China's wind power capacity to grow 40% to 290GW by 2020

Whilst solar capacity is predicted to more than double.

In the Chinese National Energy Administration (NEA)'s 13th five-year plan guidance on renewables development, it was mentioned the government plans to add 40 GW of ground-mounted, utility-scale solar projects and 80 GW of onshore wind projects between 2018 and 2020. According to Wood Mackenzie, this makes the FYP targets for solar and wind at 110GW and 210GW respectively.

Adding all of the planned and announced projects - including the poverty alleviation solar projects, solar thermal projects and UHV supporting projects – Wood Mackenzie estimates solar capacity could more than double to 240 GW and wind capacity increase by 40% to 290 GW by 2020, accounting for one-quarter of power capacity.

Ramp-down of feed-in tariffs and cost reduction are behind the solar capacity boom seen in the first half of 2017, according to Frank Yu, principal consultant, Asia-pacific power and renewables, Wood Mackenzie. "Around 24 GW of solar projects were installed in H1 2017, up by 30% on 2016. Driven by a decline in component costs and technology advancement, solar generation could be 10% cheaper than last year in 2017. We believe the ongoing cost decline will continue to boost solar capacity growth. Meanwhile more growth will come from central and eastern provinces, especially when distributed solar takes off," he said.

In contrast, wind projects only saw 6 GW growth in H1 2017 and are likely to fall below the 31 GW annual target. Project approvals, except for UHV support, are essentially frozen in six northern provinces and won't resume until the minimum guaranteed utilisation hours are met.

"We expect renewable curtailments to gradually improve. The NEA has enforced the renewable portfolio standards and has strengthened the role of grid companies in the dispatch of renewables, requiring them to commit to construction of outbound grid infrastructure as well as locking demand markets. Curtailments were down by 7% for wind and 4% for solar in H1 2017," Yu added.

Rapid growth of renewables is putting more pressure on subsidy deficit. "The subsidy deficit was already at US$9 billion by the end of 2016 and could grow to over US$26 billion by 2020. The NEA is now urging more local governments to subsidise renewables – some provinces already have RMB100-400/MWh subsidies to support solar projects. We could see further ramp-down of renewable feed-in tariffs from central government and more subsidies running into arrears. The government needs further workable plans to balance the rapid capacity growth and skyrocketing subsidy demand without reducing utilisation levels," he further explained.