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Azure International is a leading investment and advisory company focused on China's cleantech energy sector. Founded in 2003, we have a team of 20+ local and international professionals based in China with backgrounds in engineering, marketing, manufacturing, consulting, policy, government relations and finance. In addition to deep advisory capabilities in renewable energy, energy efficiency, carbon management, and energy finance, we have proven capability to invest in and accelerate the development of clean energy companies.  Our portfolio and partner companies have achieved both significant commercial success and returns to investors. Azure provides the necessary expertise and execution capabilities in China to lead relationship development with government and strategic partners, project execution, sourcing, sales and technology development – all with deep understanding of Chinese and international requirements.

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News Summary:

  • NEA publishes Solar 13th Five Year Plan (十三五)
  • NDRC publishes Renewable Energy 13th Five Year Plan 
  • NDRC issues tariff adjustments for utility solar and onshore wind
  • Offshore wind project approval authority handed down to provincial NEAs
  • Shandong starts Electricity Reform Pilot Program
  • Guangdong publishes Measures on Retail Electricity Reform




Plan: Solar Development Plan of the 13th Five Year Plan “十三五”  Published by NEA
In December the NEA  published the Solar Power Development Plan, part of China's national 13th Five Year Plan. According to the document, by the end of 2015, total installed solar capacity was 43 GW, and total power generation from solar sources was nearly 40 TWh , approximately 0.7% of national power generation. By 2020, installed solar capacity is targeted to reach 110 GW, with total power generation more than tripling to 150 TWh, 1.6% of national power generation. (NEA CN

 

Source: Azure International

While not specified in the Solar Power Development Plan, under the Electricity Development Plan, the Solar Power target for 2020 further calls for 60 GW of distributed solar and 5 GW of concentrated solar, with the remaining 45 GW assumed to be standard utility scale solar. 

While the explosive buildout of utility scale solar projects in 2016 puts the current installation numbers at 77 GW at 2016 year end, the majority of this growth has been from utility scale projects rushing to completion before the large tariff cut in June. Currently distributed solar in China is hovering at around only 7 GW. Therefore while the 110 GW target will likely be surpassed, it is unlikely that distributed solar will be able to reach its sub-target of 60 GW.



Plan: Renewable Development Plan of the 13th Five Year Plan “十三五”  Published by NEA
Following the Solar Plan, the NDRC further published the Renewable Power Development Plan, also under China's national 13th Five Year Plan. The plan covers hydro, wind, solar, biomass, geothermal and tidal energy. The plan states that by 2020 and 2030, Non-fossil primary energy consumption rate is expected to be 15% and 20%. By the end of 2015, 320 GW of hydropower, 129 GW of grid-connected wind, and 43 GW of PV installed capacity had been installed. 

 

Source: Azure International

Wind power generation on-grid price is on track to being competitive with local thermal power by 2020, while PV on-grid price can equal power grid selling price.



Policy: Tariff adjustments for utility solar and onshore wind issued by NDRC
The NDRC recently issued benchmark price adjustments for utility solar and onshore wind, revising them downwards, though not as much as many PV producers feared after the October draft was released for soliciting opinions. Beginning January 1st, 2017, Solar on-grid price will be reduced to 0.65, 0.75 and 0.85 RMB/kWh, while distributed solar benchmarks will not change. Begin from January 1st , 2018, Onshore wind on-grid price will be reduced to 0.40, 0.45, 0.49, 0.57 Rmb/kWh, while Offshore wind projects on-grid price will not change. 

Solar on-grid benchmark price



Subsidies before and after tariff adjustments

Source: Azure

While the reduction in prices is not as drastic as first indicated in the draft release, the reduction in prices in an already crowded PV field will likely lead to consolidation as China's domestic PV market matures. However this tariff reduction should help provincial subsidy schemes fill their deficits, as recently reports of delayed subsidy payouts to registered PV and Wind plants suggest at a large subsidy shortfall across many provinces. 



Offshore Wind: NEA and State Oceanic Administration decentralize offshore wind project approval authority to provincial authorities
The NEA and State Oceanic Administration decentralized project approval authority to the provincial level for all offshore wind projects. This administrative change began on December 29th 2016, and means that the national level NEA will no longer conduct project approvals, but rather delegate this responsibility to the provincial level NEAs of the relevant provinces. (BJX CN)

While offshore wind occupies only a small percentage of China's total wind generation capacity, we expect it to grow steadily over the coming years. Decentralizing project approval authority to provincial authorities is a positive step towards accelerating offshore wind project approvals and should help China meet it's offshore wind target of 5 GW.



Reform: Electricity reform pilot program started in Shandong
Recently the Shandong DRC issued measures on beginning an electricity reform pilot, in order to further introduce market principles into Shandong's electricity sector. The reforms primarily look to address eight key topics for reform, including:

  • Measures for calculating T&D prices
  • Power trading markets (including spot markets)
  • Establishment of an independent Shandong trading platform
  • Implementing demand-side management and establishing priority generation and priority purchasing systems
  • Measures for introducing competition in retail corporations,
  • Mechanisms to encourage distributed renewables,
  • Further regulations for privately owned power plants, and
  • Calls for strengthening power system planning. (BJX CN)


While short on specifics, the overall policy document reinforces the overall trend of market reform and also crucially calls for introducing spot markets, widely seen as a key step to liberalizing China's power sector.



Reform: Guangdong publishes measures on Retail Electricity Reform
The Guangdong DRC recently released the full text of its planned electricity retail reform program. Broadly, the reforms aim to liberalize the electricity retail sector by introducing market competition for retailers and opening direct power trading to more end-users. Entry requirements for retail companies, as well as electricity purchasers are detailed as followed:

  • Retail companies must have at least 20 million RMB in assets to participate in the retail market.
  • Retail companies with assets valued between 20 million and 100 million are limited to selling between 600 GWh and 3 TWh per year.
  • Companies with assets between 100 million to 200 million RMB are limited to selling between 3 and 6 TWh per year.
  • Retail companies with over 200 million RMB in assets have no limit to their yearly sales.

Furthermore, the market will be slowly opened over the next three years. The first phase of the retail market from 2016-2017 will be only open to key provincial industrial users with a yearly electricity consumption of over 8 GWh, other industrial users with consumption over 80 GWh, and commercial enterprises with yearly electrical consumption of over 50 GWh. The second phase (2017-2018) will open the market for commercial and industrial users rated at 110kV and 35 kV. The third phase, from 2019-2020, will open the market to commercial and industrial users rated at 10 kV, while the final phase in 2020 will see the market completely open to other standard users. 

While Guangdong's direct trading center has been in operation since July 2016, this has been limited to only direct power trading between large industrial users and power producers. While cautious, Guangdong's retail reform is another positive step for liberalizing China's electricity sector.


Note: Our Cleantech News Update for October 27th, 2016 wrongly reported on a draft of the NEA's “soliciting opinions” on Solar and Onshore Wind tariff adjustments as having been actually implemented. We apologize for the mistake.


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