Two policies/political targets have been introduced last week that would provide significant momentum to the developer of renewable power and hydrogen market in the mid-to-long term. However, further definition and execution roadmap for these policies would be more critical for the result of these policies.
- Carbon Neutrality at 2060: Firstly, Chinese President Xi announced that China would commit to peak carbon emission by 2030 and reach carbon neutrality by 2060. The ultra long-term strategy is still vague in its definition. Still, it will undoubtedly lead to ambitious renewable power targets set down for the 14th FYP and 15th FYP–as we somewhat predicted in last week’s analysis.
- Fuel Cell Vehicle Reward: Then, as expected, Beijing finally released the hydrogen fuel cell financial reward policy that would kick off city demonstrations. Following the introduction, we immediately saw three regional fuel cell policies and subsidy updates emerged. More are on the way as we expect cities to fight for the reward status in the coming months.
Besides the two major policy update, several industry reports and analyses are worthy of notice:
- WIND: the industry has gradually shifted its viewpoint and is expecting less severe installation dip after the 2020 subsidy cutoff point.
- ENERGY STORAGE: renewable and 5G construction are expected to bring 100-200 GWh market space for battery storage in China
Please scroll down for 10 updates of last week’s wind, solar, hydrogen, battery and the power markets.
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Beijing last week announced to officially launched the long-expected fuel cell vehicles (FCVs) demonstration program.
The new policy is a joint effort by the Ministry of Finance, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the Development and Reform Commission, and the National Energy Administration. By providing financial incentives, the policy aims to spur breakthroughs in core technology and industrial applications of the hydrogen fuel cell.
Energy Iceberg’ Summary of the Policy Details:
- A “Reward-based” financial incentive (以奖代补): Financial “rewards” would be provided to cities with successful hydrogen fuel-cell vehicle demonstration implementation. The reward system is to replace the previous subsidy scheme provided for FCV purchases.
- Regional-focused, city-cluster-focused reward system: The reward will be provided to eligible city clusters, which shall encourage hydrogen and FCV industry development in the region.
- Four-year Demonstration Period: Selected city clusters would need to carry out a 4-year demonstration. And a mid-term review after the first two years will be conducted by the five ministries.
- “NOT to Subsidize FCV Purchase“: the policy is against subsidy for FCV purchase for areas failed to be selected as the demonstration region.
Energy Iceberg Note: check out our previous detailed breakdown of the FCV reward system’s set up
China will aim to hit peak emissions before 2030 and for carbon neutrality by 2060, President Xi Jinping has announced. Mr Xi outlined the steps when speaking via videolink to the UN General Assembly in New York. The announcement is being seen as a significant step in the fight against climate change.
Energy Iceberg Note: the announcement further confirms the industry’s recent expectation–as we mentioned in last week’s analytical story–that Beijing will introduce aggressive RE targets in the coming 14th Five Year Renewable Plan. The expectation is to see at least 400GW incremental capacity of solar and wind to be added during 2021-2025. If so, the Chinese renewable industry will double its current renewable capacity size and will be the first in the world to leap to terawatt size. Check out our full review of the current prediction targets for 14th Five Year Plan renewable sector.
China will ramp up investment and R&D efforts in 8 strategic industries to foster new growth drivers, according to guidelines jointly issued last week by four government departments, including the National Development and Reform Commission (NDRC) and the Ministry of Science and Technology.
Three of the eight strategic emerging industries are energy-related, including
- New energy sector
- New energy vehicle (EVs & FCVs) sector
- Energy conservation and environmental protection sector
The guidelines aim to speed up the technology breakthrough in solving the bottlenecks in critical industries. For the new energy sector, these bottlenecks are identified as:
- ” Wind-Solar-Hydro-Storage” integration technology,
- Advanced fuel cells technology
- High-efficiency energy storage
- Ocean power generation
- Smart grid & microgrid, distributed energy
- New energy storage technology
- Hydrogen production and refuelling, and fuel cell system
As China pledged to hit carbon neutrality by 2060, the latest industry analyses believe that the severe dip of wind investment and installation–previously higher expected to take place after 2021 due to subsidy cutoff– would not happen.
