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Policy: Guangxi and Guangdong Trading Centers Open
Guangxi and Guangdong electric trading centers opened at the end of June. The two trading centers are part of China Southern Grid, which estimates 18%, or 144TWh total, of electricity consumed will be traded. (CSG CN)
Transmission: Ximeng-Shandong 1000 kV UHV Transmission Line Fully Operational
The Ximeng-Shandong 1000 kV UHV power line is now fully operational. Key statistics are:
With the new transmission line, approximately 2GW of power from Inner Mongolia is being sent to Shandong province, resulting in a total of 10GW of power coming from outside the province.
Ximeng-Shandong Transmission Line
Source: NEA, Azure International
Wind: 7GW of New Installed Capacity From January to May 2016
In the first five months of 2016, 7GW of new wind capacity was installed. China is on track for installing 20GW of wind in 2016. Wind curtailment, on the other hand, remains at roughly 15% for the national average, with some regions in the 30% average range in 2015. (Recharge EN)
Finance: Envision Energy Invests in AutoGrid
Envision Energy was part of a $20 million financing round for AutoGrid Systems. AutoGrid is a big-data software company which helps optimize demand response programs in America and runs virtual power plants in Europe. (BJX CN)
Envision is a number of growing Chinese firms investing into foreign companies who have no immediate plans for China expansion. These investments, however, provide Chinese companies with access to foreign talent and technology. When the timing is right, expect AutoGrid technology to come to the Mainland.
Transmission: T&D Prices Increase on Average 5% Across Six Provinces
Average T&D prices have risen to 186 RMB/MWh, up to 5.18% in 2015. Transmission and distribution infrastructure O&M costs rose 6.6%, or 10.3 billion RMB, from 2013 to 2014 for six provinces. The six provinces are Jibei, Heilongjiang, Shaanxi, Fujian, Hunan, and Guizhou. (NEA CN)
As shown in the figure below, depreciation took up the lion's share of the T&D costs, at 32%, followed by employee salaries, at 25%. As China's economy shifts from construction-based GDP growth to efficiency-based GDP growth, we can expect to see this trend reflected in T&D infrastructure maintenance as well.
Source: NEA (for both figures)
Solar: NEA Releases 2016 National Solar Plan
The NEA plans to construct 18.1 GW of solar in 2016. Of the total, 12.6 GW will be distributed solar generation, and 5.5 GW will be large solar “bases” with tens to hundreds of MW of capacity. Cumulative installed capacity of solar PV was 41.6 GW in 2015, and will reach 60 GW at the end of 2016 if the NEA meets its goal. (NEA CN)
Construction in the gigawatts has been the mantra for the last five years, however, 2016 may very well be the final year of a large installed capacity push. The next phase of renewable energy in China will be the integration and utilization of renewable energy, which, so far, China is behind its peers in the rest of the world
China National Cumulative and Forecast Installed Capacity from 2011-2016
Source: Azure International, NEA
Finance: NDRC Announces New “Insurance” on Renewable Energy Utilization Hours
The NDRC announced a financial guarantee to wind and solar power plants who fail to meet minimum utilization hours in the year due to manmade events (curtailment). The pricing is benchmarked to the on-grid price times the number of guaranteed utilization hours, shown in the tables below. (NDRC CN)
The new policy may have sweeping implications across the renewable energy industry in China. Many wind and solar power producers have felt the pressure of high-level curtailment rates in the 30% range for the past few years, and have considered selling their investments due to a lack of financial protection during curtailment events. Now, for the first time ever, a sort of “insurance” policy has been set in place to allow renewable energy plants to continue to operate in an otherwise uncertain economic and market environment.
While this may be positive thinking, it will be interesting to see what happens if curtailment rates and an overcapacity year eat into the cash reserves the NDRC will undoubtedly have to put aside to support this new policy. Azure maintains a state-of-the-art grid curtailment modeler that can forecast curtailment rates throughout China, and we suspect this new policy to have a positive impact on our wind and solar plant investment clients.
Wind Power Utilization Hours Guarantee by Resource Type, Region/Area, and Hours
Solar Power Utilization Hours Guarantee by Resource Type, Region/Area, and Hours
Source: NEA, NDRC, Azure International
Wind: ADAMA Phase II 153 MW Wind Power Plant in Ethiopa Completed
China Power recently completed the delivery of 102 1.5 MW wind turbines to the ADAMA Phase II wind farm in Ethiopia. The total installed capacity for the wind farm is 153 MW. The export project is part of China’s one belt policy, where it hopes to have unifying push toward exporting its technologies to developing markets globally. (China Power CN)
President Xi Jinping Inspecting a Wind Farm Model
Source: Power China
Azure maintains a list of qualified EPC suppliers to support overseas construction projects. When choosing EPC partners, they must pass a thorough vetting process to understand they can deliver high quality goods on time, on budget, and without headaches.