China High in Renewable Capacity, But Not in Production Efficiency

The growth of China’s economy and electricity demand have slowed in recent years. Yet, its construction program has continued for all types of generating plants, making them run at much lower capacity factors than their design capability. In particular, by the end of 2017, China had over twice the wind and solar capacity that the United States had, but the capacity factors of their solar and wind units were about half that of similar technologies in the United States, making China one of the least efficient renewable energy generators in the world.

Once wind and solar plants are built and paid for, they represent almost a free resource for producing electricity since there is no associated fuel cost and as such they would normally be dispatched before other technologies. But, there are other issues associated with China’s low capacity factors for their wind and solar units that make them less productive than those in the United States, including the inferiority of Chinese wind turbines and solar panels, poor site selection or geography to obtain high wind speeds, a lack of adequate transmission lines to connect to the grid, and long distances over which the electricity has to be transmitted to reach population centers.

To encourage construction of wind plants, policy makers in China implemented a range of provincial- and national-level policies that include a mandate for power companies to install minimum capacity shares of wind, a feed-in tariff introduced in 2009, a requirement for grid operators to connect wind farms to the grid and to purchase their power, and other financial and tax incentives. As a result, China is the world’s leader in wind capacity.

Renewable Capacity and Generation

In 2017, China had 289 gigawatts of installed wind and solar capacity compared to 121 gigawatts for the United States. Although China had 139 percent more installed wind and solar capacity than the United States, it only produced 38 percent more electricity from the two renewable technologies in 2017. For example, China had 164 gigawatts of installed wind power, generating 305,700 gigawatt-hours of electricity in 2017 while the United States had 88 gigawatts of wind capacity and generated 254,254 gigawatt-hours of electricity—83 percent of what China’s wind units produced. The production efficiency comparison is even worse for China’s solar plants.

Below is a comparison of capacity factors for China and the United States. (Capacity factor is a measure of how often installed power sources operate at their rated capacities.)

Power Source	2017 Capacity Factor, United States	2017 Capacity Factor, China
Thermal (coal and natural gas)	53.5% (coal), 54.8% (Natural gas (combined cycle)	48.6%*
Nuclear	92.2%	71.8%*
Hydroelectric	45.2%	40.4%
Wind	36.7%	21.3%
Solar photovoltaic	27%	10.7%

Source: The Motely Fool

Comparison of the United States’ and China’s wind turbines found a number of areas for improvement in China grid connectivity and project selection and siting. Because policy efforts by the Chinese government focused primarily on creating incentives to install new wind turbines (rather than incentivize generation), project design decisions (e.g., site selection, turbine model selection, and hub height) were insufficiently valued and evaluated. To increase capacity factors, the Chinese government primarily focused on factors related to improving grid integration and grid management, which are two problem areas. But, for new wind plant construction, the government needs to also incorporate policies to address turbine siting and technology choices to increase the sector’s performance relative to the levels in the United States.

Despite the poor performance from China’s renewable plants and the country’s excess generating capacity, Apple recently launched a $300 million clean energy fund that is expected to fund additional renewable energy generation in China.

Conclusion

China’s national plans call for increasing renewable energy through 2050. In order to obtain the most productive units, China needs to incentivize project siting and technology selection, as well as ensuring grid connectivity of its wind and solar units. Otherwise, it will be building unnecessarily duplicative and inefficient sources of energy that are already inherently intermittent.

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