source: stratfor.com
China’s implementation of renewable grid reforms may address longstanding connectivity issues, but the emphasis on transmission infrastructure may raise new concerns about the grid’s ability to respond to challenges. China is reinvigorating plans for long-range ultra-high voltage (UHV) power lines to connect underutilized renewable energy supplies to centers of consumption. Beijing is also expanding its plans for and implementation of smart grids to manage the complex flow of electric power across the country as Beijing seeks to advance its carbon reduction commitments, as well as mitigate concerns regarding pollution levels and regional imbalances in power production and consumption. These efforts have the potential to ease the greater challenges currently plaguing China’s domestic development — namely, interregional competition, centralization of governance, mismatched regional implementation of national policies, and a poorly optimized electricity grid. If the reforms are enacted, China can finally integrate its renewables into a larger grid to reduce the amount of wasted power generation. An interconnected grid, however, also creates new vulnerabilities. And this, combined with climate-related shortages of hydroelectricity, may result in more power disruptions in the future.
For the next few years, China’s electricity policy will focus on grid interconnectivity, peripheral installed capacity, and introducing ”smart grid” technologies.
- China has been continuing to develop the West-East Transmission grid project, which aims to connect the country’s more power-generating provinces in the west with the more power-consuming provinces in the east. Significant UHV lines and generation infrastructure has already been constructed as part of the project, with more slated to be built over the coming year.
- China’s 14th Five-Year Plan, released in 2021 and updated in March 2022, emphasizes ”smart grid” management along with UHV transmission and storage, increasing the central government’s ability to track local grids given the interprovincial connectivity of such a smart grid system
- In April, China’s Central Comprehensively Deepening Reforms Commission (CCDRC) announced that environmental performance would be a key part of future cadre evaluation for promotion, which suggests local cadres may align their environmental policies with Beijing’s to advance their careers.
Through these grid projects, Beijing is hoping to address the connectivity issues that have plagued its renewable sector. China’s installed renewable capacity has rapidly expanded over the past decade. In 2010, solar and wind power together comprised only 3% of installed capacity, but as of 2020, they comprised nearly 25%. China has also invested billions in installing renewable energy in western, peripheral provinces. Connectivity issues, however, have hindered the utilization of this newly installed power capacity. Due to over-construction, renewables in China have had a high rate of ”curtailment,” which is the amount of potentially generated energy that was not delivered to the grid. This largely stems from local governments in China building power capacity without concern for integration into the national network due to development incentives and regional development evaluations. For China’s power grid, this scattershot approach to the energy transition has come at the cost of reduced efficiency and reliability.
- Curtailment rates for renewables in China have often spiked above 8% over the last decade. The curtailment rate for wind energy in the country temporarily decreased after the central government imposed limits on renewable construction in 2017. But in 2020, wind and solar developments exploded amid the reintroduction of government subsidies, which has increased China’s curtailment rate by causing the country’s potential power capacity to further exceed absorption ability. So far, in 2022, Inner Mongolia and Qinghai reportedly face curtailment rates of up to 10-12% for renewables (the U.S. state of California, by comparison, averaged about a 3% curtailment rate in 2021).
- Hydropower makes up the largest portion of China’s installed renewable capacity. But in recent years, extended droughts related to climate change have significantly reduced the reliability of this energy source by leaving dams without enough water to generate electricity. In provinces like Yunnan, low rainfall in 2020 and 2021 reduced hydropower generation by 30% in some months. Sichuan — which relies on hydroelectricity for 80% of its power generation — is also currently facing a major ongoing drought, which recently forced the province to implement power cuts for industrial operations. Nonetheless, new dams have just finished construction in southwestern China and more are scheduled to be built.
