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Generating a Solar Giant: China, a White Dwarf?

China’s increase in the production of renewable energy over the past decade has been astronomic. Despite its successes, significant issues have arisen and the course for the future is not clear cut. This article examines the driving forces behind the growth in China’s renewable energy production and considers the problems that have consequently emerged within the domestic economy.


In recent years it has been hard to ignore China’s growth in any aspect of production. Since opening their doors to the world, Chinese dominance has spread far and wide, transforming them from an agricultural backwater into a global manufacturing hub. As a prime area of growth for China, the energy market is no exception to their multifarious industrial expansion. China are something of a paradox in this as whilst they remain the world’s greatest contributor to CO2 emissions, they have carried out tremendous efforts to become a leading renewable energy producer. For instance, they overtook Germany as the world leader in solar photovoltaics (PV) generating capacity after adding 15.2 gigawatt (GW) to reach a total generating capacity of 43.5 GW in 2015.[1] China was also the first country to pass the 100 GW milestone and their cumulative installed PV capacity is over 130 GW at the moment.[2]


Figure 1  Installed Solar PV Capacity in China (Gigawatt) 

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One of the major driving factors behind the growth of renewable energy in China could be the exponential growth in their CO2 emissions. China emits the most carbon dioxide in the world and in 2014 their total emission output reached over 10 million tonnes, representing around a fivefold increase since 1990. Whilst there is an argument that China’s carbon dioxide emissions per head of population have not been above that of other developed economies, it has nonetheless witnessed an astronomical growth, experiencing a 340% increase in emissions between 1990 and 2014. During this period the global total of CO2 per-capita emissions increased by 19%. To put this in relative terms, in 2014 China alone was responsible for about one-third of the world’s total CO2 emissions. It is clear to see the growing base cause of China’s huge growth in renewables.[3] Simply, it was necessity.

This goes some way to explain the investment of ¥2026.04 billion (approximately $311.6 billion) in the domestic production and supply of electric and heat power in 2016, up from a mere ¥41.47 billion (approximately $6.4 billion) in 2000.[4] This continuous increase in industry investment offers an explanation for the increase of solar businesses in China. Of 1,163 global monocrystalline solar panel manufacturers, 548 are Chinese[5] and Chinese companies fill 3 of the top 5 spots when it comes PV manufacturing.[6] China has continually increased its investment in solar since 2005 and a decade later in 2015 they had a record breaking year, investing $102.9 billion in renewables, double as much any other continent — $44.3 billion of this total investment was directed towards solar power.[7]

The huge investment and commitment to new solar installations led to the exponential growth seen in China over the past decade.

Key challenges

This kind of growth has inevitably given rise to a number of new problems for China to overcome. A key challenge for China is the issue of energy oversupply. The ongoing macro-transition of the Chinese economy towards a service and information based economy creates added uncertainty and difficulty to this issue, as in recent years power-hungry industries have been closing down or moving offshore en masse.[8] On the consumption side of the economy, it seems that China has proactively taken steps to reduce energy demand and between 2016-2020 there will be a cap on annual energy consumption.[9]

Addressing oversupply from the production side, China follows a 3-step policy to deal with excess electricity. Initially they attempt to accommodate variable supply, then if this is not possible they curtail supply. Finally, they transmit the power to neighbouring power stations.[10] This process has led to the large curtailments of solar generation seen in 2015.[11] Curtailment occurs when solar generators have to turn off their systems and precious energy is then left unused. This may explain why Chinese investment has cooled off in the preceding years as they begin to tackle domestic supply issues. However, this reduction in investment has not cured the problem. China is facing slowing power demand and growing curtailment in both the solar and wind sectors.[12] China’s high investment, export driven surge to the top of the world industrial stage is stalling sooner than many thought and action needs to be taken to avoid excessive wastage of resources, such as the energy oversupply glut occurring since 2015.[13]

Is there a solution?

