China’s solar target crucial for the global industry

China's new target for the renewable power will revitalise the sector, but adjustments are needed

PUBLISHED : Wednesday, 18 June, 2014, 10:59am
UPDATED : Thursday, 19 June, 2014, 2:04am

China's new target for solar power has global implications for a world struggling with climate change.

Last month, Beijing pencilled in 70 gigawatts of solar photovoltaic power plants by 2017.

Solar hit 20GW in China last year, when the world set a new solar power record, adding 39GW.

Solar's global growth averaged 48 per cent annually between 2009 and last year, more than double that of wind power.

China's great leap for solar is timely. It reinforces clean-tech industrial policy as the climate imperative deepens, and shields manufacturers facing anti-dumping duties in the United States, Europe and India.

Surging orders will fill excess capacity and restore balance sheets. More factories and research into better solar cells by Chinese manufacturers is the likely result.

In the medium term, if all goes well, solar prices will continue falling, performance will rise, and profits may pick up.

Prices are already falling such that Eric Luo, chief executive of Shunfeng Photovoltaic International's Wuxi Suntech subsidiary, expects electricity generated by utility-scale solar power plants to undercut coal by 2017, RenewEconomy reported.

Luo's comments parallel powerful global dynamics triggering bullish reports from Wall Street over the last year.

Solar's quick march across China over the next few years, backed by more wind, risks trouble, however, for the power grid and conventional utilities. The country's grid already struggles with wind and solar. In some cases, wind farms wait for power lines, in others the grid is overloaded, so owners are paid to idle their turbines.

China's struggles to match a power grid conceived for the characteristics of coal, gas, nuclear and hydro with the fundamentally different proposition presented by zero-carbon solar and wind are mirrored elsewhere.

Renewable generators in Europe are paid to curtail output. Conventional utilities in Australia and Germany, for instance, suffer falling revenues and, in some cases, power plant write-offs. They cannot compete with the near-zero marginal cost of solar and wind.

Grid revenues are sagging because rooftop solar trims demand for power from far-off generators. Whether similar events unfold as China's tightly regulated power system proceeds along a similar path remains to be seen.

In China, as in Europe, curtailment payments cannot maintain system stability indefinitely. The pressure is on to redesign markets and lay new power lines for renewable energy, such as the ultra-high-voltage network being built in China.

Meanwhile, some relief for China's grid, which soaked up more capital than generation last year, might come from the rooftop, or distributed, solar target of 8GW this year out of a total of 14GW.

Distributed solar can be more efficient than far-flung large power plants because power is produced near where people need it. All else being equal, more distributed solar points to a smaller grid, plus lower carbon emissions and cleaner air.

Rooftop solar booms in America, Australia and Europe show what could happen quickly in China once regulations and financing are in place.

In any case, the new 2017 solar target will change China and the world by delivering cheaper, better solar. That is critical to decarbonising the global power system fast enough to temper climate change.

Last month, the International Energy Agency, echoing the Intergovernmental Panel on Climate Change, concluded governments must pursue "active transformation" of energy through "radical action".

One model that might qualify is Germany's pathfinding Energiewende (energy transition) policy. Another might be evolving in the halls of Zhongnanhai in response to national needs and global opportunities.

Count on more quick leaps and bounds for solar in China.

David Fullbrook is an ecological economist and a senior consultant with DNV GL Energy's Clean Technology Centre in Singapore advising policymakers and executives on renewable energy strategy and policy. He writes in a personal capacity