Cleantech Market Intelligence
China Seizing Leadership in Global Solar
In November 2017, I wrote about the surging Chinese solar market. On January 2018, China’s National Energy Administration (NEA) confirmed this trend when it announced that 52.8 GW of solar were installed in 2017. To put this into perspective, this is more than the cumulative solar installed capacity in the US at the end of 2017. At the same time, PV became the technology of choice for the country—at least on installed capacity terms—as in the same period, China only installed 45.78 GW of conventional generation.
China As an Example for Solar Development
With a record year in 2017, China’s cumulative solar capacity reached 130.3 GW, or around 7.3% of the country’s national power generation capacity—3% of it coming from capacity installed in 2017. While this is still far from the levels of conventional generation, it does show the potential of PV to scale quickly and have an effect on a country’s electricity system. After all, China has the largest generating fleet in the world, with close to 1,800 GW of capacity.
Perhaps more surprising about the record installation figure was the take-off of the Chinese distributed solar generation sector. The country continues with the trend shown in 1H 2017 and is estimated to have closed the year at around 20 GW and a massive annual growth of 370% to reach 29.7 GW of cumulative capacity. As explained in November, this rise was caused by a rush to capitalize on highly attractive feed-in tariff (FIT) premiums that expired at the end of 2017.
Duration and Stability Expected
Despite the opportunistic nature of the surge in distributed solar, this sector is not expected to collapse in 2018 (although it might see a fall in new additions). There are several trends that still support the distributed sector. First, the new FIT, although not as attractive as the previous one, is still interesting enough to keep investment in the sector. In addition, the Solar Energy for Poverty Alleviation Program will also support new installations.
Distributed solar has also been beneficial for more fundamental changes in the Chinese electricity sector. The Chinese market is seeing increased competition thanks to China’s power sector reform, now nearly 3 years old, which has included a gradual effort to unbundle retail and distribution business from the large grid companies to varying degrees across provinces. On October 31, 2017, NEA and the National Development and Reform Commission jointly announced a new initiative for Market-oriented Distributed Power Generation as a new part of the power sector reform. The document calls for the creation of platforms that will facilitate electricity trading between distributed generation projects and end users across a local electricity distribution network, starting with large-scale pilots in yet-to-be decided locations. Although it will take time to implement, this initiative should help develop distributed solar installations as behind-the-meter installations will be able to trade their generated electricity freely, paying only distribution network costs, not transmission network costs.