Cost deflation for wind and solar could sustain the momentum of renewables.
China’s renewables sector is set to retain its market leading position as its solar and wind capacity additions could average to 36GW and 23GW respectively between 2019 and 2028, according to Fitch Solutions.
This would also increase the share of non-hydropower from an estimated 8.5% in 2018 to over 16% by 2028. The country’s wind and solar generation is expected to be increasingly able to compete with coal generation.
“Our optimistic outlook is predicated on our expectation that renewable energy will register continued cost deflation in the Chinese market, making the sector more attractive on a cost-basis relative to conventional sources of power generation,” Fitch Solutions stated.
China deployed nearly 44GW of solar capacity over 2018, bolstered by the deployment of unsubsidised projects which represents the most solar capacity additions registered for any country globally.
“This substantial growth was largely supported by distributed solar projects (smaller than 20MW) having registered robust unsubsidised growth over the year, aided by the availability of cheap solar equipment following the oversupply of solar panels from Chinese manufacturers,” the research firm said.
Furthermore, the country’s feed-in-tariffs (FiT) system has been responsible for its growth surge in the past five years as project developers have tapped into its attractive rates but have also made challenges for the Chinese government.
Renewable generators are facing bankruptcy risks as they have not paid the electricity they have generated, driven by its subsidy payments surpassing US$17.4b last year.
They also warned that distribution operators in provinces would still focus on coal generation as it is cheaper than renewables generation and the coal sector remains a key industry for employment.
“This points to continued risks that Chinese renewables generators will face curtailed access to the grid, despite becoming cost-competitive vis-à-vis coal projects, which would weigh heavily on the economic viability of unsubsidised renewables projects,” Fitch added.
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