AsiaElec: Beijing liberalises renewables tariffs

China has liberalised its solar tariff rules in a bid to boost investment in renewables in order to meet rising demand for power in the coming winter.

New tariff rules introduced this week mean that only residential and industries linked to the agricultural sector will be allowed to maintain fixed tariff purchase programmes. In other areas, prices will be allowed to rise.

When coal hit $234 per tonne earlier in October, Beijing was faced with the stark reality that increased – and immediate – investment in renewables may be the only way to make it through the upcoming winter; either that or face wider inflationary repercussions should the nation’s industrial powerhouses have to cut back on production and subsequent exports.

At present, China’s booming industrial sector, much of it focused on metal – predominantly steel – production and PV cell manufacturing, accounts for 59% of the total nationwide grid demand, a number more than double comparable figures from the US.

Yet despite massive investment in wind and solar plants for much of the past decade across large swathes of central and southern China, in addition to increased nuclear capacity and multiple nuclear power plants (NPPs) at various stages of construction, coal continues to produce the lion’s share of all energy pumped into the national grid at around 65%.

Power from renewable sources currently stands at around 28%; an impressive figure when held up alongside neighbouring countries, but not enough for the world’s second-largest economy.

And as part of a seemingly never-ending increase in coal prices in the years since 2017, shortly after China clamped down on numerous dangerous, and often illegal, mines, annual coal prices are up almost 60% year on year after an initial dip when coronavirus (COVID-19) first ravaged the country.

Cue a second chance for the renewables sector across the country.

Under current legislation imposed by Beijing, Chinese provinces are limited on the total amount of power consumption permissible, which analysts suspect led in recent years to a capping and quasi-suspension of investment in both the solar and onshore wind sectors as coal-generating infrastructure was already in place and readily available.

The new tariff rules mean that only residential and industries linked to the agricultural sector will be allowed to maintain fixed tariff purchase programmes.

However, the decision to free tariffs could be too late for some given that the average amount of electricity consumed per capita by China’s 1.4bn population has already moved past figures posted in the United Kingdom and a number of other western nations.

For large-scale industries, steel and other metals in particular, and to a lesser extent smaller users across the country, the gloves are now off on how high prices can go in a desperate bid to limit demand on the domestic grid and force the biggest consumers to shoulder the brunt of the cost of generation.

In knock-on effect the most popular forms of renewables, including wind and solar, and to a lesser extent hydro-generated power, are at least expected to benefit.

The Chinese language media is now looking at renewables as a possible saviour to help prevent power cuts, and a potential loss of face on the international stage should the upcoming Winter Olympics be affected.

At the same time, authorities in Beijing will continue to seek a balance between global demand pushing energy-guzzling production lines across the country, and pressure from overseas governments and other cross-border agencies on CO2 emissions.

Chinese President Xi Jinping has previously promised that emissions in China would peak by 2030, and the following three decades would see numbers drop to net zero 

The winter of 2021-2022, as the wider world focuses on the Beijing Winter Olympics with temperatures in some parts of the country set to hit 20 below zero, may just prove the tipping point in pushing the government in Beijing into realising its existing dependence on coal needs to be reconsidered, and acted on much sooner than planned.