Chinese government is taking a more centralized approach in developing the country’s renewable and clean energy sector. It is focusing on higher utilization as a priority, in addition to increasing power generation capacities, according to Fitch Ratings.
China will increase investments in its power grid to enable the deployment of clean energy. State Grid Corporation of China says it will spend more than RMB1 trillion ($162.8 billion) between 2013 and 2021 to building eight Ultra High Voltage (UHV) transmission lines across China.
This investment demonstrates the government’s commitment to effectively deploy electricity generated by renewable and clean sources that are often located far away from end consumers.
China has been investing heavily in the research and development of UHV transmission technology. Traditional transmission has significant losses when electricity is transmitted over long distances. UHV transmission enables clean energy producers to close the gap between consumption and power generation.
It will also help China maintain its coal-fired generation capacity, which will be located further away from cities in the future.
Hydropower is currently the leading source in renewable energy in China, providing approximately 20% of the country’s installed power capacity.
Of the total additional power generation capacity in 2013, new hydropower capacity accounted for over 30%, and thermal capacity took around 48%.
In January 2014, China increased the on-grid tariff for new hydropower plants by about 25% to 30% to reach similar levels that coal-fired power plants receive.
China has resumed an ambitious program to add nuclear generation capacity following a halt in the wake of the 2011 nuclear power plant disaster in Fukushima, Japan.
In October 2012, the State Council approved the restart of nuclear power development in China by providing new nuclear power targets and tougher safety guidelines for operators.
In addition, China raised the on-grid tariff for nuclear power to similar levels that thermal energy plants receive in June 2013.
China General Nuclear Corporation currently has 16 power units under construction and it would benefit from the increased on-grid tariff.
China has made the most effort to develop wind power. The rapid development in wind power and a lag in grid connectivity have caused overcapacity issues. The authorities have taken a more centralized approach now, removing local governments the power to approve projects, as well as limiting annual development for each region.
This has resulted in increased grid connection to 84% of capacity in 2013 from 72% in 2011. Meanwhile, wind power wastage has declined to 11% in 2013 from 16% in 2011.
Currently, the on-grid tariff for wind power generators is still 25% to 40% higher than for coal power plants and is subsidized by the central government.
China is providing clear economic incentive for greater use of clean and renewable energy sources. But coal will continue to be the largest source of electricity generation in the foreseeable future. It now accounts for around 70% of total capacity.
