China reconsidered policy of support to renewable generation

Investments into renewable power decreased in many respects because China reconsidered policy of support to solar and wind generation. Now the branch faces overproduction crisis threat. And Europe already today needs to solve a problem of duplicating capacities without which the power supply system containing an excess share of renewable will appear extremely unstable.

Billion without electricity

A lot of benefits of civilization, which we use daily and consider them self-evident, are inaccessible to considerable part of the population of Earth. So, according to the UN, more than 40% of the world’s population suffers from deficiency of drinking water. And this share grows. According to The World Bank, about 1 billion people on our planet have no access to electricity. Today it is 13% of the population of Earth.
The highest shortage level suffers the population of Africa and also the Central and Southern Asia. And even if flowing is quite high, rates of electrification will remains, by 2030 there will still live 674 million people without electricity. On the one hand, it will be nearly 1 billion less than it was in 2007. And on the other hand, even those who formally have access to electricity do not possess it on a constant basis. It opens enormous prospects for growth of world economy and development of electric generation, first of all, traditional electric generation.
For some reason some people from the safe countries which include Russia, apparently, think that it is healthy to live without civilization benefits. To carry water from a well, to heat firewood, to read by the light of a splinter is improbable romantic and in conformity with the nature. But there is a terrible back at this power pastoral which is not visible to «ecological tourist». It hides in a simple principle: the less energy population can use, the worse is the quality of life of its average representative.
It is now difficult to imagine as far as the invention of an oil lamp changed life of people. Only with its emergence doctors received enough light to give emergency aid to patients even at night. Candles are romantic. But would you agree to have appendectomy at romantic light of candles?
Introduction of an internal combustion engine and electricity led to further growth of quality of life. Anthropogenous impact on environment at the same time grew. Now about 7 million people in the world die in a year of the reasons connected with air pollution. And 90% of the population, according to the World Health Organization data, breathes air with the raised content of harmful substances. The question is still open: whether the remained 10% which were lucky with the atmosphere belong to those who are compelled to live without electricity and whose expected life expectancy leaves much to be desired?

The mankind in general makes more and more garbage. Ironically, but the last researches show that the greatest number of electronic garbage make the most ecologically conscious (in representations of wide audience) countries. So, Norway (28.5 kg per inhabitant) became the champion in ejection of electric devices. After it there are such countries as Great Britain, Denmark, Australia, Germany, France, Spain, Canada, the USA. Russia (9.7 kg) was at the 11th place in this anti-rating — after Japan (16.9 kg). And such countries as China (5.2 kg) and India (1.5 kg) appeared on the 14th and 15 places. Thus China is also the champion on average quality of coal power plants. But owing to scales of the used energy resources three cities from this country appeared in ten megalopolises with the most polluted air. There they adjoin to Moscow, Los Angeles, Paris and Cairo.
Anthropogenous impact on environment for the last hundred years grew in steps. But at the same time by one and a half times the expected life expectancy rose. And if one billion vegetating without electricity got access at least to the most modest benefits of a civilization, this indicator would be even higher.
Here we once again face civilization dualism. The civilization certainly does harm to the nature, but at the same time it improves human life. In the XIX century the American romantics tried to reject civilization and to live in the woods, but so that the woods were closer to the house. Otherwise it would be too long to go for a fresh pair of underwear.
Certainly, we do not want to tell that to multiply the garbage round ourselves and harmful emissions are the benefit. We only want that the view of an ecological perspective was more reasonable, without distortions in this or that party, without industrial facile optimism and ecological hypocrisy.
From the point of view of history, the mankind received tools to estimate damage put to the nature quite recently. To reduce impact on environment it is necessary to transform, in particular, such fundamental branch as power. And the choice of the incorrect direction in this case can lead to senseless squandering of resources and catastrophic consequences for economies of the whole countries. Therefore we once again concern a subject of the renewables, their prospects in present conditions and their role on the world power card.

