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Wind and solar records tumble as China and India accelerate energy transition

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Key developments in China and India this week provide more confirmation that the global electricity markets are transforming a great deal faster than anyone expected.

China is expected to have set two new clean energy world records in 2015 – one for installing a record 30.5 gigawatts (GW) of wind in a single year, and the second for installing 16.5GW of solar.

And the Indian solar sector has started 2016 with a further 7% reduction in tariffs to Rs4.34/kWh (US6.5c), building rapidly on the 20% decline achieved in 2015 alone (and 80% decline in just five years).

Following on from reports earlier this week that China’s coal consumption declined by 4-5% over 2015, this gives yet more confirmation that the global electricity markets are transforming a great deal faster than anyone expected.

The Chinese Wind Energy Association (CWEA) has announced a preliminary estimate of China’s 2015 wind installations at an all time global record of 30.5GW,[i] 20-30% ahead of even the most optimistic forecasts by financial markets. This partly reflects a feed-in-tariff revision to any windfarms completed after 1st January 2016, which drove a pull-forward on completions.

The National Energy Administration’s official tally is due out in February, but we expect this to match the CWEA estimate.

The total cumulative installed wind capacity across China is estimated to have reached 145GW by end 2015. This is almost double the cumulative installs of 75GW in the US, more than triple the estimated 43GW of wind in Germany (#3 globally) and more than five time the 26GW installed to-date in India (#4 globally).

China’s solar installs in 2015 are also thought to have set another world record for annual installs at an estimated 16.5GW, as reported in Chinese PV industry news media this week.[ii] Germany in its best year ever commissioned a then record 7.6GW of solar in 2012, while China installed a reported 12.9GW in 2013 before a policy rejig to encourage more distributed rooftop solar saw a slowdown in installs in 2014.



IEEFA forecasts that China will install an additional 24 gigawatts (GW) of wind, 16GW of new hydro, a record 6GW of nuclear and another new record of 18-20GW of solar (60% utility scale, 40% distributed rooftop solar) in 2016. With electricity demand forecast to grow by only 3-4% yoy in 2016, this 65GW of additional zero carbon electricity capacity will be more than sufficient to meet total demand growth, such that coal consumption is forecast to fall again in 2016.

“At the same time as China is setting new global records, India continues to announce new achievements of its own to advance the pursuit of its goal to install 175GW of increasingly low cost renewables by 2021 and rapidly improve grid efficiency,” said Mr Buckley.

January 2016 saw yet another breakthrough on the Indian solar front. Solar tariffs in India have fallen to a new low of Rs4.34/kWh (~US6.5 cents/kWh). It was reported that Fortum Finnsurya Energy of Finland won a reverse tender auction to build a 70MW solar plant under NTPC’s Bhadla Solar Park tender. Of the 420MW auction, the remaining 350MW were won at bids of Rs4.35 (140MW by Rising Sun Energy Pvt Ltd and another 140MW by Solairedirect) and Rs4.36/kWh (70MW by a newer entrant Yarrow Infrastructure), indicating that the Rs4.34 bid was not an outlier.[iii]

This Rs4.34/kWh bid represents a 7% decline from the previous record low solar bid established only as recently as November 2015 when SunEdison won 500MW at Rs4.63/kWh (US$7.1c). Solar’s total installed cost in India dropped by more than 20% in 2015 alone.

As a brilliant example of grid efficiency programs, in January 2016 Energy Minister Goyal announced a US$11bn investment to rollout 30 million solar irrigation pumps for farmers over the next 3-4 years. Annual savings on existing farm subsidies is modelled at US$3bn, suggesting the program is entirely and immediately commercially viable.

Bloomberg New Energy Finance last week reported that China’s new investment in renewable energy and energy efficiency rose 17% yoy to a record US$110 billion (bn) in 2015.[v] This was almost double the U.S. spend of US$56bn (itself up 8% yoy). India’s investment rose 23% to $10.9bn, the highest since 2011.

Tim Buckley is the Director of Energy Finance Studies, Australasia for IEEFA. He has 25 years of financial markets experience, including 17 years with Citigroup culminating in his role as Managing Director, Head of Australasian Equity Research.

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  • Russell

    If they continue installing that much non-FF electricity they are going to decarbonize their electricity grid very quickly. Depending on capacity factors that is about 35GW baseload equivalent, and china electricity demand only grew about 0.5% last year? If that trend continues it will be less than 30 years before they are completely off FF.

    • Jens Stubbe

      Much faster. There is no way they will keep subsidizing coal. Coal is a killer and far more expensive than wind and according to the Chinese solar industry 2016 will be the year where solar cost go below coal for electricity despite the huge subsidies the Chinese government shower over coal generation. China is currently building a huge HVDC grid backbone, which will make the windy interior accessible for wind power with a huge reduction in wind power cost.

      They could decarbonize with huge economic gains over the next ten years. In your estimate you probably forget that growth rates for solar and wind are both near exponential and you also forget that the capacity factor of both wind and and solar is rising fast. A major stumbling stone for the Chinese plans is the low quality of wind turbines that they produce, so if they decided to go for western quality wind turbines they could leap frog the development to much higher productivity, capacity factor and lifetime as well as much lower maintenance cost.

      Over the past five years where the Chinese government has showered both the domestic solar and wind industry with subsidies the solar industry has become a global market leader while the wind industry has lost out big time to the western wind turbine industry.

  • onesecond

    Everyone wants to get rid of coal as fast as possible except the Australian government.

  • Jacob

    Omg, I cannot believe that solar power in India in Jan 2016 is significantly cheaper than in Nov 2015!

    Staggering progress!

  • Ray Miller

    Their is the New Economy and the rest. Good news for China but no so for us. Over 50 years ago Australia started the Australian and New Zealand Solar Energy Society (now Clean Energy Council), over a long period of time we have had International status in renewables, the makings of the future Economy, we have had a range of key political moments since the 70’s in which our future could have different. But alas we always seem to treat the opportunities as a part-time hobby instead of a business. We, Australia still have so much to offer but opportunities still go wanting. We even have working museum lignite energy plants in Victoria which we are paying to keep operating as a reminder of the ‘glory days’ supposedly.

    As the article points out very clearly the future is not in coal especially, for us, but in renewables. It is long overdue for Australia to ‘grow up’, stand on our own two feet and move to the 21st century.

    Its time we recognized all the ’20th century energy cartels’ in Australia for what they are, and formulate an overall 21st Century energy policy (without any input from the energy Cartels) and implement it post haste. Mine solar instead.

  • Sam Gilman

    A minor correction: China brought 7.3GW of nuclear online in 2015, so the 6GW forecast here for 2016 wouldn’t be a record.

  • Peter smith

    And quite apart from the environmental costs, we in Aus will be so hugely disadvantaged very quickly by our rising electricity costs when the cost/KWh are dropping so fast in countries like India that are leapfrogging us. Isn’t it a no brainier to business minded liberal govts that renewables is good for the economy and lagging behind will only serve to further puts brakes on our growth?

    • BasM

      Australia may experience real stagnation due to high electricity prices, as S-Autstralia now is developing plans to go nuclear.
      Then (~2030?) you can forget international competitive electricity prices in Australia…