China’s major cities can produce electricity from solar power more cheaply than the grid


A team of researchers with the KTH Royal Institute of Technology, Mälardalen University and Tsinghua University has found that all of China’s major cities are now in a position to produce electricity from solar power more cheaply than can be had from the grid.

In their paper published in the journal Nature Energy, the group describes how they estimated solar energy costs for all the major Chinese cities, and what they found when they compared them to costs associated with the grid.

In recent years, China has put a significant amount of effort into producing and installing solar technology to the extent that they are now the world’s biggest producer of solar cells, and also the world’s biggest installer of solar panels.

Last year, installations in the country accounted for half of all installations worldwide.

A lot of that growth has been stimulated by government subsidies, but the Chinese government has made it clear that it wants solar to fly on its own – subsidies are slowly being withdrawn.

In this new effort, the researchers wanted to know if China was ready to fly on its own, at least in its major cities.

The researchers started by estimating solar energy system prices and electricity production in all of the major Chinese cities.

They then compared what they found with prices from the grid. Next, they estimated solar electricity prices at the grid scale, and compared them to electricity generated strictly from coal.

The calculations accounted for estimates of the lifetime of solar systems.

They report that they found that all 344 of the major cities they studied were currently in a position to generate electricity at lower costs than the grid supply – without subsidies.

They also found that 22 percent of those cities could also produce electricity at a lesser cost than possible with coal.

The researchers note that advances in technology and low installation costs (due to less expensive hardware and low labor costs) have allowed China to achieve grid parity far sooner than predicted by most analysts.

They suggest that the developments in China could serve as a boost to the solar industry in general.

China hopes to reduce its dependence on carbon-based fuels, especially coal, by expanding its supply of clean energy.

However, the vast differences in China’s geography mean that the country must transfer the power generated by solar, wind and hydropower sources in the west to populous regions in the east.

Authorities hope to address this issue by using advanced technologies such as ultra-high-voltage direct-current connectors, which are cheap and effective over long distances.

Meanwhile, electricity pricing reform is moving ahead, to help to reduce wastage through market-based prices.

The west is the main producer of China’s clean energy, accounting for the majority of the nation’s total electricity production from hydro (68%), solar (76%) and wind (52%) sources in 2016.

Non-renewable thermal power factories are concentrated in the east, accounting for 46% of total thermal electric production.

Regional disparities

The cleanest province is Tibet, which had 97% of its power generated from clean energy sources (hydro, solar, wind and geothermal) in 2016.

Yunnan and Sichuan saw 83% and 87% of their electricity respectively generated from hydropower sources, while Qinghai enjoys the highest ratio of solar energy, at 16% of total energy output.

Gansu, Jilin and Inner Mongolia are China’s top wind-energy producers, with each province seeing 11% of local power output generated from wind turbines.

A chart showing the sources of power generation among China

China’s east coast is dirtier by comparison; Shanghai and Tianjin saw almost 100% of their locally produced electricity generated from thermal power.

This is partly due to geography: the mountainous topography of eastern and southern China makes it difficult to install wind-power generators, which require large, open spaces, while the arid northern China plain makes hydropower infrastructure unfeasible.

Other reasons are economic: the industrialised central and north-eastern parts of the country have historically relied on cheaper energy sources, like coal, both to fuel economic activity and to provide a source of heating in the winter.

However, this has led to pollution severe enough to block 20% of sunlight from reaching installed solar panels, according to a study from Princeton University (US), denting the efficacy of solar renewables.

Despite these challenges, some eastern provinces, such as Fujian and Hainan, have developed a strong nuclear energy sector; both provinces have derived nearly one-quarter of local energy output from nuclear power plants.

The imbalance between power supply and demand is significant. Guangdong’s electricity consumption in 2016 exceeded its local production by 153bn kWh—the largest gap in the country.

The national capital, Beijing, was only able to produce 43% of its own electricity consumption in 2016, and was forced to import the rest, mostly from Inner Mongolia and Shanxi.

In contrast, Yunnan sent 75% of its locally generated energy to other provinces.

electricity balance

However, while China’s clean energy production is abundant, it is also wasteful.

The country’s total installed capacity of wind power accounted more than one-third of the global total in 2016, with solar power accounting for more than one-quarter, but wastage rates are high.