Let’s not forget about the substitute

It is necessary to stipulate one basic moment before passing to the most burning topic — monetary investments in renewable energy sources. The renewable power is a special category for which assessment of success wider set of criteria, than for traditional generation is necessary. So, it is not enough to know, as far as the price of the equipment fell, what quantity of money is invested and what stimulating measures were taken by this or that state.
For assessment of prospects of renewable energy sources it is necessary to remember need of the duplicating generation. Once again we will notice that gas, coal, nuclear power plants give electric power, when necessary, and in the demanded volumes. A person can directly influence the volume of the made electric power. And the wind and the sun do not depend on our will. Now the wind blows, and in a minute — no.
Of course, we exaggerate. But the essence from it does not change. You should have a gas power plant which will start developing electric power when the wind ceased to blow or the sun set for clouds. After all effectively the mankind is not able to reserve electricity in large volumes. Roughly speaking, on any 2-4 GW of rated capacity of a wind or solar power station 1 GW of gas thermal power plant has to function. This fact needs to be held in mind when we speak about investments into renewable energy sources.

Nose downwind

Earlier we already expressed our admiration of financial side of renewable power. Few branches can brag of ability to find tens unaccounted earlier billions of dollars after recalculation of data for last years. In 2018 Bloomberg New Energy Finance (BNEF) by such specification backdating increased investments into renewable energy sources for 2016 on 37 billion dollars (to 324.6 billion dollars). According to the data which were available at that time, in 2017 investments in renewable power grew on 3% (to 333.5 billion dollars).
The new 2019 brought new specifications. And here already investments for 2016 reached 330.1 billion dollars, and for 2017 – 361.7 billion dollars. During revision «taking into account new information on projects and transactions» 2017 unexpectedly moved 2015 from a position of the champion year (360.3 billion dollars). It is a miracle.
Perhaps (it is also our assumption only), the solution of wonderful transfer of the champion’s title in 2017 is covered in the fact that except the advanced power technologies and technologies of storage of energy (smart grid, digital energy, energy storage) investments in electric cars now account also for a share of investments into renewable energy sources. Certainly, electric cars directly refer to «pure power».
Most likely, without this revision following the results of last year it would be impossible to write heading in «Investments in Pure Power Exceeded 300 Billion Dollars Again» style. Investments, even taking into account a new technique of calculations, in 2018 decreased on 8% and made 332.1 billion dollars. Thus investments in intelligent counters and electric cars grew. Investments into wind power generation also increased in 3% to 128.6 billion dollars.
As well as it was supposed, the greatest growth was shown by the offshore direction: 14% more investments than were made previous year in sea wind farms (VES). Total amount of investments made 25.7 billion dollars. Perhaps, the Moray Firth East project with a rated capacity of 950 MW located in the North Sea in 22 km from the coast of Great Britain was the most large-scale in this segment (3.3 billion dollars were spent for it). In general across Europe five offshore wind projects were realized, each of which cost more than 1 billion dollars. Also China began construction of 13 coastal sea wind farms for the total amount of 11.4 billion dollars.
It was spent on 2% more on overland wind farms than in 2017 – 100.8 billion dollars. Expenses on 1 MW on large projects made 1.5-2 million dollars. The total amount of new capacities reached 53.5 GW. It is little more than an indicator of 2017 (according to the specified data – 52.6 GW) and it is much less record than in 2015 (63.6 GW). BNEF predicts 70 GW of new wind farms for current year. It looks excessively optimistic.
But at the moment it is much more important for us that average costs for renewable energy sources megawatt grew a little, and in the next years it, most likely, will continue growth as a share of offshore, more expensive than overland, wind farms increases.

China failed the sun

In 2017 total investments in solar generation reached 161 billion dollars. In 2018 total amount of investments decreased to 130.8 billion dollars. Thus, according to BNEF, the cost of installation of megawatt of photo-electric power was reduced on 12%. And the volume of rated capacity opposite — grew: from 98-99 GW in 2017 to 109 GW in 2018. Really there was a break — radical improvement of technologies or improbable growth of capacities? Actually, no, there was not. China became the main responsible for an event.
Since 2013 the People’s Republic of China is the main driver of the world renewable power: it provides the greatest monetary investments, puts into operation most of all generating capacities and makes the equipment most on the planet. In certain years the world investments into renewable energy sources showed growth only at the expense of China.
In 2017 the volume of investments of the People’s Republic of China in solar generation made 86.5 billion dollars. And on all sectors of «pure power» investments of this country reached 132.6 billion dollars — 24% higher than an indicator of 2016. But investments fell in 2018 to 100.1 billion dollars. Most of all solar generation suffered: decrease is more than on 50% — to 40.4 billion dollars.
Thus China all the same remained the leader in investments into renewable energy sources. The USA which increased investments on 12% — to 64.2 billion dollars is also at the second place. According to BNEF, the American companies hurry to invest money in wind and solar power stations in hope to manage using tax privileges. Their action will end at the beginning of the next decade. And it is at hand. It will be interesting to look at dynamics of investments and volume of input of the new generating capacities. As it is known in narrow circles of «evangelists» of renewable power, renewable energy sources are so favorable as coal and gas, and can even better. Only current processes in the People’s Republic of China can break purity of the future experiment of cancellation of privileges in the United States.
In the middle of last year the government of China changed policy of support of renewable generation. Quotas of construction of the industrial solar power stations applying for subsidies are stopped being given. Provinces were forbidden to issue permission for construction of similar stations. In addition to it gradual decrease of «green» tariffs began.
The People’s Republic of China already achieved objects in the area of renewable generation set on the current five-year period. And spending money for support of capacities which are not provided and, perhaps, are not even necessary does not make sense. The solar boom needed to be cooled.

