But the technical and regulatory barriers are many, leading to curtailment. A paradox also faced by Germany.
The deployment of renewable energies (REN) poses a challenge for developing and “developed” countries alike. It requires a major transformation in existing infrastructure and regulations, which needs to be carefully planned. The cases of China and Germany described here are informative, as these countries currently combine a highly ambitious political will regarding renewable energies with equally important technical and regulatory barriers.
Renewable energies: Key figures in China and worldwide
(2016), RTE, World by Map and China Climate Change Info-net (2016).
Source: I4CE, January 2017 based on REN21 (2016), Global Carbon Atlas, IEA (2016), National Bureau of Statistics of China
Paradox of Chinese renewable energies
In a decade, China has become the world leader in renewable energies. In 2015, the country invested USD 103bn to install an additional 30 GW of wind capacity and 15 GW of solar capacity on its territory. This trend stems from a structural development of its economy, but also from a strong political will to reduce its energy dependency and address the issue of air pollution, which causes 1.6 million premature deaths in the country every year.
The 13th Five-year Plan, which was approved by the State Council – the country’s supreme body – in November 2016, confirmed this orientation by setting a target for the installed capacity of 110 GW for solar energy and 200 GW for wind energy by 2020. In addition, in January 2017, the National Energy Administration (NEA) announced that over USD 360bn would be invested for renewable energy projects by 2020, creating 13 million jobs.
Curtailment is a forced reduction, for economic or regulatory reasons, of renewable energy power generation, compared to the maximum achievable at a given time with the resources (wind, sun) available and installed production capacity.
However, the day-to-day administrative management of projects sends out quite a different message: in March 2016, the same NEA asked the local authorities in six Chinese provinces to stop authorizing the construction of wind turbines on their territory. China is, in fact, finding it difficult to use all its renewable electricity: in 2015, 15% of wind power and 9% of solar power were consequently curtailed (see Curtailment).
Figure 1: Renewable energies still only account for a fraction of power generation in China, despite a substantial installed capacity
Installed electrical capacity by renewable energy source and percentage of power generation coming from renewable sources, excluding hydro
Source: China Statistical Yearbook 2016, National Bureau of Statistics of China.
Blockages caused by technical limitations…
There are many technical reasons for the difficulties mentioned above, which include the geographical mismatch between the areas where renewable energy is generated and the areas where energy demand is high, and the insufficient development of power transmission infrastructure. As an example, most of the country’s large wind farms are located in northern China in sparsely populated regions, while high-demand areas are located on the east and south coasts. Since 2009, the Government has been focusing on the construction of ultra-high-voltage transmission lines to transport the electricity, sometimes over thousands of kilometers. The regional transmission grids have not been sufficiently developed and currently cause most of the congestion problems.
…but also regulatory limitations
The prevailing regulatory framework in China is also a major obstacle to the deployment of renewable energies in China. Firstly, grid operators pay the same price for electricity regardless of its source, and the curtailment of renewables is not penalized. These operators thus have no incentive to opt for renewable energy to supply the grids. They thereby limit REN contribution to thresholds intentionally set low, to hedge against production variations and forecasting errors (especially for the weather), which can make renewable energy generation unpredictable.
Secondly, a number of historical coal-fired power plants – the so-called “cogeneration” power plants” – provide an incompressible minimum quantity of electricity, as a byproduct of heat production. In winter, there is a high level of heat demand. The cogeneration power plants consequently produce a lot of heat and therefore a lot of electricity too. As a result, when electricity demand is low (during off-peak hours), the electricity produced by cogeneration covers virtually all this electricity demand. With no appropriate incentives (see previous paragraph), this simpler and more stable cogeneration electricity is preferred to renewable electricity, even while coal power plants are highly emissive.
Figure 2: The situation of wind energy by province in China: curtailment rate and freeze on new projects
Source: I4CE based on China Dialogue (May 2016 and July 2016) and InsideClimate News (March 2016).
Remove regulatory barriers: The Government’s complex task
The Chinese Government has been taking action on these issues since 2015. The solutions identified are based on four areas of action:
Prioritize renewable energy access to the power grid: in September 2015, China made a joint statement with the USA giving renewable energies priority access to the power grid. This statement fits in with the reform launched in March 2015, which plans to transfer to grid managers the responsibility of developing REN generation.
Guarantee market opportunities for the sale of renewable electricity: in March 2016, the Chinese Government announced that it would guarantee, for an allocated number of hours every year, the purchase of the renewable energy generated in regions where there are high curtailment rates. Furthermore, the curtailed renewable energy production will be financially compensated in the future, either by the “fossil” energy producers or by the grid managers.
Introduce quotas for renewable electricity: the power grid managers in each province are now obliged to include a share of renewable electricity in the electricity transported, ranging between 5% and 13% of total electricity. Electricity producers will be required to produce a minimum of 9% of renewable electricity as of 2020 (or purchase the corresponding certificates from third parties).
Reduce the role of coal: the Government has suspended the authorization to build new coal-fired power plants in 13 provinces and has delayed the construction of power plants which had already been approved in 15 others. This is an essential stage in limiting the overcapacity of coal-fired power plants and installing renewable generation units, in a context of a slowdown in electricity demand. Furthermore, the Chinese Government wishes to promote the use of renewable energies (especially wind energy) for heat production.
Other measures are also under discussion, such as the development of mechanisms to meet demand, closer regional cooperation, and greater flexibility for cogeneration power plants.
For further reading on iD4D: “Sustainable energy: derisking investment is more cost-effective than providing subsidies”, by Jo Scheuer, Director of Climate Change and Disaster Risk Reduction at UNDP’s Bureau for Policy and Programme Support.
Germany: another country facing curtailment issues
China is not the only case: in Europe, Germany, which has over 40 years’ experience in supporting renewable energies, also had to curtail its wind generation by 5.2% of total generation (79.1 TWh) in 2015, i.e. three times more than in 2014. Albeit proactive, the country was overwhelmed by the rapidity of the deployment of these energies: only 40% of the upgrading of the transmission grid launched in 2009 had been completed at the end of 2016 and it is not expected to be completed until the end of 2025. The outlook for congestion between the generation plants in the North Sea and consumption centers in the South of the country is such that in February the country limited new onshore wind capacity to 900 MW a year until “at least 2019”.
In Germany, as in China, power transmission infrastructure needs to be adapted to transport an increasingly variable and decentralized production. However, it is especially the regulatory situation which requires major changes in order to integrate new players with very different constraints. The areas of action identified by China signal a first step towards the changes required in its power system – and an objective which still largely needs to materialize through concrete measures in favor of renewable energies.
For further reading on iD4D: “Development, energy and climate: the challenge of our time”, by François Bourguignon, President of the European Development Research Network.
 Jilin, Heilongjiang, Gansu, Inner Mongolia, Ningxia and Xinjiang.
 26% for the first half of 2016.
 For example, in Germany, in the event of grid congestion, wind energy producers receive compensation for 95% of what they should have earned from the unsold production.
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.