Cost of Renewables in China to Match Coal Power by 2026: Report

According to new research, the cost of renewables is already cheaper than gas-fired power in China, and will match and better coal power by 2026

Cost Renewables China

As China moves towards a subsidy-free era for wind and solar projects beginning in 2021, the economics of renewable power have come into the spotlight. According to new research China provincial renewables competitiveness report 2019 from Wood Mackenzie Power and Renewables, the average levelised cost of electricity (LCOE) for solar and wind power is already cheaper than gas-fired power in China, and will be competitive with coal-fired power by 2026.

In 2019, new-build ultra-super critical coal plants are the key conventional low-cost power supply option with an LCOE of below USD  50/MWh, while offshore wind is in the higher range, hitting USD 116/MWh. 

Cost Renewables China

Alex Whitworth, research director with WoodMac, said that “Across most of China’s provinces and regions, a renewable cost premium remains over coal power, averaging 26 percent in 2019 for wind and solar, down from over 100 percent in 2010. 28 of 30 regions examined in our latest report see premiums of up to 70 percent, and only Shanghai and Qinghai have cost-competitive renewables today.”

2019 also marks the first time when solar PV costs have fallen below those of wind power in the country, overturning the latter’s traditional cost advantage. Solar PV is cheaper than wind in 19 provinces, including Qinghai, Gansu, Ningxia and Shaanxi.

“We’ve seen solar costs drop in China by nearly 40 percent in the past three years alone, slightly faster than the global average. Technology advancements, government support and expanded scale have contributed to rapidly falling costs,” added Whitworth.

Renewables competitiveness is achievable in the next few years for some of China’s regions, but for others, the journey will not be a sprint but a marathon – taking a decade or more.

Cost competitiveness is not the end of the story. Wind and solar power still only supplied 7.4 percent of the domestic power generation mix in 2018, compared with 83 percent from coal and hydropower. The share of renewables is increasing, but the recently announced renewables subsidy phaseout planned for the end of 2020 threatens the profitability of new investments in renewables in coming years.

The report further reveals that curtailment is also another key issue to deal with in China and creates uncertainty in LCOE modelling in the medium to long term. A 1 percent rise in curtailment typically increases the costs of wind or solar plants by 1.2 percent.

The costs of solar-plus-storage and offshore wind are expected to decline much faster than conventional fuels in the outlook. By 2040, solar-plus-storage costs will range between USD 33-85/MWh due to declines in battery costs and economies of scale.

Offshore will be a key technology for increasing renewables penetration near coastal demand centres. Technology improvement, economies of scale and a high capacity factor are driving costs down. Annual cost declines of 6 percent will make offshore wind competitive with gas by about 2025 and coal by 2032,” concluded Whitworth.

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Ayush Verma

Ayush Verma

Ayush is a staff writer at saurenergy.com and writes on renewable energy with a special focus on solar and wind. Prior to this, as an engineering graduate trying to find his niche in the energy journalism segment, he worked as a correspondent for iamrenew.com.

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