Globality of the market of China

Following the results of 2018 growth rates of volumes of development and electricity consumption in China reached maximum for the last seven years. According to «Jingji tsankao Bao», on average 18.47 billion kWh was daily made in the country. It is 8.52% more than in 2017. Electricity consumption increased on 8%. One of the main reasons is transition of part of the population from coal on electricity for heating in the winter.
Power of photo-electric installations in the People’s Republic of China following the results of last year grew on 34% and reached 170 GW. However growth rates decreased: if in 2017 about 58 GW of solar power stations, in 2018, according to the Chinese association of the photo-electric industry, — 43 GW were put into operation. Shortly before the beginning of the collapse about which Chinese experts warned, IHS Markit predicted an annual gain of solar generation in the People’s Republic of China at the level of 50-60 GW till 2022.
Total amount of wind generation, according to China Energy Portal, grew from 164 GW in 2017 to 184.26 GW in 2018. For comparison, the rated capacity of coal, gas and black oil power plants in this country makes more than 1.14 TVT. Besides in 2018 total increase in production of the electric power at these power plants in absolute measures approximately on 1.5 times exceeded total growth of all other types of generation.
Let’s remind, by the way, that in the second half of 2016 China revised plans for renewable energy sources till 2020: from 150 GW of solar and 250 GW of the wind generating capacities to 110 GW and 210 GW respectively.
Solar power stations share in the total rated capacity of the Chinese power plants exceeded 9%. By the end of 2020 in the People’s Republic of China at the expense of renewables 27% of all electric power – 1.9 trillion kWh are to be developed. In this case treat the renewable not only the sun and wind, but also hydropower.
If in 2017 the rated capacity of the generation working at renewable energy sources in China made 650 GW (growth on 14%), by the end of 2018th it increased on 12% — to 728 GW. About a half of this volume occupy hydroelectric power stations (growth for 2018 on 8.5 GW).
In the first quarter of the current year power generation from renewable sources in China increased on 13% (in comparison with the first quarter of 2018) — to 388.5 billion kWh. A share of renewable energy sources (including hydroelectric power stations) in the general electric generation made 23.2% (1.2% more than for the same period of last year). According to Public administration for power industry of the People’s Republic of China, development of hydroelectric power stations increased on 12% (to 215.9 billion kWh), wind power — for 6.3% (to 104.1 billion kWh), and solar generation — for 26% (to 44 billion kWh) is followed further by the power plants working at biomass. They increased the indicators on 16.7% (to 24.5 billion kWh).
Today in China the main world capacities for production of photo-electric panels are concentrated. The Chinese producers won against the European competitors and restrict the American. All processes which happen in the People’s Republic of China market, have global character as are reflected in all main markets.
So, new rules of the game in domestic market of China led to the classical beginning of crisis of overproduction. Earlier we already suggested about possibility of such succession of events. At last in 2018 Chinese producers of photovoltaic reduced selling prices of the production. They were afraid of surplus in the world market because of restrictions in the People’s Republic of China.
As a result worldwide specific costs of construction of solar power stations decreased. And, it seems, this fact in itself looks hopefully as simplifies development of solar generation. But a problem that overproduction crisis plays into the hands of the consumer only at the beginning. The fierce price competition will be endured by not all producers. And the wave of ruins can cover not only producers in China but also their colleagues worldwide.

