MAKE Consulting has downgraded China’s 10-year outlook by 6.5% from 2016 to 2025 for both installed and grid-connected capacity due to cutbacks in the national target of wind power in the Thirteenth Five-Year Plan and increasing curtailment impacting new grid-connected capacity.
This news comes after China’s Thirteenth Five-Year Plan (2016-2020) for renewable power was submitted to the State Council for final approval.
MAKE’s report states that the national targets for wind power have been reduced to 210 GW of grid-connected capacity (including 5 GW of offshore) by 2020 instead of the original target of 250 GW (including 10 GW of offshore) included in the draft earlier in 2016.
As reported, cumulative installed offshore capacity will face a 47.4% decrease by year-end 2020 and 60% decrease by year-end 2025.
According to MAKE, annual installed capacity will drop to 20 GW-22 GW between 2017-2020. New projects in northern regions will find it increasingly difficult to connect to the grid in the short term as pressure mounts over curtailment and excess power supply. Northwest provinces, such as Gansu and Xinjiang, with heavy curtailment of wind power will suffer significantly lower growth from 2016 to 2018.
The new plans will trigger a more severe shift in growth to southern regions, the report states. Southern regions (including the South, East and Central regions) are considered focus regions in the Thirteenth Five-Year plan and will contribute with more than 50% of annual growth over the next three years.
Curtailed wind output in the first half of 2016 was almost at the same level as fiscal year 2015, predominantly in northern regions but additionally started occurring in the southern regions of Yunnan and Shandong. Local authorities may limit connection of installed projects to the grid in order to reduce curtailment in the short term.
The report says growth of new orders started slowing down from the fourth quarter of 2015 and decreased noticeably in 2016. Newly installed capacity of Tier I turbine original equipment manufacturers is expected to drop between 5% to 30%. Component suppliers significantly suffered from decreased orders, with a range of a 20% to 30% year-over-year decrease in 2016.
In addition, blade suppliers built up large inventories in 2015 and the first half of 2016. The report says the sudden decrease in deliveries and new orders from July 2016 hit the blade industry hard.
Further reductions to onshore feed-in tariff (FIT) levels in 2018 and to the offshore FIT from 2017 have been proposed and are expected to be released in December 2016. Proposed FIT reductions and increasing curtailment of wind power production will dampen investment enthusiasm. Impact on developers in northern regions will be even harder than before, especially in those provinces with severe curtailment.
According to the report, progress of 10.53 GW (changed to 10.45 GW) of centrally planned offshore projects has been slower than anticipated, with only 40% installed, under construction or approved. Planned projects that fail to be approved by year-end 2016 will be canceled. However, there is no indication that independent power producers are accelerating project approvals. A complete lack of investment incentives means offshore growth remains limited, depending entirely on political drive, MAKE concludes.