China's wind power to get a boost from grid parity

Tech upgrades could improve utilisation hour and bring down costs.

Although it would lower the returns for wind power projects, China’s wind energy sector stands to gain from grid parity as a higher wind power utilisation hour (UH) would bring down the levelised cost of energy (LCOE), according to UOB Kay Hian.

Technological upgrades and government efforts to guarantee renewable energy’s consumption are cited to boost the sector. In addition, wind farm operators are tipped to get rid of subsidies.

Wind power producer Longyuan also said that, although some subsidised projects may switch to being non-subsidised, their IRR should be able to meet the companies’ required IRR.

Also read: China to slash renewables subsidies by 30%

In December, the country’s National Energy Administration (NEA) issued a consultation paper on wind power construction and management for 2020, which included pushing for the active promotion of grid-parity projects and encouraging subsidised wind power projects to voluntarily switch to being non-subsidised.

The report added that wind power capacity has reached 198GW as of September, but is tipped to hit 258GW by end-2020 based on guidance opinions for the 13th FYP in 2017, which could suggest a room for capacity addition. However, Longyuan noted that the government plans to cap the yearly capacity addition as the connection ability of the grid network is limited.

According to the NEA, wind power capacity climbed to 200.8GW by end-Nov 19. National average wind power utilisation hour (UH) declined 10 hours YoY to 1,882 hours in 11M 2019. Investment in wind power surged 84.8% YoY to $1.28b (RMB8.9b).