China’s launch of a national carbon trading market–expected to take place as soon as next year–would change the gameplay of the Chinese renewable market. That expected launch has taken the first concrete step. Last week, the Ministry of Ecology & Environment unveiled the plan for the power sector to participate in the trading market.
Besides the carbon policy update, several signals herald that the upcoming 2021 will be a different year for the renewable sector. Our top picks of market updates from last week:
- RENEWABLE: the finance regulator unleashed a critical policy that will help many of the renewable projects in China to secure renewable subsidy, of which the payment has been long overdue. However, the strict grid-connection timeline also means that many under-constructing projects would fail to apply for a 20-year subsidy.
- WIND & SOLAR: prices of wind turbine dropped to a historical low, and solar PV makers face harsh price war ahead, as the market steps into the zero-subsidy territory from 2021
- HYDROGEN: with over 88 hydrogen refuelling stations in operation, China has surpassed Germany and becomes the second placer in the world for H2 fueling infrastructure. Meanwhile, oil company Sinopec pledged to invest more on turning its gas stations to H2 fueling stations in the next decade.
- CARBON POLICY: Bejing has taken the first serious step to establish the national carbon trading market, with trading measures for the power industry unveiled
Please scroll down for the 9 updates last week.
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Ministry of Ecology and Environment last week published a policy regarding quotas and implementation plans of national emissions trading scheme (ETS) (feedback-invitation version). The policy specified that:
- Power plants (including self-consume power producers) with annual CO2 emissions of +26,000 tons (Total Energy Consumption of 10,000 TCEs) are included in the first phase of the scheme.
- The quota allocations have been determined based on emissions levels from 2013-2019.
- The ETS will cover a total of 2,267 power plants in its first phase.
Energy Iceberg Note: On early Nov. Ministry of Ecology and Environment has released a new consultation plan for a long-delayed national emissions trading scheme (ETS).
Ministry of Finance (MoF) last week issued a new policy regarding renewable subsidy application and payment. According to the new rule:
- All renewable projects (incl. wind, solar PV, CSP, geothermal, and biomass) – completed all necessary filing procedures in 2006 or after 2006 – will be included in the subsidy payment scheme.
- “Full Unit Grid-Connection“: in order to secure subsidy, projects need to complete grid-connections for all of the planned units on time. Projects with partial grid connections will not be qualified.
- Definition of “Grid-Connection Time”: projects’ grid connection timeline will be based on: i) the connection time promised by developers; ii) the grid-connection time agreed in the PPA; iii) the grid-connection time set in the electricity certification granted to the operators.
- Review System: after connected to the grid, projects need to meet a production time requirement in its first 12-month operation (producing for more than 50% of the regional average production time).
Energy Iceberg Note: This policy overall is good news to renewable developers. Formerly, RE projects need to be reviewed by the regulator and enlisted in the “subsidy “catalogue to receive the subsidy. However, Beijing has only announced a limited amount of catalogues which include a limited amount of projects. The issue is in part due to administrative backlog and is also related to the severe subsidy deficit. Earlier this year, Beijing has announced to scrap the “catalogue” mechanism. Instead, all projects fulfilling the legal-binding requirements are entitled to the subsidy.
For instance, China’s operating solar PV plants have reached nearly 200GW, but only about 50GW of them are included in the subsidy catalogue. The policy will pave the way for developers to secure better revenue.
Megawatt wind base project in Inner Mongolia of China Huaneng recently opened bids. It is reported that the quotations of wind turbines for all bid sections are lower than the current market prices.
- The lowest price of wind turbine (including supporting equipment such as tower and foundation anchor bolts) is ¥3101/kW.
- The price of wind turbine (excluding the cost of supporting equipment at ¥500-600 /kW) is around ¥2500-2600/kW, setting a record low in wind development history.
Energy Iceberg Note: Between late 2019 to early 2020, the market witnessed a jump of turbine price due to developers’ raising demand to secure turbine supply amidst an installation dash. However, as new projects would no longer receive the renewable subsidy from 2021, the installation dash is set to over soon. Consequentially, wind turbine prices are expected to drop significantly throughout 2021.
Statistics from PV-Infolink suggests that:
- Solar module production capacity would reach 272GW globally by the end of 2020.
- The production capacity of PV panels would reach 207 GW in 2021 based on capacity ramp-up plans of seven leading solar module manufacturers (Longi, Trina Solar, JA Solar, Jinko Solar, Risen Energy, Canadian Solar and Hanwha).
- Global PV installed capacity would register about 160-170GW in 2021.
- Correspondently, the demand for PV module would be at 176-187GW. The top 7 module companies alone would be able to support that demand.
Competition among the leading module manufacturers would be fierce in 2021.
PV experts, including those from the National Development and Reform Commission (NDRC) last week predicted distributed PV installed capacity for the 14th Five-Year Plan (14th FYP) on the 4th Distributed Photovoltaic Carnival.
Shi Jingli, a researcher at NDRC, predicted that:
- The total incremental installed capacity of wind and PV in the next five-year (2021-2025) would reach 100 GW
- Non-fossil energy is set to represent 20% of the total energy supply in 2025.
- While annual PV incremental installed capacity would be at 70GW, that of distributed PV needs to reach 30GW.
Wang Shujuan, the founder of PV-Perspective, projected that:
- The accumulative installed capacity of PV during 14th FYP period (2021-2025) would increase at least 300GW-400GW.
- The incremental installed capacity of distributed PV would increase more than 100GW.
Hydrogen Storage & Fuel Cells
Recent research from XCH-Club revealed that there are 458 hydrogen refuelling stations have been built worldwide, and there are further 255 in the pipeline. Statistics showed that:
- Japan has the largest number of hydrogen refuelling stations in the world, with 146 hydrogen refuelling stations have been built.
- Europe: There are 136 hydrogen refuelling stations in Europe, 87 of which are located in Germany.
- China has surpassed Germany to become the world’s second-largest country with a total of 88 hydrogen refuelling stations have been built. Some 149 hydrogen refuelling stations are in the pipeline.
The world’s biggest oil refiner, Sinopec, is expanding its core business to include green energy, said company chairman Zhang Yuzhuo on Bloomberg’s New Economy Forum recently.
- Natural Gas Still the Main Focus: The company, according to Zhang, still sees natural gas as its main focus for the energy transition but plans to develop geothermal, offshore wind, and solar power is already under the way.
- Transforming Gas Stations: On hydrogen, Sinopec will transform its conventional petrol stations into H2 refuelling stations integrating petrol, hydrogen, and LNG.
- Petrochemical Byproduct gas the Main H2 Source: On H2 gas production, Zhang said Sinopec will still prioritize petrochemical by-product gas, but with an action plan to develop renewable power-to-gas.
31 financing events have been carried out in the hydrogen energy industry by mid-November. The total amount involved is expected to exceed ¥1.5b. These amounts manifested a significant increase comparing to:
- 2018: 16 financing events with total amount exceeded ¥500m;
- 2019: 24 financing events with a total amount of about ¥1b.
EV & Battery
China’s Ministry of Finance (MOF) last week issued an early budget for new energy vehicle (NEV) subsidies in 2021. The subsidy amount totals ¥37.58b in 2021, increased 234% over the 2020 amount of ¥11.257 b.
Among them, the subsidy for the operation of new energy buses in 2021 is ¥15.689b, accounting for 41.74% of the total amount.