Decrease in a «green» tariff

The unelectrified billion would be to the point here, besides China is active in Africa. But at the same time there are two logical questions: who will build reserve capacities necessary in that case and who will pay for it? Nobody will solve a problem of power poverty outside China with powerful blow even if it allows expanding sales market for production going through difficult times. Therefore it is possible to assume that crisis of photovoltaic will take place.
Perhaps, for the sake of decrease in the related risks and for the fastest establishing order in renewable generation at the beginning of the current year Chinese management declared new changes in measures of support of wind power generation and photovoltaic.
The new policy of the country on development of renewable energy sources means stimulation of building of new objects of generation in case they are capable to compete at the price with the reference price coal generation. Also do not use for this purpose a subsidy. Besides, electric networks should have an opportunity to receive electricity developed by new capacities.
Also new rules mean a wide dissemination of the scheme of the green certification experienced in 2017. Certificates bargain in the market. The enterprises, on which target indicators are assigned for use of «net energy», for example, can be interested in them. But is not clear yet, how will this scheme work in China.
According to the available information, new rules will work until the end of 2020. So far we will notice that at the end of 2018 in the People’s Republic of China two 500 MW solar power stations were put into operation. One of the projects sells kWh for 0.316 yuans. The reference price of coal generation, according to Forbes, makes 0.325 yuans. That is the scheme, which is theoretically offered within new rules, can work. However you should not forget that quality of the Chinese coal power plants grows. It is quite possible that «the reference price» in the next years will fall.
So far we will notice that on the example of China we saw rehearsal of remarkable effect which makes decrease in preferential support and a «green» tariff for renewable generation.

Romantic candles

One of the main regions on which changes of rules of the game affect the Chinese market, is Europe. Last year, according to BNEF, investments into renewable power grew on 27% here — to 74.5 billion dollars. It was an unexpected event as the last years Europe promptly reduced investments. However, this growth became only return to positions of 2016. And not all this sum was spent on construction of the generating capacities.
According to WindEurope, in 2018 in development of the European wind power generation 26.7 billion euros was invested and in solar generation – 10.4 billion euros, 5.1 billion euros was a share of other types.
Though in 2017 more money (10.9 billion euros) was invested in solar power stations, input volume in 2018 was 2 GW more — to 8 GW. Actually there was a return to rates of 2015. Most likely, collapse of prices of the Chinese solar panels affected. And we remember how destructive for the European producers was an attempt to compete with the Chinese companies at the beginning of the current decade.
According to SolarPowerEurope, the most significant growth in absolute measures was shown by Germany – 1.76 GW in 2017 and 2.96 GW in 2018. If to take relative sizes, the Netherlands distinguished itself here (growth on 81% — to 1.4 GW) and Spain (growth on 94% — to 261.7 MW). In recent years Spain practically left race of renewable power to what small absolute measures of growth indirectly testify.
Investments in wind power generation though increased on 20% in comparison with 2017, but nevertheless did not hold on to the level of 2016. Investments in offshore projects made 10.3 billion euros and in overland made 16.4 billion euros.
It is remarkable that total input of new capacities was minimal since 2012. From 11.7 GW of new wind farms 2.7 GW fell to a share of sea projects and 9 GW is a share of overland which at all established an anti-record for the last decade. Leaders of the wind direction remained the same — Germany and Great Britain.
Total power of the European wind power plants reached 189.2 GW (directly in the EU – 178.8 GW). 14% of electricity consumption in the European Union was at their expense provided. And in general EU countries receive more than 17.5% of energy from renewable sources.
Thus a need for the duplicating «traditional» capacities grows. So far that very Europe keeps balance at the expense of the baggage of gas and coal power plants which is saved up for last years. Yes, in separate areas the system already fails, but in general the balance of the electric generating capacities plays into the hands of the European Union. But the EU plans to refuse coal generation gradually. The current rated capacity of gas and nuclear power plants will not be enough for ensuring stability of system against let and in a slowed-up way, but the growing renewable generation. And it is necessary to solve this problem already today. Moreover that for last year input of new gas capacities reached record-breaking low level – 0.8 GW.
Without the duplicating capacities mankind in general and Europe in particular will appear in a situation of a patient lying on the operating table. It darkens behind the window. And the surgeon has neither electric, nor oil lamp, candles only. Romantic, but giving not enough light for carrying out successful operation.