One alternative way that China can combat the oversupply of energy could be through the promotion of electric vehicles and other such technologies that do not harm the environment. For example, local Chinese municipalities have already employed several policy tactics to support this and the city of Beijing has recently announced plans to replace 70,000 gasoline taxis with electrically powered ones over the next five years. Yet China is already a global leader in the electric vehicle industry and in 2016 electric vehicle sales reached 507,000 units; double that of Europe and four times the US figures.[14]

Furthermore, some improvements could be made in the storage of energy, namely batteries. This could help deal with the oversupply of energy and help subsidise high demand periods. The lowered production cost of Lithium Ion batteries and the largest electric vehicle fleet in the world[15] present China with a real opportunity to overcome their electricity supply issues with the redirection of investment. Electric vehicles have the potential to act as both a storage device and a dispatchable energy resource.[16] Greater R&D investment in this area could provide fruitful results for the automobile and energy industry among others and cement China’s place at the top of the renewable energy sector.

Another alternative approach that could be effective is a change in investment strategy which may better benefit the Chinese renewables industry. As shown in Figure 2, the vast majority (~90%) of investment in renewables is currently directed towards asset finance, which constitutes payments for the infrastructure required to produce renewable energy and increase its production. This has led to huge additions of renewable energy in China and caused it to become the world leader but not without problems. It can be argued that if a larger proportion of investment was directed towards research and development then the oversupply issues outlined above could be reduced.


Figure 2  Composition of Chinese Investment in Renewable Energy (2015)

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That being said China is actually performing well when it comes to relative comparisons of R&D investment. China’s total combined investment in research and development in the field of renewable energy challenged Europe’s for the first time in 2015, each investing $2.8 billion.[17] This highlights the complexity of the problems with oversupply and the difficulty of finding an effective solution.

Unsurprisingly, China’s National Development and Reform Commission (NDRC), Ministry of Finance and National Energy Board issued a statement just recently halting all subsidies for utility-scale solar projects in favor of competitive bidding, and greatly reducing feed-in-tariffs. This move is likely to effectively slash demand in the world’s largest solar market by about 40%.[18]

China may need to introduce such aggressive measures in the years to come to better ensure that their growth in renewable energy is sustainable for the future.

∗∗∗

[1] Reuters (21 January 2016) China’s Solar Capacity Overtakes Germany in 2015, Industry Data Show
[2] BBC (4 September 2018) How China's Giant Solar Farms Are Transforming World Energy
[3] World Bank (2016) World Development Indicators - Table 3.8: Energy Dependency & Efficiency
[4] National Bureau of Statistics of China (2016) China Statistical Yearbook 2016
[5] ENF (2016) Company Directory, Monocrystalline - Solar Panel Manufacturers from China
[6] Power-technology.com (2016) The World’s Biggest Solar Photovoltaic Cell Manufacturers
[7] [11] REN21 (2016) Renewables 2016, Global Status Report
[8] [13] Forbes (9 July 2016) China's Growth In Energy Demand Drops To 17 Year Low
[9] Xinhua (5 March 2016) China to Cap Energy Consumption in 2016-2020
[10] [16] IEA (2011) Integration of Renewables: Status and Challenges in China
[12] Bloomberg NEF (12 January 2017) Record $30bn Year for Offshore Wind But Overall Investment Down
[14] Forbes (28 February 2017) China Deploys Aggressive Mandates To Take Lead In Electric Vehicles
[15] Clean Technica (25 January 2017) China Electric Car Sales Demolish US & European Electric Car Sales
[17] BNEF & UNEP (2016) Global Trends in Renewable Investment 2016
[18] Forbes (18 June 2018) Solar Leader China Is Slashing Its Subsidies On Solar Power

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Jonathan Bayliss is a recent graduate from the University of Exeter, currently working in the financial services sector.

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About the author

Jonathan Bayliss is a recent graduate from the University of Exeter, currently working in the financial services sector.

The views and opinions expressed in this article are those of the author(s).

More from the author

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Inquisitive university students and recent graduates are welcome to collaborate with our team to produce insightful articles.