Analysis: Lowering Key Local Renewable Energy Target Highlights China’s Grid Shortfalls

China has revised its renewable energy targets for provincial governments, reflecting the country's substantial expansion in wind and solar capacity, which has strained the grid's ability to absorb the output. The National Energy Administration (NEA) announced on June 4 that areas with abundant renewable resources now need to achieve a new-energy utilization rate of "no less than 90% in principle," a reduction from the previous target of 95% [para. 1][para. 2]. This utilization rate gauges the amount of power a renewable energy project generates relative to its planned generation, and it currently applies only to solar and wind projects. The issue of wastage, known as "curtailment," arises when the timing of power generation does not align with peak demand periods [para. 3].

The adjustment aims to make it more feasible for provinces to meet their targets while continuing to promote renewable energy development [para. 4]. The State Council had included the lowered target in an action plan released on May 29, specifying that the utilization rate "can be lowered to 90%" for areas with favorable natural resources [para. 5].

Utilization rate targets were originally established in a 2018 national clean energy plan, which required the rates for wind and solar to reach about 95% by 2020. Although these targets have become industry standards, achieving them has been challenging. Despite increasing new energy utilization rates for five consecutive years, reaching a rate of 97.6% in 2022, the rate is expected to decline this year [para. 6][para. 7][para. 8]. Zhang Jinping, a director at the Renewable Energy Research Center of the China Electric Power Research Institute, forecasted that the rate might drop to around 90% by 2030 [para. 9][para. 10].

China's cumulative renewable power capacity surpassed that of thermal power for the first time last December, comprising more than 50% of the national total. However, maintaining a 95% utilization rate would necessitate significant investment in energy storage and place immense pressure on the power grid [para. 12][para. 13]. This would diminish the economic competitiveness of renewable energy, prompting the NEA to set the more attainable target [para. 14].

China aims to increase its installed wind and solar capacity to over 1,200 gigawatts (GW) by 2030, a target it may achieve by the end of 2023. By April, the nation had already installed over 1,100 GW of wind and solar power capacity, a 38% year-on-year increase. The escalating need to accommodate this capacity has led to decreased utilization rates in several regions [para. 15][para. 16][para. 17]. In April, six regions—Inner Mongolia, Liaoning, Gansu, Qinghai, Xinjiang, and Tibet—saw their rates drop below 95% [para. 18]. Zheng Ying, a guest researcher at Tsinghua University, emphasized that while a high utilization rate is desirable, it must be balanced against economic and logistical constraints to ensure the sustainable growth of the renewable industry [para. 19][para. 20][para. 21].

One of the primary challenges China faces is that renewable projects are being constructed faster than the grid can adapt. Renewable projects can be built within six months, but grid modifications require three to five years. Northern and northwestern regions, where large-scale projects are emerging, struggle to accommodate the surges in supply due to limited grid capacity and challenges in distributing power [para. 22][para. 23]. To address these issues, the NEA encourages better alignment between renewable projects and grid infrastructure development [para. 25]. China is currently constructing 37 projects to facilitate the transmission of renewable electricity, including ultra-high-voltage lines connecting high supply regions with high-demand areas like Beijing. Another 33 projects will be completed within the year [para. 26][para. 27].