On 16 March, just a few days after the 10-day annual National People’s Congress concluded in Beijing, China’s top energy regulator, the National Energy Administration (NEA), released the official solar PV installation target for 2015 of 17.8GW, thus replacing a 15GW target communicated via a draft circular earlier in late January. The 17.8GW is not only 20% higher than the tentative target of 15GW, but also 27% higher than the 2014 target of 14GW.
This rather aggressive target of 17.8GW demonstrates the regulator’s determination to deploy solar power across the country. Its aggressiveness appear not to derive from the expectation that the 35GW target set in the current 12th Five-Year-Plan for Solar Development (2011-2015) will be missed in its final year, because according to NEA’s statistics, by the end of 2014 China’s total installed PV power generation capacity amounted to 28.05GW, so just 7GW shy of what as a minimum is expected under the plan. Assuming the 17.8GW will indeed be realised, by the end of 2015 China would then be home to 45GW of installed PV capacity thereby not only exceeding its 35GW target by a good 30%, but as well overtaking Germany’s pole position in terms of installed capacity, which at the end of 2014 amounted to approximately 37.6GW, thus becoming the country with the world’s largest installed solar PV power generation capacity.
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Utility versus distributed
One surprise about the 17.8GW is that it no longer stipulates any specific target for either utility-scale (ground-mounted) or distributed generation (ground-mounted up to 20MW in certain areas and rooftop). This deviates from the government’s former policy line of explicitly promoting distributed generation, even though this has been on top of the political agenda since August 2013. Growing grid curtailments in particular in provinces across China’s West due to a relatively undeveloped grid infrastructure, low local power consumption or long-distance transmission lines under construction urged the government to favour distributed generation under its motto “on-site generation and on-site consumption”, focusing on industrial and commercial rooftop applications. Against this backdrop a total of 1,823MW of distributed demonstration projects were approved and scheduled to be realised in 18 designed industrial and development zones by the end of 2015. However, despite these efforts, achievements fell short of set targets: in 2013 out of 10.95GW installed (according to revised NEA figures) just 800MW were considered ‘distributed generation’ and last year out of the 8GW target for distributed generation just 2.05GW (including both rooftop and specific ground-mounted systems up to 20MW) were realised.
The author argues, given the local circumstances hampering the smooth execution of solar rooftop projects across China, in particular identification of rooftop ownership, identification of structurally sufficient roofs, average lifetime of buildings below 20 years and insufficient financing, among other reasons, the government should move away from its former ‘hard’ target policy towards a ‘soft’ target policy. Not setting specific targets for various types of applications would allow the local governments and companies to develop projects not subject to a myriad of constraints. Such flexibility would possibly ensure a greater success in terms of installations given that according to official statistics last year just 10.60GW of the targeted 14GW were achieved.
The official 2015 target notification does however encourage local governments when elaborating their respective local construction plans to prioritise projects up to 20MW in 35kV areas and (66kV areas in north-east provinces), thus implying that distributed projects are still being favoured. Such local development plans shall be submitted to NEA by late April for official approval. In this context, once projects have been approved, a monthly monitoring and supervision scheme will come into effect, helping in particular the central government to reassess the overall progress. Depending on actual progress central government will then determine which provinces will be rewarded with an increase or face a potential decrease of their quota for next year.
The new target also includes 1.5GW of poverty alleviation pilot projects spread across in total six provinces. Counties targeted for pilots are those where at least 200 households have a disposable income of less than RMB3,000 (US$484) a year, with such households qualifying for a 3kW solar system. system The required budget for the hardware procurement will be provided by the provincial and central government. The author assumes that the inclusion of 1.5GW for poverty alleviation is to be seen in the context of the central government’s efforts to achieve a 100% nationwide electrification by the end of 2015.
Along with the 2015 target announcement, the NEA is “re-introducing” competitive mechanisms in an attempt to reduce the fixed solar feed-in tariff. For example, local governments are encouraged to allocate construction quotas or project developing rights to companies with sound financial health and adhering to technology guidelines, such as deployed modules having to achieve minimum efficiency levels set earlier by the Ministry of Industry and Information Technology (MIIT). The proposed “encouragement” implies some form of bidding process, similar to projects which NEA put up for tender and invited the industry to bid for in 2009/2010.
Overall, the 17.8GW target, even without taking into account 1.5GW for poverty alleviation, is undeniably ambitious. If successful, annual installations would increase by almost 70% year on year. Replacing the apparently impractical hard target policy with a more flexible and pragmatic approach, taking into account the local conditions and allowing utility-scale projects if needed, makes the target easier to achieve. Constraints associated with distributed generation projects as briefly elaborated above won’t disappear in the near future, hence the new approach ensures that the gap can be filled with utility projects.
However, the re-introduction of a competitive mechanism as a means to reduce the FiT is perceived by the author as a critical approach, in so far as developers will be pressured to offer a lower FiT in order to obtain official project approval, thus reducing the financial attractiveness of such projects. Also, through the offering of lower FiTs is there perhaps the possibility that overall system quality will be compromised and therefore long-term sustainability jeopardized?
A relatively tight timeline and near-term milestones, quotas for certain provinces which lack attractiveness, some sort of unproven bidding process, financial support lacking, prevailing grid curtailment constraints in certain regions, among other reasons makes it at this stage challenging to determine whether the 17.8GW target is indeed achievable. AECEA is of the opinion that by mid May, once the provincial constructions plans shall have received official approval by NEA overall visibility until the end of 2015 shall have improved.