China has taken a meaningful step forward in electricity market reform, as the top economy planner NDRC unleashed a critical power pricing policy last week. The regulator inked the policy swiftly after the State Council reached conclusions on addressing the looming energy supply shortage (see last China Clean Energy Syndicate Oct 11). The change in retail power pricing mechanism is a highlight of the new policy. Previously the industry has been debating on the issues regarding retail catalogue pricing for years, but progress has been limited. The change might kick off China’s next reformative moves on the electricity market.
The reform is also significant for renewable, clean energy investment and energy storage market development.
Some other critical updates of the Chinese clean energy market last week:
- Net-Zero Investment: President Xi last week announced China’s big moves in biodiversity, where mega renewable complex investment is remarked as part of the solution. The top authority’s statement is a clear indication of the investment trend in China’s renewable market.
- Renewables: The upcoming CWP will see major R&D development from the Chinese wind OEMs. Already CRRC Yongji released the 18MW wind turbine generator while Dongfang Electric Wind Power announced that it is going to reveal this 13 MW turbine prototype in the CWP.
- Hydrogen: LONGi made another leap in hydrogen equipment development by launching its first alkaline water electrolyzer product.
Please scroll down to check out the 8 updates that we considered noteworthy last week.
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National Development and Reform Commission (NDRC), China’s top economic planning agency, last week announced that it will allow coal-fired electricity prices to fluctuate in a wider range to better reflect market fundamentals. The regulator also said the end game is to de-regulate all coal-fired power generation, which means the pricing would be determined mainly by trading in the market.
The NDRC has carried out the new regulation regarding electricity pricing, in the awakening of the State Council’s decision last week.
The key policy changes are:
- Deregulation: full de-regulation of coal-fired power generation trading; the pricing mechanism for coal-fired power based on “benchmark plus fluctuation” will be in full execution.
- Higher Price Ceiling: mid-to-long-term contract pricing of coal-fired electricity can be 20% higher or lower than the coal benchmark, while currently price increase is capped at 10% and decrease at 15%. Energy-intensive industries are not subjected to the cap (+20% price increase is possible. )
- “Deregulation of the Retail Pricing: “commercial users will “enter the electricity market trading,” and the previous “Catalogue retail pricing” mechanism ends. However, catalog prices will remain to be the case for residential and agriculture users.
Energy Iceberg’s Note: the policy marks one of the most significant power market reform steps being taken. The shelve of catalog pricing for commercial retailed users is especially a major step–something that the industry has been calling for years but unable to achieve.
Net-Zero Investment Trend
Chinese President Xi Jinping last Tuesday attended via video link the leaders’ summit of the 15th meeting of the Conference of the Parties to the United Nations Convention on Biological Diversity (COP15) and delivered a keynote speech. Here are some highlights.
China will donate 1.5 billion yuan (US$232.5 million) to set up a new fund to help developing countries protect the variety of plant and animal life in the world, President Xi pledged at the COP15.
Xi said China has been working on a massive renewable energy project, with its first phase comprising 100 GW of wind and solar in the desert, sandy, and rocky reaches having recently launched operations.
Previously, Premier Li Keqiang at a State Council meeting emphasized the need for the speedy building of large-scale wind and solar PV power projects, as well as “peak-shaving” power sources – stressing the urgency of safeguarding energy supplies even as China reeled from a widespread power crisis blamed on coal supplies.
Energy Iceberg’s Note: the recent speech of President Xi marks the growing importance of renewable energy in China’s climate and international strategies.
Wind & Solar
CRRC Yongji last week released an 18MW wind turbine generator design independently developed by the firm. Industry experts from Tsinghua University, Ming Yang Smart Energy, and others reviewed and witnessed the product launch.
CRRC said that a prototype of the PMSG will be produced by the end of 2022, with large-scale commercial production soon followed.
Energy Iceberg’s Note: Chinese players’ R&D efforts to develop larger offshore wind turbine has been speeding up since 2021, after a relatively quiet 2020. The 18MW generator is a big jump from the current 11MW-13MW design. CRRC Yongji is cooperating closely with Ming Yang.
Dongfang Electric Wind Power (DEWP) is going to release the 13MW offshore wind prototype (E3-C01) at China Wind Power 2021 this week (18-25 Oct), according to local industry media Wind Daily. The prototype to be release is featured with:
- Applicable wind condition: above 8.5s/h
- Rotor Blade diameter: 211m
- Stand-alone capacity: 12.5MW
Energy Iceberg’s Note: DEWP is the first company in China to launch 10MW wind turbines, which is the only +10MW being installed in an offshore wind farm in APAC so far. Since the 10MW launch of DEWP, Chinese wind market players like Mingyang, CSSC Haizhuang, and Shanghai Electric have all speeded up OW R&Ds. The release of the 13MW design would be a breakthrough for DEWP and China’s wind sector.
Mingyang Smart Energy (MYSE) European R&D Center announced that it has signed a cooperation agreement with EnerOcean, a Spanish floater design company. The duo will jointly develop a floating wind power project in Spain.
The firm said that the demo is the first appearance of MYSE as well as China’s 11MW floating turbine to enter the European market.
How far is China’s offshore wind from reaching grid parity?
For China’s offshore wind projects, failing to connect to the grid by 31 December 2021 means losing the entitlement to the national renewable subsidies. Without subsidy, the project tariff revenue from 2022 onward will benchmark the prevailing coal-fired power tariff only, equivalent to being cut by half from the feed-in tariff level of 850 yuan per MWh by 2021.
Hydrogen & Fuel Cells
LONGi Green Energy Technology (LONGi), the world-leading solar technology company, last week launched its first alkaline water electrolyzer product. LONGI suggests that by the end of this year, it will have an electrolyzed water hydrogen production capacity of 500MW, which will provide a strong guarantee for mass delivery in 2022.
LONGI has been conducting strategic research on the hydrogen energy industry chain, and cooperating with domestic and foreign scientific research institutions electrolytic water hydrogen production equipment and technology R&D since 2018. LONGI formally established a hydrogen arm in March this year. In the fourth quarter of 2021, the company will form a capacity of 500MW of electrolyzed water hydrogen production equipment, and the capacity will reach 5-10GW in the next five years.
Energy Iceberg’s Note: LONGi has secured 10 hydrogen energy-related projects since it set up a hydrogen business unit this April. See our summary here.
CRRC and Tongji University recently have jointly developed a series of performance tests such as traction for a hydrogen fuel cell hybrid locomotive with the largest power in China. The hydrogen fuel cell system, with a power of 400kW, is currently the largest in the field of rail transit.