Yunnan greenlights new construction plan of 11GW non-hydro renewables and offers an attractive deal to new renewables investors

Yunnan greenlights new construction plan of 11GW non-hydro renewables and offers an attractive deal to new renewables investors

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On September 30, the Yunnan Provincial Development and Reform Commission and the Yunnan Provincial Energy Bureau issued a notice on the "Plan for the Proper Development and Utilization of Renewable Energy in Suitable Areas in Yunnan Province" (hereafter “Plan”).

The government released a construction plan of 11GW installed capacity in 31 renewables project bases (8GW onshore wind power and 3GW solar power). The projects are clustered in the Eastern and Central North areas of Yunnan and 60% of the project capacity will be planned in the less economically developed areas. Most of the projects are supposed to start construction in 2020 and be completed by the end of 2021. When the 11GW is commissioned, renewable energy including hydro power will account for 85% of Yunnan’s total installed power generation capacity.

According to Yunnan government projections, the province’s electricity power demand would reach 311.5TWh by the end of 2025. The annual power demand of the region where the new renewables bases are to be built would rise to 206.7TWh with an incremental of 86.1TWh compared with that of 2019. These 31 renewable energy bases will generate 17TWh to 25TWh of electric power every year, which would help to mitigate part of the new power demand increase.

The government proposes a creative on-grid price scheme, which is named “electricity price dredging system” for this 11GW of renewable power projects.

Historically the average trading price of solar and wind in the Yunnan power market have been lower than the coal-fired power benchmark price (which has been changed to base price since 2020). Average trading prices of the transaction for year 2020 are 0.224CNY/kWh and 0.227CNY/kWh for solar and wind power respectively. There is a huge gap between the market price and the base price of coal-fired power in Yunnan, which is 0.3358CNY/kWh this year. It is definitely an encouraging message from the Yunnan government for new project investors. However for market players, it also raises questions on how the government will be able to deliver on this offer, and on who will cover the gap between proposed tariffs and real market prices. (Sohu News)