Are renewables spared from China's slowing power consumption?

The renewable portfolio standard rewards gridcos to buy the pre-set renewables quota in provinces.

The burden of China’s slowing electricity consumption is likely to fall heaviest on coal power as the state is incentivising grid companies to first offtake the pre-set quota of renewable capacities in provinces through the renewable portfolio standard (RPS), according to S&P Global Ratings.

The growth in China’s electricity consumption is projected to moderate to 4-5% over 2019-2020 from 8.6% in 2018 with its economy tipped to slow in the next few years.

In addition, the secondary industry dominated by manufacturers consume about two-thirds of the country’s electricity, with 25-30% consumed by the top-four energy-intensive sectors.

The scheduled commissioning of renewables plants, like the mega hydropower plants Wudongde and Baihetan with 26.2GW capacities and new nuclear power projects in 2020 and 2021, will also pressure coal power in the eastern coastal provinces.

The consumption of natural gas, which is supported by the policy as it is deemed relatively cleaner than coal, is expected to continue growing faster than GDP. However, it is expected to moderate to 10-12% for 2019-2020, as the tapering effect of coal-to-gas conversion in northern China and the slowing economy slows down new connections and gas sales.

In Hong Kong, the growth in electricity and gas sales is expected to remain flat in 2019 and modestly grow in 2020, but due to temperature and major infrastructure developments.