Agencies
Only a few years after droughts and heatwaves caused a spate of power outages that plunged millions into darkness across several Chinese provinces, other areas of the country are now dealing with what would appear at first glance to be an enviable luxury – a seemingly inexhaustible surplus of renewable energy.
In April, the power station for a town with half a million people in northeastern China received a notice from the provincial development and reform commission, the area’s top economic planner. Labelling the place a “red line region” for renewables, the commission slammed the brakes on a full-scale revamp of the grid to support photovoltaic power.
“The grid can no longer consume new energy,” said a local official in charge of power distribution on condition of anonymity. “There has been too much solar photovoltaic [building], and it has resulted in a backflow.”
Backflow in a power grid occurs when electricity moves in the opposite direction of what is typical – in this case, from the consumer to the distribution network – as energy generated by household solar panels exceeds local consumption. If left unmanaged, it could lead to voltage fluctuations or blackouts in the worst cases.
Similar conundrums are causing headaches for officials throughout the world’s second-largest economy. As China continues to swap out fossil fuels for green energy, the integration and consumption of wind and solar energy – sources which can be unpredictable even in ordinary times – has put a heavier strain on the system.
Analysts have recommended a thoroughgoing reform of the power sector to resolve these issues, including the introduction of market-based mechanisms. They have issued a call for shareholders who can cover the costs associated with the widespread adoption of renewables.
And while the subject has come up frequently over the past decade, they said, the pace of reform has been slow.
That pace quickened in late May, after a symposium with President Xi Jinping and several of the country’s business leaders. Already a rare occurrence, the meeting was viewed as even more consequential because of its timing – about two months in advance of July’s agenda-setting third plenum of the Communist Party’s Central Committee.Significantly, the delegate who spoke first at the symposium was the director of the State Power Investment Corporation.
The Chinese stock market reacted strongly to the news, with investors snapping up shares of companies producing solar panels and power storage equipment.“This is a sign the top leadership is still pushing for reform of the power sector,” said Yan Qin, Norway-based lead analyst at the London Stock Exchange Group.
The choice of first speaker was likely thought through carefully, she added, as the company has a high renewables share in its power generation business and is seen as a pioneer firm in the country’s green transition.“However, even if this topic was brought up at the symposium, it does not necessarily mean the power sector reform will be sped up. It is a comprehensive process and needs solid steps,” Qin said.
“We need to be patient. This reform will not be finished overnight.” In recent years, China has made significant progress in the installation of renewable energy and the substitution of fossil fuels with cleaner sources – particularly in the realms of solar and wind power.
Though already well under way, this campaign for decarbonisation received a supercharge four years ago. In September 2020, President Xi Jinping pledged before the United Nations General Assembly to peak the country’s carbon emissions by 2030 and reach carbon neutrality by 2060.
The response was near-instantaneous. From 2021 to 2023, China’s average annual newly installed wind power capacity was 53.62 gigawatts, up 70.7 per cent from the previous five-year average.
During the same period, China’s average new solar installation totalled 119.45 gigawatts per year – an increase of 188 per cent compared with the figure for 2016 through 2020 according to Darius Tang, associate director of corporates at Fitch Bohua.
As of 2023, photovoltaic and wind have become China’s second- and third-largest power sources respectively, trailing only thermal power, Tang said.
But the substitution rate for new energy in the overall power supply has been slow, and thermal remains the backbone of China’s electricity grid.In 2023, the share of thermal power was 69.9 per cent, only decreasing by 1.3 percentage points compared to 2020. The shares of wind and solar power were 9.1 per cent and 3.3 per cent last year, respectively, Tang added – 3.5 and 1.4 percentage points higher than 2020.
