Q1 2021: China’s climate pledges underscore country’s renewables narrative

But the country is also the global leader and biggest investor in clean energy, with a capacity of around 895GW in 2020, followed by the US with 292GW.¹https://www.statista.com/statistics/267233/renewable-energy-capacity-worldwide-by-country/ As part of China’s policy on climate change, they aim to lower carbon dioxide emissions per unit of GDP by over 65% from their 2005 level. Third Bridge Forum closely monitors trends pertaining to China’s renewable energy industry, with Interviews in Q1 2021 focusing on hydropower and wind power. 

With an abundance of mountain valleys and large rivers, China is the world’s largest producer of hydroelectricity, accounting for about 18% of total energy consumption. In addition to projects due to come online in the next few years, the country’s recently pledged climate target of carbon neutrality by 2060 will further boost the market. 

“The installed capacity of China’s hydropower market will increase by 10-15% in the next three years due to the operation of several large hydropower projects on Jinsha River and Lancang River, and about 20% in the next five years due to the launch of the Lianghekou Hydropower Station on Yalong River and other hydropower stations on Dadu River,” a senior manager at Chongqing Datang International Pengshui Hydropower Development Co Ltd told Third Bridge Forum. 

Regarding the competitive landscape, Yangtze Power, which operates the world’s largest hydroelectric facility, the Three Gorges Dam — has the biggest market share. Described by the expert as a “star company”, Yangtze Power’s low cost per kWh and close relationship with the government, and China’s climate goals, are among its core competitive advantages, according to the Interview. The specialist also predicted a spike in market share once the Baihetan and Wudongde hydropower stations are fully operational, with the former going live next year and four units already completed at the latter. “As its capacity increases, there will be a rapid increase in market share for Yangtze Power, reaching a peak value after three years. After that, with the completion of large-scale hydropower stations on Yalong River, Lancang River and other rivers, there will be a decrease.” 

The China climate goals expert is also optimistic about the future of Huaneng Hydropower. “With the best resource endowment on the Lancang River, but limited by Yunnan’s hydropower installed capacity surplus and low electricity price, Huaneng Hydropower’s ROI is relatively low compared with its profit level,” they said. “However, with the increase in electricity prices in Sichuan and Yunnan provinces, I am particularly optimistic about… Huaneng Hydropower in the future.”

GHD’s outlook is also positive. “The resources of GHD on the Wu River is abundant, and the electricity price has remained relatively stable, so GHD’s profitability has also been very stable.” With rising electricity prices along the Jinsha River, the company “enjoys the great potential for profit growth”. GHD’s future growth in hydropower “should be second only to Huaneng Hydropower, and may compete with CDC for second place”. The expert was less upbeat about China Energy, which has limited hydropower capacity and is refocusing on wind and photovoltaic (PV) power. 

Wind power was China’s third-largest source of electricity at the end of 2020, accounting for 12.8% of total power generation capacity.²https://www.statista.com/statistics/302233/china-power-generation-by-source/ And 2020 was a record year for installed capacity globally, with developers adding almost 100GW, up nearly 60% on the previous year.³https://about.bnef.com/blog/global-wind-industry-had-a-record-near-100gw-year-as-ge-goldwind-took-lead-from-vestas/ Of this 100GW, 57.8GW was commissioned in China and most turbine makers now sell into the country. 

As noted by a former director at Xinjiang Goldwind Science & Technology, developers rushed to complete projects before the cut-off date for government subsidies, meaning installations are likely to slow but will still be significant this year. According to the Chinese Wind Energy Association, at least 50GW will be installed in 2021, which the specialist believes “is a bit high”. Instead, they anticipated a minimum of 24-25GW and a maximum of 38-40GW. 

“Although the installed capacity in 2021 may be obviously lower than that of 2020, it will certainly be higher than that of 2019 because there will be previously approved projects to be rolled out, as well as projects that enjoy subsidies and other supportive policies,” the expert added. “There are also newly approved large bases, offshore and small decentralised bases, as well as overseas projects, such as the one won this year by Goldwind Science & Technology (Goldwind). All these will drive the development of the wind power industry. I’m optimistic about the growth in 2021.” With continued advances in technology and the government promoting a shift from benchmark tariffs to fairer prices, the cost per kWh of wind power is also falling. 

China’s recent pledges as part of their policy on climate change— to hit peak carbon emissions before 2030 and reach carbon neutrality by 2060 — will require an abundance of clean energy and a determined shift away from coal, which remains the country’s dominant source of energy. While some critics have commented on the lack of detail in China’s climate change goals, it is worth noting that its consumption of renewables has risen to over 140 times that of the early 2000s.⁴https://www.statista.com/statistics/302233/china-power-generation-by-source/ Tackling climate change also emerged as one of China’s key goals in its 14th Five-Year Plan set out in March 2021, with 18% and 13.5% reduction targets for CO2 and energy intensity respectively.

And, at the end of last year, President Xi Jinping announced that the country’s installed capacity of wind and solar power will be lifted to over 1,200GW by 2030, while boosting the share of non-fossil fuels in primary energy consumption to around 25%.⁵https://www.reuters.com/world/china/china-aims-push-wind-solar-capacity-beyond-1200-gw-by-2030-2020-12-12/ As the world’s largest manufacturer and installer of PV power systems, solar in particular is garnering significant interest at present. However, conditions are also ripe for hydro, wind and nuclear to remain as vital sources of clean energy.