- As China aims to achieve 18% non-fossil in the total energy mix by 2025, renewable capacity growth is still of vast space. Between 2021-2025, the annual incremental wind capacity will be about 25GW. And after reaching 18%target, for every 1% increase in non-fossil energy share, the corresponding incremental installed capacity of wind power will be around 7GW per year. (From Tao Ye from the Center for Renewable Energy Development (CNREC) of NDRC)
- By 2030, China hopes to see 50% non-fossil in the energy mix. That means that the market needs to add 100-150 GW wind capacity and 200-300 GW PV capacity during the “14th Five-Year Plan” (2021-2025) period ;
- And, new wind power capacity will be around 150 GW and photovoltaics 300-350 GW during the “15th Five-Year Plan” period (2026-2030).
Energy Iceberg Note: the predictions are also in line with our recent summary.
The provincial government of Guangxi and China State Shipbuilding Corp. (CSSC) last week signed off an industry-based offshore wind project. CSSC plans to invest about ¥1.5 bn to build a 100,000-ton-level gravity wharf. It is mainly used to develop the design and manufacturing business of large offshore equipment such as offshore wind power jackets and offshore oil and gas production facilities.
Energy Iceberg: notably, the province has not approved any offshore wind construction yet. The industrial complex is an indication for future projects and could be used to supply to the Guangdong offshore wind market.
China Agricultural Machinery Industry Association (CAAMM) last week released a wind power services & aftermarket outlook report. The report concluded that by 2022, the cumulative grid-connected wind power would reach 288GW, of which 58.3% or 164GW are turbines operating for more than five years. The figures suggest significant aftermarket space.
2020, 2021 and 2022 services and aftermarket spaces are valued at 29.4b, 32.4b, and 35.6b Chinese yuan.
Hydrogen Storage & Fuel Cells
China’s Southeast province Sichuan last week released a five-year hydrogen energy development plan. The plan aims to, by 2025:
- Deploy 6,000 FCVs and a total of 60 hydrogen-refuelling stations.
- Build up two hydrogen energy storage stations and five hydrogen stations (as distributed generation or and back-up power sources).
- Achieve demonstration in applying areas including H2 combined heat & power (CHP), H2 railway transportation and H2 drones.
Wuhan City of Hubei Province envisions to build 15 hydrogen refuelling stations and promote 3000 hydrogen vehicles in 3 years. The city released a hydrogen development action plan last week.
- On Hydrogen Value Chain: To promote the application of industrial by-product hydrogen, normal temperature and pressure liquid hydrogen storage, ultra-high temperature waste to hydrogen production, and power-to-gas
- On FCVs: To have > 3,000 FCVs in operation and 15 hydrogen refuelling stations built up
Foshan of Guangdong province last week updates its local subsidy policy for companies and individuals who purchase FCVs from Jan 1, 2017, to Apr 22, 2020.
The city will provide a subsidy amount for FCVs purchase that is the same as the central government subsidy. That means the national subsidy and local subsidy will be 1:1.
Energy Storage & Battery
China Galaxy Securities released a special report on energy storage development during the “14th Five-Year Plan” (14th FYP) period. The report predicts that battery energy storage would benefit from China’s new energy expansion and 5G network construction. The report assumed that:
- During the 14th FYP period, China would require renewable power plants to equip with 10% storage capacities. That requirement would provide some 10-20GWh energy storage capacity demand annually, leading to a total of 50-100GWh capacity space between 2021-2025.
- Meanwhile, China would see major 5G construction activities in the coming five years. It is estimated that the cumulative number of new 5G base stations will reach 4.93 million by 2025, which would lead to 59-98GWh battery storage demand.