China’s Breakneck Solar Expansion Starts To Meet Power Grid Resistance

(Bloomberg) -- China's solar market is growing faster than its power system can handle in some places, creating constraints that could slow its world-leading pace of clean energy installations.

Several local governments in China have begun limiting solar capacity and lowering power rates for daytime hours when photovoltaic generation is at its highest. The constraints are surfacing amid an unprecedented solar building boom, and highlight the problems electricity grids face in digesting large volumes of clean energy that are only available for a few hours a day.

China is on track to add about 210 gigawatts of solar panels this year, according to BloombergNEF, more than the US has ever built and enough to power the UK twice over. But grid constraints are likely to slow that pace from next year, according to Zhong Baoshen, chairman of the world's largest solar manufacturer, Longi Green Energy Technology Co.

“Given the fast growth this year, grid constraints will keep popping up,” Zhong said during an earnings briefing on Tuesday. “The domestic market's growth rate will slow next year and the year after, mainly because of the mismatch between the grid and renewables.”

The main culprit is a surge in installations on rooftops of homes and businesses driven by government support and attractive economics. That's created too much generation in the middle of the day in provinces like Shandong, where the grid has been forced to introduce negative prices and ask owners to unplug their panels to avoid being overwhelmed.

As installations grow, those problems are spreading. Ten of China's 31 provinces have now introduced lower power rates during the middle of the day, Morgan Stanley analysts including Simon Lee said in a research note on Monday. In Shandong and Hebei, another strong rooftop market, local governments have capped solar capacity at 80% of what local transformers can handle, the analysts said.

While lower rates benefit households and industry, solar developers get paid less for the energy they generate, which affects their incentives to invest. 

Although spending on energy storage to mitigate renewable energy's intermittency is also growing, it's nowhere near the pace of solar's expansion. China has 17 gigawatts of grid-scale batteries in place, and local governments have signaled that level could more than quadruple to 73 gigawatts by 2025. But that pales besides the 1,135 gigawatts of solar BloombergNEF expects the country to have by then.

“Solar is completely destabilizing the system in some places,” said Cosimo Ries, a Shanghai-based analyst at Trivium China. “The flexibility that the system needs with storage and other market mechanisms — they're not there. So you're going have to face these price volatilities, and whatever happens, you have to absorb the cost.”

The Week's Diary

(All times Beijing unless noted.)

Wednesday, Sept. 6

• CCTD's weekly online briefing on Chinese coal, 15:00
• China coal summit in Nanning, Guangxi, day 1

Thursday, Sept. 7

• China's 1st batch of August trade data, including steel, aluminum & rare earth exports; steel, iron ore & copper imports; soybean, edible oil, rubber and meat & offal imports; oil, gas & coal imports; oil products imports & exports. ~11:00
• China foreign reserves for August, including gold
• China coal summit in Nanning, Guangxi, day 2

Friday, Sept. 8

• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30
• China coal summit in Nanning, Guangxi, day 3

Saturday, Sept. 9

• China inflation data for August, 09:30

On the Wire

No. 2 iron ore miner Vale SA said the outlook for China's steel-intensive property sector is “more encouraging” despite uncertainties, and reiterated its long-term view of the global steel market remains intact.

Three Chinese groups are among suitors still in the race to acquire a Botswana copper mine that could fetch about $2 billion, according to people familiar with the matter.

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.