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Renewable Energy: Reform Needed

Nov 11-2020   



China tops the world in wind and photovoltaic power with an installed capacity of 200 million kilowatts, or 30% of the global total. That says much about China’s efforts to adjust its energy mix from the supply side, said Wang Min, Associate Professor of the NSD and Deputy Director of the Institute of Environment and Energy Economy at PKU.

 

Even so, these two types of energy only account for a small share of all power generation in China. Coal-firing and hydro power still take the predominant lead. Despite over a decade of rapid growth, wind and photovoltaic power are still beset by two salient issues: an escalation of subsidy shortfall, and a high rate of being jettisoned from power grids. Given current installed capacity, over 2 trillion yuan in subsidy will be needed over the next 20 years; however, the financing shortfall had skyrocketed from 14 billion yuan in 2014 to 120 billion yuan in 2018. Subject to nature’s whims, wind and photovoltaic power generation lacks the stability to meet demands; as a result, a high proportion of power was discarded in 2015 and 2016. Recent policies and measures have mitigated the issue.

 

In 2006, China promulgated the Renewable Energy Law, ushering in a new era. The years after the Copenhagen Conference in 2009 saw the industry grow in leaps and bounds. Since 2018, a range of reforms has been undertaken to address various problems and safeguard healthy development.

 

Further reforms should rely on the market primarily for eliminating the controls on price and quantity, said Prof. Wang. So far, around half of coal-firing power is involved in the trading on the electricity market, yet wind and photovoltaic power is still not included in such trading in most provinces and cities. In 2019, eight provinces jointly established a pilot spot market for electricity. More breakthroughs might come up. In the spot market, wind and photovoltaic power enjoys immense comparative advantage.

 

On the pricing side, coal-firing offers low price largely due to distorted costs: if pollution tax and carbon costs are factored in, coal firing would have a higher cost than wind and photovoltaic. To what extent can wind and photovoltaic substitute coal-firing depends on their real costs, including pollution tax, carbon costs, storing costs, and peak load regulating costs. In 2021, photovoltaic is expected to hit a global average price of USD0.039 per kilowatt - lower than land-based wind power, sea-based wind power and photo-thermal power – and can still go further down in the future, said Prof. Wang.

Renewable Energy: Reform Needed

Nov 11-2020   



China tops the world in wind and photovoltaic power with an installed capacity of 200 million kilowatts, or 30% of the global total. That says much about China’s efforts to adjust its energy mix from the supply side, said Wang Min, Associate Professor of the NSD and Deputy Director of the Institute of Environment and Energy Economy at PKU.

 

Even so, these two types of energy only account for a small share of all power generation in China. Coal-firing and hydro power still take the predominant lead. Despite over a decade of rapid growth, wind and photovoltaic power are still beset by two salient issues: an escalation of subsidy shortfall, and a high rate of being jettisoned from power grids. Given current installed capacity, over 2 trillion yuan in subsidy will be needed over the next 20 years; however, the financing shortfall had skyrocketed from 14 billion yuan in 2014 to 120 billion yuan in 2018. Subject to nature’s whims, wind and photovoltaic power generation lacks the stability to meet demands; as a result, a high proportion of power was discarded in 2015 and 2016. Recent policies and measures have mitigated the issue.

 

In 2006, China promulgated the Renewable Energy Law, ushering in a new era. The years after the Copenhagen Conference in 2009 saw the industry grow in leaps and bounds. Since 2018, a range of reforms has been undertaken to address various problems and safeguard healthy development.

 

Further reforms should rely on the market primarily for eliminating the controls on price and quantity, said Prof. Wang. So far, around half of coal-firing power is involved in the trading on the electricity market, yet wind and photovoltaic power is still not included in such trading in most provinces and cities. In 2019, eight provinces jointly established a pilot spot market for electricity. More breakthroughs might come up. In the spot market, wind and photovoltaic power enjoys immense comparative advantage.

 

On the pricing side, coal-firing offers low price largely due to distorted costs: if pollution tax and carbon costs are factored in, coal firing would have a higher cost than wind and photovoltaic. To what extent can wind and photovoltaic substitute coal-firing depends on their real costs, including pollution tax, carbon costs, storing costs, and peak load regulating costs. In 2021, photovoltaic is expected to hit a global average price of USD0.039 per kilowatt - lower than land-based wind power, sea-based wind power and photo-thermal power – and can still go further down in the future, said Prof. Wang.