Gansu and Inner Mongolia, two of China’s windiest provinces, will use a higher share of locally-produced wind energy as the government tries to cut down on the amount of low carbon electricity lost through the country’s old-fashioned system of power grids.
The initiative, which will feed electricity generated from wind to local sources of demand rather than over long distances, indicates the central government has, in the short-term at least, given up hopes of having all power purchased by the State Grid.
China is the world’s largest producer of wind and solar energy, but the sector has long been plagued with problems connecting to the grid or having its output used fully.
In China coal-fired power plants get preferential access to China’s state grid through a tariff system that critics say is in urgent need of reform.
In addition, a proportionately high level of China’s wind capacity isn’t used because the system can’t cope when the wind blows particularly strong in some areas, or when there are big fluctuations in demand, promoting temporary shutdowns or ‘curtailments’ of wind farms.
With the economic slowdown reducing demand for power, the problem of getting solar and wind power onto the grid is worsening.
National Energy Administration figures show a large rise in the amount of wasted wind power in the first half of 2015 – 1.75 billion kilowatt hours were lost, worth 870 million yuan (US$136 million) and representing 15.2% of all wind power, up 6.8% year on year.
The problem is at its worst in the north-west and north-east, where most of China’s wind farms are situated. Around 10% of solar power generation is also wasted.
The document from the NDRC did not specify how the electricity should be used, saying only that “any policy can be tried, provided it does not breach laws and regulations, does not impact on the safety and stability of electricity generation, and encourages local use of electricity.”
This implies a large degree of flexibility for local government - analysts say in effect the two provinces are being encouraged to try and poach power-intensive industries to move from the east of China. Local governments will also get strong central support for new systems designed to use up renewable energy, such as direct sales to large companies.
The document also reflects a sense of failure on the part of power regulators. Since 2005 renewable energy has been given priority in sales to the grid, and according to legislation, regulatory documents and the 12th Five Year Plan, the State Grid should be purchasing all available renewable energy. Yet wastage of renewable power has worsened year by year.
Some of the reasons for this are long-standing, others are newer. Older issues are systemic – planning for power generation and power transmission is not coordinated, and the power grid has failed to keep up with the expansion of renewable energy.
While new coal-fired power plants approved by the NDRC are given a fixed number of hours for which they can operate, ensuring that these have to shut down on occasion, the rules also can also crowd out low carbon energy from the grid.
The newer issues stem from China’s new economic circumstances – growth in demand for power is falling, yet new capacity is still being installed at a fast rate typical of the frenetic growth rates seen earlier in the decade. China's power demand has hardly grown this year, yet installed power generating capacity rose by 15%.
Wind power capacity grew 27% in the 12 months to November 2015; while 23.43 gigawatts of coal-fired capacity was added in the first half of 2015, up 55% year on year.
The rapid growth in wind power can be regarded as in line with China’s aim of producing 15% of primary energy coming from non-fossil fuel sources by 2020.
But with existing overcapacity and a population suffering from air pollution, the growth in coal power is harder to justify.
The problem is particularly apparent in certain areas. In an interview with Oriental Outlook, Xie Guohui of the State Grid Research Institute said that the north-east of China has 2.7 times more generating capacity than necessary, while demand fell 2% in the first half of the year. 70% of power generation in the north-east is coal-fired and there is little scope for growth in demand – so any extra wind power will be wasted.
Oversupply of power is eating into profits for generators. Statistics show that utilisation of coal-fired power plants is only 49.6%, while according to figures from the China Electricity Council, wind turbines are on average in use for 1,002 hours over a year. But given current costs, they need to run for 2,500 hours a year to be profitable.
The failure to get renewable power onto the grid is a combination of system failures, low demand and technical bottlenecks. Wind power is intermittent and needs to be complemented with other sources of electricity to ensure stability of supply.
But in the provinces where wind power has been developed, the suitable sources – pumped hydropower and gas-fired generation – account for only 3% of total supply, while less suitable coal power accounts for 76%.
This has all lead to a new approach – allowing renewable power to be used locally. The experiment is worth watching, but there are obvious challenges to be overcome.
There is already overcapacity in the power-intensive industries that might be suitable partners and the question arises whether companies be inclined to undertake expensive relocations in western provinces. Doubts also persist whether many new factories will actually be built as part of such a trial.
And the environment in these areas is already fragile – can it handle the pollution that will be produced? All of these issues will need to be considered by the local governments involved.