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On 10 February 2021, National Energy Administration (NEA)
released drafted renewable power consumption targets during
2021-30, following China's 2030 new Nationally Determined
Commitments (NDCs) announced in December 2020.
Renewable power (including hydro power) consumption share in
total power supply will reach 28.7% and 40% by 2021 and 2030,
respectively.
Non-hydro renewable power (mainly wind, solar PV and biomass)
consumption share in total power supply will reach 12.7% and 25.9%
by 2021 and 2030, respectively.
Renewable power consumption share targets will increase from
2021 levels, which vary across provinces, to a uniform 40% by 2030
at a constant rate for each province.
The government launched the Renewable Portfolio Standard (RPS)
mechanism in early 2018, setting mandatory renewable and non-hydro
renewable consumption targets, or RPS targets, at provincial
level.
2021 RPS targets are well achievable
China has maintained a good record in achieving provincial RPS
targets during 2018-2020. On the one hand, the target setting
represents merely incremental growth each year. On the other hand,
rapid renewable power penetration enabled the target achievement
for most provinces through local renewable consumption. In 2019,
70% of the provinces met the renewable consumption targets and 80%
met the non-hydro renewable consumption targets, based on local
consumption. For provinces that initially missed the targets with
local renewable consumption, the gaps were limited and then largely
filled by the renewable consumption volume trading.
By end-2020, wind, solar PV and biomass installed capacity
reached 281 GW, 253 GW and 29.5 GW, growing by 25.3%, 19.0% and
22.6%, respectively. Wind and solar PV new additions reached 71 GW
and 48 GW in 2020, despite the negative impact of COVID-19. In
2021, IHS Markit expects total renewables and non-hydro additions
to be above 110 GW and 90 GW, respectively. The incremental pace in
RPS target setting is also maintained in 2021. Therefore, we expect
that the provinces will continue to achieve RPS targets in 2021
without encountering insurmountable challenges.
2030 RPS targets are also within reach
The 2030 RPS targets indicates that the renewable and non-hydro
renewable consumption share will grow at 1.3% and 1.5% per year.
Compared with the pace in 2021 share growth at 0.6% and 1.3% for
renewable and non-hydro renewable consumption, 2030 targets
represent fairly modest tightening.
In the latest IHS Markit outlook (issued before 2060 carbon
neutrality pledge was announced), China will add above 90 GW of
wind and solar PV capacity each year during the next decade.
Installed capacity of wind and solar will exceeds 1,200 GW by 2030,
well aligned with China's 2030 NDC, which is also the basis for the
2030 RPS target setting.
Increasing penetration of wind and solar PV will be accompanied
by peaking coal-fired power generation at 2026-27, as well as the
growth of hydro, nuclear and battery capacity. By 2030, IHS Markit
expects the renewable and non-hydro renewable power consumption to
take shares of 42.3% and 26.9%, respectively, compared with RPS
targets of 40% and 25.9%.
RPS mechanism is the pivotal renewable policy in grid
parity era
China's renewable policy has gone through a number of phases
starting with a decade of direct subsidy to renewable auction from
2019, then grid parity from 2021. Shifting away from subsidy
mechanism that focuses on capacity buildout, China relies on RPS to
mandate renewable consumption, which is pivotal for China's energy
transition strategy and climate commitment.
RPS mechanism will entail the optimization of renewable capacity
additions and penetration process. The entities who are obliged to
meet the RPS targets—including local governments, power
generators, grid companies and power users—will have to work
closely to fulfill the local targets. Along the collaboration
process, we expect to see simplified project approval procedures,
improved access to low-interest financing, more diversified tax
benefits, and accelerated grid connection.
Moreover, RPS mechanism will facilitate the market-oriented
power sector reform. In addition to direct trading of renewable
consumption volume, Green Certificate (GC) purchasing is also
recognized as an alternative solution for target fulfillment. The
RPS-plus-GC mechanism will give rise to sustained demand for GC
market and materially improve the liquidity.
Bing Han, senior research analyst at IHS Markit, works
on Greater China power and renewables research and is a member of
Asia's research and consulting team.
Lara Dong, senior director on the Climate and
Sustainability team at IHS Markit, leads Greater China power and
renewables research and is a member of Asia's research and
consulting team.
