The National Development and Reform Commission of China announced financial guarantees for wind and solar power plant operators, when minimum utilization hours are not met.
Sources and further information with kind recommendations of Azure International.
As pointed out in an earlier post, current curtailment of renewable energy feed-in leads to significant wastage of carbon-free electricity from wind and recently also from solar PV in China. Now, the National Development and Reform Commission of the People’s Republic of China (NDRC) decided to pay operators of wind and solar power plants in case they do not reach the minimum utilization hours due to man-made events, i.e. curtailment.
This policy might have a tremendous effect on the financial viability of renewable energy developments, as curtailment levels reach up to 30 percent. According to Azure International a range of producers have been considering to sell their investments as no “insurance” policy has been in place.
For wind and solar different resource areas are defined in China. They are grouped according to the availability of wind or sunlight. There are four different resource type areas for wind and two for solar. The financial guarantee is benchmarked by multiplying the guaranteed utilization hours for each of the resource type areas with the on-grid price for electricity. Table 1 and 2 show the guaranteed utilization hours as well as the real utilization hours during 2015 according to the existing resource types and areas for wind and solar PV.
Source: Azure International
Table 1: Wind power utilization hours guaranteed by resource area
The utilization hours for solar PV in 2015 only exist as an average as of now. In 2015 the national average utilization hours for solar PV amounted to 1130. For resource rich, but heavily curtailed areas such as Gansu or Xinjiang (Sinkiang) the real utilization hours were about 1050.
Source: Azure International
Table 2: Solar power utilization hours guaranteed by resource area
It remains to be seen how much payments from the new financial guarantee will flow to renewable energy projects in the coming years and how that effects the cash reserves the NDRC put aside for that purpose.