In 2016 Gansu idled 43% of its wind and 30% of solar power capacity—an amount equal to 13bn kWh.

This situation improved slightly in 2017 as China upgraded its electricity grids, but problems persist; that year Sichuan and Yunnan, the two biggest hydroelectric producers in China, wasted around 13% of their hydropower capacity.

Cross-province transmission

The geographical imbalance makes cross-province transmission necessary.

In 2017 cross-province energy transmission reached 587bn kWh, equal to around one-tenth of total electricity consumption.

Transmitting power across several thousand kilometres requires high voltages, however, which are hard to achieve with alternating current (AC), the most common method of transmission at present.

In recent years policymakers have moved to install ultra-high-voltage direct-current (UHVDC) connectors, which are better suited to such geographic spans.

China started widespread construction of UHVDC infrastructure in 2010, as part of an aim to achieve a national no-carbon grid.

China’s state-owned electricity utility, State Grid, is halfway through a plan to build 23 such lines by 2030.

The nine lines finished by end-2017 have sent 300bn kWh/year from Xinjiang, Inner Mongolia and Yunnan to the east coast. The largest connection under construction, between Xinjiang and Anhui, will carry 66bn kWh/year (an amount roughly equivalent to total power usage in the Czech Republic) over 3,300 km.

State Grid is looking to replicate its success in this area overseas: in December 2017 it won a contract to build a 2,000‑km UHVDC line in Brazil.

Electricity pricing reform

On top of strong government regulation, overcapacity in domestic power plants has resulted in cheap electricity prices.

In 2016 electricity prices averaged US$0.93/kWh, less than one-third the level in Brazil.

China aims to reform its pricing policies under the current 13th five-year plan (2016‑20), and in 2015 the State Council (China’s cabinet) chose Yunnan, Guizhou, Guangdong and Chongqing as the first pilot areas for such reform.

By 2017 authorities had extended this pilot to 18 provinces, although progress remains slow. While domestic electricity prices have started to converge with global rates, various subsidies, quotas and other forms of state control continue to distort them. This is problematic: artificially low prices encourage waste and weaken incentives to incorporate clean energy into the grid.

Despite its downsides, cheap electricity is a major advantage for high energy-consuming sectors, such as cryptocurrency.

China accounts for 80% of the world’s processing power devoted to bitcoin mining, with these activities centred in Yunnan and Sichuan, due to their vast hydropower capacity.

Bitcoin miners have adapted to using energy sources seasonally, utilising mining facilities in those two provinces during the wet season and relocating to Inner Mongolia and Xinjiang—where coal and wind power sources are abundant—in the dry season.

Future challenges

China’s aggressive environmental policy will continue to exert pressure on the national power grid.

Over the winter of 2017‑18 Beijing’s electricity-powered heating accounted for 40% of total heating sources—an all-time high, according to local media reports, due largely to the national alternative heating scheme.

National policies to encourage the adoption of new-energy vehicles (NEVs) have also introduced new consumption challenges to the grid, particularly as China aims to have 2m NEVs on its roads by 2020 (and to eventually phase out diesel-powered cars altogether).

China has also yet to tap into other areas of renewable energy, such as geothermal energy, for which the country has one-sixth of world reserves.

Currently only Tibet uses geothermal power, although this accounted for just 2% of its power production in 2016. Yunnan, Guangdong and Hebei also have sizable reserves, but low levels of technology make accessing geothermal sources difficult.

China’s ambitious targets for clean energy may ultimately be hard to achieve. For example, its goal of achieving 340 GW in hydropower production by 2020 would require the construction of the equivalent of the

Three Gorges Dam project every two years. In addition, authorities have continued to approve hydropower projects despite threats to local fish species and the inefficient use of existing power capacity.

The push for wind and solar energy also has its own price.

The splurge of public subsidies to these areas has resulted in a glut of power-generating capacity, which has pushed down prices and profits, while low efficiency rates have sustained the need to use coal-powered plants as back-up. Without allowing for more substantive reforms to the country’s energy framework, in areas such as pricing, China seems ill-equipped to meet its ambitious clean energy goals. 

More information: City-level analysis of subsidy-free solar photovoltaic electricity price, profits and grid parity in China, Nature Energy (2019). DOI: 10.1038/s41560-019-0441-z


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