China’s Energy Transition at Odds With Solar Glut, Cheap Power

(Bloomberg) — The green energy transition in China is at a critical juncture, as oversupply in the solar sector, declining power prices, and continued reliance on fossil fuels threaten to derail progress.

Most Read from Bloomberg

Chinese spending on renewable energy dwarfs its rivals, with over $800 billion — or 4.5% of its GDP — invested last year, according to BloombergNEF. But the country still faces significant hurdles in balancing its ambitious climate goals with delivering energy security, according to experts at BNEF’s summit in Beijing last week.

It’s uncertain whether existing infrastructure can support the surge in wind and solar, said Yong Zhao, president of the Energy Research Institute at China Huaneng Group, a major electricity supplier. “We are in uncharted territory for the power transition,” he said.

The decades-long boom in clean energy is straining the grid, and cuts in output of solar equipment are “too late and too little” to end the industry’s slump this year, said BNEF analyst Youru Tan. BNEF now expects a longer trough in prices rather than a V-shaped recovery, he said, pointing to a failure to eliminate smaller, inefficient factories.

China is still expected to keep installing renewables at pace, with annual additions of around 300 gigawatts over the next decade, said Zhongying Wang, a senior researcher at a government-affiliated think tank. That would help deliver over 9,000 gigawatts by 2060, President Xi Jinping’s net zero deadline, which would be six times current levels.

But such a rapid expansion will require massive investment in long-distance transmission lines, energy storage, and flexible peak-loading to make up for clean energy’s intermittency.

“Coal and gas remain the most accessible balancing tools for grid stability,” said Huaneng’s Zhao.

The deluge of solar power has thrust electricity prices into negative territory in regions with liberalized energy markets, which bodes ill for the economics of further expansion.

Shandong province, home to China’s largest solar fleet, has been forced to curtail rooftop projects due to grid constraints. Its three-year-old spot market saw prices settle below zero for over 1,000 hours last year, an occurrence that will become more frequent, said BNEF analyst Sisi Tang.