China’s upcoming 14th Five-Year Plan could drive 45 GW of annual solar additions
September 24, 2020 PV InfoLink
China’s 14th Five-Year Plan is expected to come into effect in the second half of 2021. Unlike the 13th Five-Year Plan, the new edition will not draft specific targets for solar and wind, according to statement made by the Chinese authority.
The current 13th Five-Year Plan has set a target of 110 GW and 220 GW respectively for solar and wind deployment for the 2015-2020 period. In 2019, renewable sources accounted for 15.3% of power generation in China.
Under the new policy direction, which is expected to raise the overall renewables target to 18% to 20% of total energy mix, China’s solar installation capacity could experience growth in the coming 14th FYP cycle. PV InfoLink projects that annual solar installation additions will be as high as 45 GW in the years ahead.
With the 14th FYP underway, renewable energy stocks set to shine in the second half of this year. As of September 18, the markets saw the Clean Energy Index rising 22.20% thus far, according to Sina Corporation. Stocks of industry leaders Longi, Tongwei, and Aiko are also worth taking a closer look at.
China’s solar sector, however, is facing hidden threats. As China is shifting the PV sector towards an unsubsidized footing, the government will no longer subsidize solar projects apart from residential ones. Although solar costs have dropped significantly in terms of technology, non-technical expenses such as solar energy curtailment, land tax, financing cost and pre-development costs account for 20% of total costs of a project. With the government scrapping payments, new projects will have difficulty achieving grid parity.
Moreover, the curtailment problem caused by poor grid availability and excessive supply will hinder the development of the solar industry if the regulators are unable to provide solutions, such as a guaranteed quota for power consumption and power supply, to solve the mismatch of installation and transmission capacity.
According to the statistics from the International Renewable Energy Agency (IRENA), the world’s new solar PV additions hit 97.5 GW in 2019. Of the rest of the new renewable capacity installed last year, 59 GW came from wind, 12 GW from hydropower, 6 GW from biomass, and 0.6 GW from geothermal. Solar and wind power accounted for around 90% of the total. Given limited room for development of other renewable energy sources or immature technologies, it’s expected that China will continue to scale up the development of solar and wind to increase the share of renewables in electricity generation.
The Chinese government has been soliciting comments and feedback on the 14th FYP. After the consultation finishes before the end of November, the official draft will be submitted for review by the end of March 2021, and an official announcement of the policy and related measures is expected to be made in the second half of next year.
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