China Clean Energy Syndicate – [2020 June 29]

Last week was relatively “quiet,” with fewer updates from the Chinese market, in part due to the national holiday of Dragon Boat Festival.

Still, several policies have been introduced–both on the central government level and the regional levels. And some indicate critical market directions.

The highlights of last week [June 22- June 28]:

  • Hydrogen: Shandong province introduced a long-waited hydrogen development plan–a highest level plan released in China and aiming at hydrogen application in renewable and the power system. Meanwhile, Guangzhou city also passed its hydrogen plan, which calls for setting up a hydrogen gas trading platform.
  • Renewable: almost half of China’s renewable projects that applied for subsidy payout this year failed to secure approval–a severe sign showing the challenges facing the wind and solar sector
  • Energy Policy: Beijing released the belated 2020 energy development plan, which shows storage and hydrogen are the two raising stars

We have shared our summary of the above-mentioned policies. Scroll down for the seven updates this week. Hope they could bring some new ideas for your week.

Best Regards,

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Key Policy

China's 2020 National Energy Development Priorities Set by NEA

As a routine, National Energy Admission (NEA) last week published the guideline for China’s energy development priorities in 2020:

  • Wind and Solar: The country aimed to maintain a reasonable scale and pace of development; orderly develop centralized renewable projects; accelerate distributed projects; actively promote zero-subsidy projects.
  • Energy storage: The country would actively explore the technology and business models to apply energy storage on renewable energy, auxiliary power services, distributed power and micro-grid.
  • Hydrogen: Formulate and implement a hydrogen industry development plan, promote technical research and demonstration.
  • Emission and coal reduction: China aims to cap 2020 energy consumption at 5b tons of coal equivalents in 2020. The share of coal in primary energy consumption shall drop to 57.5%.

Energy Iceberg Note: the routine policy release has been delayed this year due to apparent reasons: the coronavirus outbreak. The emphasis on the renewable sector is on zero-subsidy–in our take, it is a clear indication of the challenging market environment facing the industry. For hydrogen and storage, the scenarios are very different. However, we are also poised to see over-heated investment and over-promise targets amid current political momentum.

Wind

Nearly 50% Of Renewable Energy Projects Still Failed in the Recent Subsidy Review

Since last year China has stopped issuing renewable energy subsidy catalogue (Energy Iceberg Note: a catalogue approved by Ministry of Finance that list renewable projects entitled to the national subsidy). Instead, eligible wind and solar projects are now entitled to subsidy automatically.

To receive the subsidy, however, projects still need to fill in the application for the subsidy payout via an online platform, while their applications are subject to review.

Beijing will complete the first batch renewable project review for their subsidy payout on Jun. 30.

According to the information released by the National Renewable Energy Center, as of 17Jun, a total of 1,216 renewable projects across 14 provinces and cities have applied for the subsidy payout, of which a total of 685 renewable energy projects passed the review while 500 projects failed. Another 31 projects are pending review.

Energy Iceberg: the data is a clear sign that renewable projects in China still face a serious challenge in securing subsidy payment, even though the country has shelved the subsidy catalogue policy. The reasons for the projects’ failure in passing the review was attributed to the problems in their project permits (in terms of environmental assessment, land use compensation, etc. ) A project dash in the past two years could be another factor, we believe. While in theory, the failed projects could still seek official reviews for the second time. But many are pessimistic over the outcome. 

Solar

Photovoltaic Capital Market Boom In 2020 Set New Record
Photovoltaic Capital Market Boom In 2020 Set New Recordfinance.sina.com.cn

With Arctech Solar and Wuxi DK Electronic Materials Co. completed the initial public offering (IPO) in mid-June, there have been a total of 63 photovoltaic companies in China’s domestic stock market (the A-share) by June 23.

The total market value of these 63 companies is roughly ¥926 b.

Energy Iceberg Note: the data and chare above show an unusual capital market boom for PV sectors this year. Since 2001, there have been two other solar IPO booms, which were in 2010 and 2011. In those two years, the number of A-share photovoltaic IPOs was seven each year. 

2020 will register new record, with10 IPOs already listed and planned so far. 

Hydrogen Storage & Fuel Cells

Shandong Released Hydrogen Development Plan for 2020-2030–Highest Level Plan Seen So Far in China

Shandong Province last week introduced its provincial Medium- and Long-term Development Plan for Hydrogen Industry (2020-2030), after one-year research and policymaking effort.

