Azure China Energy Transition Update-August 30th

Azure International

2022-08-30

导读：China energy news digest this week.

Another batch of wind and solar projects have been cancelled in China, this time in Shaanxi province, representing more than 1 GW of capacity. New capacity targets have been released by Hainan and Fujian. Hainan targets 5.5 GW and 2 GW of PV and wind installed capacity by 2025. The PV target seems ambitious as the island has only installed 1.4 GW so far, while the wind target seems cautious, as a 12.3 GW offshore wind plan has been launched last year and 10 GW have seemingly already been allocated to identified developers.

The Guangdong Power Exchange has released its power market report for the first 6 months of 2022. We give an overview of the main statistics in our Corporate Net Zero Pathways column.

The Azure Research

and Strategy team

News summary

Shaanxi province cancels more than 1 GW of wind and solar projects
Hainan targets 5.5 GW solar and 2GW wind installed capacity by 2025
Huaneng obtain 3GW renewable resources in Cangnan, Zhejiang
In 2030, Fujian wind and solar installed capacity will reach 20GW
Corporate net zero pathways: Guangdong released its power market report for H1 2022

Shaanxi province cancels more than 1 GW of wind and solar projects

Recently, several cities and counties in Shaanxi province (陕西) issued a"Notice on Sorting Out the Renewable Energy Projects in the 13th Five-Year Plan", including Baoji City, Fugu County, Yang County, Xianyang City, Xi'an City, and Weinan City.

According to their respective notice, 25 wind power projects representing a total of 779.5MW and 7 photovoltaic projects representing a total of 247.5MW were cancelled in these locations. This follows a move from neighboring province Shanxi province (山西) to cancel 1.4 GW of wind and solar projects in July. (China Power)

Hainan targets over 5 GW solar and 2GW wind installed capacity by 2025

The ‘Hainan province carbon peak implementation plan’ was released by Hainan government this week. The plan sets the following targets:

With already 1.4 GW of installed solar capacity, Hainan plans to add another 4 GW by 2025.
Total onshore and offshore wind power installed capacity will reach 2GW.
The proportion of non-fossil energy power generation installed capacity will reach 55%. By 2030, non-fossil energy resources will be fully developed and utilized, and the proportion of installed non-fossil power capacity will reach 75%.

Hainan also plans to establish a hydrogen value chain, from its production, storage, and transportation, to its applications, such as fuel cell vehicles and the usage of green hydrogen in industry.

(Hainan GOV)

Huaneng obtains 3GW renewable resources in Cangnan, Zhejiang

The Zhejiang Branch of Huaneng Group and the Cangnan County Government held a cooperation agreement signing meeting for the development right of 3GW of new energy projects in Cangnan. In exchange, the Zhejiang branch of Huaneng Group set up a manufacturing base in the county.

(CHNG）

In 2030, Fujian wind and solar installed capacity will reach 20GW

A carbon peak and carbon neutrality work plan released by the Fujian GOV includes the following targets up to 2060:

By 2025, the proportion of non-fossil energy consumption will reach 27.40%.
By 2030, the proportion of non-fossil energy consumption will reach more than 30%, and the total installed capacity of wind power and solar power generation will reach more than 20GW.
By 2060, the proportion of non-fossil energy consumption will reach more than 80%, and the carbon neutrality target will be successfully achieved.

(Fujian GOV)

Corporate net zero pathways

Guangdong released its power market report for H1 2022

Guangdong’s total power consumption for H1 2022 was 355.6TWh, a decrease of 2.4% YoY. From January to June, the total transacted power volume (i.e. traded and consumed, excluding grid company retail) was 140.81TWh, including 136.61TWh of tier I (wholesale) market transactions and 4.65TWh of tier II (retail and contract transfer) market transactions, comprising:

The average annual contract transaction price was 497CNY/MWh. Another 10.56TWh was signed through monthly contracts from Jan. to Jun with an average price of 532CNY/MWh.

Source: Guangdong power exchange

For the first six months, the total on-grid power of the market-based power generation units reached 200.1TWh, of which 30% (including part of the nuclear priority dispatch) was sourced by the grid company trading on behalf of power users, 68% was sold through mid-long term forward contracts, and 2% was sold to the spot market for power deviation rectification.

Concerning monthly contracts, from January to June, the cumulative transaction volume was 10.56 TWh, with an average transaction price of 532CNY/MWh (excluding the variable cost compensation tariff变动成本补偿价格,which is the difference between the FiT of each individual unit and the coal-fired base price). Among them, 7.7TWh of coal-fired power was traded at an average price of 538 CNY/MWh, 1.61 TWh of gas-fired power at a price of 514CNY/MWh, and 1.26 TWh of nuclear power at 517CNY/MWh.

Source: Guangdong power exchange

Green electricity annual contracts trading volumes from January to June reached 0.68TWh at 484CNY/MWh, with a green premium of 32.1CNY/MWh. During the monthly trading organized in Jan.-Jun, trading volume was 0.18TWh, sold at a price of 487CNY/MWh on average.

Source: Guangdong power exchange

Conclusion:

Power market trading is less developed than planned. The market-based on-grid power during the first six months was 200.1TWh, which is only 36% of 550TWh, the original annual target set by the Guangdong government in December 2021. At the beginning of 2022, total direct trading volumes were expected to exceed 480TWh for the year (power consumption of all power users of and above 10kV voltage level). Apparently, the actual market scale excluding grid company retail reached only 140TWh as of the end of 1H 2022.

Power traders in Guangdong remain rather conservative by relying heavily on mid-long term wholesale contracts (i.e. yearly, monthly, weekly) with only 3% of power trading in the spot market.

Concerning transaction prices, the average trading prices of different sources of energy including nuclear were driven high, between 500 and 540CNY/MWh. However, the green electricity trading was competitive and stable in terms of price but still low in terms of volume.

(Guangdong Power Exchange)

This content is prepared by the Research and Strategy Team of Azure International. Please contact us via our official account or email for any enquiry.

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