China's Blistering Solar Growth Runs Into Grid Blocks

China's rapid solar power expansion is slowing due to grid bottlenecks, market reforms, and diminishing rooftop space, with new solar builds dropping 32% in March year-on-year. Reuters reports: The country's solar power expansion is slowing due to tighter curbs on supplying excess power from rooftop solar into the grid and changes in electricity pricing that are denting the economics of new solar projects. Forecasts show China's solar build this year will be heavily outpaced by growth in its photovoltaic (PV) module manufacturing capacity, raising the prospect the country will export more solar panels despite a trade backlash in Europe and the U.S. The main factor slowing the expansion of distributed solar - installations built near the point of use, mostly on rooftops - is that there is not enough storage or transmission capacity to soak up the excess power generated when the sun is shining. That in turn is leading regulators to take away some of the price support that led to the rapid growth of distributed solar. "In the next couple of years, this is going to be a huge problem that all provinces will face as grids are oversaturated, the infrastructure is overwhelmed," said Cosimo Ries, an analyst with Trivium China, a policy research group. [...] Renewable generators previously enjoyed a guarantee that grid operators would buy nearly all of their power at a rate tied to the coal index. That guarantee was lifted on April 1 and took effect earlier in some places, three industry experts said. Now, renewable generation is increasingly subject to less favourable market pricing. Shenhua Energy, a state-run coal and power firm, said in its first-quarter report that prices for its solar power fell 34.2% year-on-year to 283 yuan per megawatt-hour (MWh), while its coal power prices fell just 2.4% to 406 yuan per MWh. Wang Xiuqiang, a researcher at consultancy Beijing Linghang, attributed the lower solar prices and profitability to a higher proportion of market-based pricing. At the same time, grid companies are dialling back the 5% curtailment limit, "creating the risk for project owners that their generation might not be bought", said David Fishman of Shanghai-based energy consultancy the Lantau Group. Curtailment for Huaneng Power International, a major state-owned generator, rose to 7.7% in the first quarter from 3.1% a year earlier, Jefferies analysts said in a client note, citing Huaneng management. In a further challenge, the easiest-to-site projects have already been largely developed, said Shi Lida, research manager at Yongan Guofu Asset Management. At sites still available, rooftops may need to be reinforced, grid connections may be limited, or hours of sunlight may be short. "If your costs don't continue to fall, the investment will not be cost effective," Shi said. Further reading: Germany Has Too Many Solar Panels, and It's Pushed Energy Prices Negative

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