Key Summary:

  1. This is the first H2 development plan in China issued by a provincial government central office. In contrast, the plans of this kind previously released were issued by administrative departments of the provincial government. Shangdong’s plan is, thusly, dubbed as the highest-level plan for H2 in China.
  2. Shandong’s H2 production capacity is estimated to be the largest among peers in China. According to preliminary estimates, the annual output of hydrogen is 2.6m tons.
  3. Targets for FCVs : 3,000 by 2022, 10,000 by 2025, and 50,000 by 2030.
  4. Targets for H2 fueling stations: 30 by 2020, 100 by 2025, and 200 by 2030.
  5. Development strategy for the initial stage (2020-2022): the priority is to develop and apply hydrogen in commercial vehicles and backup power sources (UPS), while the province would begin to explore the application of H2 in the mining sector and harbour electricity.
  6. Development strategy for mid-term (2022-2025): application of H2 should expand to passenger vehicles, fuel-cell ships, forklifts, grid dispatch and peak regulation, island power supply, as well as gas-to-heat storage and other fields.
  7. Development strategy for long-term (2025-2030): the priority in this stage would be applying H2 in renewable energy consumption, power grid peak regulation. The province sets to explore and foster the integration between renewable generation and hydrogen storage.

Guangzhou City Released a Hydrogen Industry (2019-2030) Plan

The plan envisions that:

  1. By 2022, FCVs shall account for 10% of the incremental utility vehicles (for sanitation); there would be over 3000 demonstrative FCVs for public transportation and logistics sectors; there would be over 100 FCVs as (government-used) official vehicles and taxis.
  2. By 2025, Guangzhou city would establish a hydrogen energy hub, in which FCVs would account over 30% of the city utility vehicles, and there would be over 1000 FCVs for fuel cell passenger vehicles.
  3. By 2030, there would be over 50,000 fuel cell stakes in use, applied in energy storage, UPS, distributed energy, combined-heat-cooling-and-power systems; there would be over 100,000 fuel cell stakes used in the transportation sector. The city would build up over 10 green-hydrogen power peakers and over 100 H2 fueling stations.

Energy Iceberg: the plan also sets to explore and develop a hydrogen trading platform and establish a national “hydrogen price benchmark,” which is a first-of-this-sort suggestion raised by local government and worthy of highlighting. 

China Soon to Lacunh another Hydrogen-Powered Railway Vehicle
China Soon to Lacunh another Hydrogen-Powered Railway Vehiclechuneng.bjx.com.cn

The demonstrative fuel cell railway train referred to as the “New Era Hao,” is developed by China Railway Hi-tech Industry Corporation Limited (CRHIC). The development project kicked off on Jan. 2 2019, with the prototype launched on Dec. 20 last year. On Apr. this year, the firm completed static testing of the train.

Please note that this is not the first H2 train in China. Last year, CRRC released the country’s first-of-this-kind fuel cell train prototype, which has been put in test operation in Foshan.

Power Market

Electricity Consumption Bounced in May

The world’s second-biggest economy had seen year-on-year growth in total power consumption for the first time this year in May following the relaxation of anti-coronavirus measures and the resumption of business.

China Electricity Council statistics show that:

  • China’s electricity consumption during Jan-May this year was 2719.7 TWh, fell 2.8% YoY while the consumption in May increased 4.6% YoY.
  • Jan-May, the average utilization time of all power plants was 1405 hours, 114 hours less compared to that of the same period last year.
  • The country added 25.24GW of power generation capacity Jan-May. There are less additional nuclear, wind, and solar capacity (-1.25GW, -19.8GW, and -18.8GW) compared to those last year same period. Meanwhile, there are more new hydropower and thermal power capacities (+ 460 MW and +650 MW).
  • The total investment amount of power projects was ¥126.4b during Jan-May, up 45.4% YoY; Hydropower investment increased 15.5% YoY; thermal power down by 33.7% YoY; nuclear power decreased 18.7% YoY; wind power investment totalling ¥62.3 bn, increased 165.7% YoY.

Energy Iceberg Note: the 167% YoY investment growth of the wind sector speaks the on-going project construction dash. However, the number of new wind/solar units starting operation declined, which is likely due to the construction or supply-chain bottleneck. The discrepancy is an alarming signal, and it potentially points to massive project delays or stranded investment in the coming two years.

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