The underutilization of installed renewable capacity in China partially reflects central-local and inter-regional policy disagreements on electricity production and transmission. Beijing’s policy priorities are codified in its Five-Year Plans, but their implementation is left to local officials who must balance those central priorities against their region’s economic and social interests. The Chinese government financially incentivizes provinces to develop local renewable energy sources by offering subsidies, guaranteed pricing and feed-in tariffs, which has resulted in oversupply and inadequate connections for built installed capacity. Another form of regional protectionism arises when local energy providers provide tax revenue for provincial governments, which incentives cadres to buy power from local power generators (and deters them from relying on inter-provincial transmitted power). This often results in the propping up of unprofitable companies, insecure financing for renewable ventures, and an unwillingness to fully utilize national UHV transmission lines.
For China’s power grid, this scattershot approach to the energy transition has come at the cost of reduced efficiency and reliability. In August 2021, the NDRC reprimanded several provinces for failing to maintain ”low energy intensity,” a measure of how efficiently energy gets turned into economic output. In 2020, China also failed to meet its 15% national energy intensity reduction goal laid out in its 13th Five-Year Plan. In the wake of these failures, China modified its energy intensity caps to encourage renewable energy production and greater efficiency, as well as bolster renewable usage and grid connections, while phasing out traditional energy generators. But grid disruptions have nonetheless continued to draw widespread attention.
- In September 2021, due to coal shortages and concerns about industrial power use, the Chinese government ordered power-intensive industries to slow operations, which caused production delays. This iteration of cuts spanned many northern provinces and extended until December. Since then, power cuts have resumed amid a series of heat waves and droughts, which have increased the demand and slashed hydropower capacity.
China’s energy plans can significantly reduce curtailment and promote regional interconnectivity in the long term. The political capital of leading renewable investment is not lost on Chinese leaders, who are keen on bolstering its domestic production of renewable components with an international market in mind. ”Smart grid” technology, in particular, has been a major focus for the export market. Many countries that look to Beijing for energy leadership may request China to help upgrade their own grids.
- Popular sentiment in coastal provinces has been to shift pollution- and land-intensive energy production out to China’s western regions. As the central government is politically dominated by coastal provinces, Beijing has been massively investing in solar and wind power in the west, with Xinjiang alone planning to increase its solar and wind capacity to 80 gigawatts by 2025. This is bolstered by new UHV lines meant to increase transmissions eastward, contrary to regional protectionism that prioritizes local generation. Recent power cuts have tempered Beijing’s ambitions, but have not slowed projects aimed at increasing China’s peripheral generation and transmission. As of July, major interconnectivity projects are set to finish before the end of this year, such as the Huadian Jinshang Suwalong hydropower station in Sichuan.
- The West-East Transmission project, connecting as far west as Xinjiang and Tibet to as far East as Jiangsu and Anhui, is expected to accelerate in the coming years. As this transmission grid matures, and as more provinces are connected out west and renewables are further able to deliver electricity, China will once again be able to bring its curtailment rates under control.
But this reform push will also come with trade-offs, including:
- Increased risk of social unrest. As China increases its focus on renewables and prioritizes energy transmission, local traditional power generators in some areas risk going bankrupt, leaving people without jobs. In areas that are heavily dependent on coal-fired power generation, like Inner Mongolia and Shaanxi, unemployment in local energy sectors may cause social unrest and disrupt the implementation of the improved grid.
- Potential for construction-related outages. There are some risks inherent in the construction of UHV lines. They are points of failure that increase the risks of outages by sabotage or accident. These lines become critical nodes, which may serve as points of reduced physical redundancy for the grid.
- Continued vulnerability to extreme climate events. China’s grid remains heavily dependent on hydropower generation in the West. This will leave the country’s power grid vulnerable to supply disruptions as climate change increases the length and severity of droughts and, in turn, decreases the generative capacity of China’s rivers. Such disruptions may eventually force China to walk back some of its more ambitious renewable transition goals and/or scale up non-hydropower energy sources. Beijing could also possibly look to nuclear to replace hydroelectricity as the base power load of its grid.
Source: Stratfor.com August 29, 2022 | By Satvik Pendyala