Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the BNAF podcast. The Chinese government has introduced one of
Speaker 1: the world's most ambitious renewable energy plans, targeting one thousand,
Speaker 1: two hundred gigawatts of wind and solar installations. To help
Speaker 1: them get there, over the past three years, China has
Speaker 1: announced three successive batches of projects which will rely on
Speaker 1: some very very large renewable energy projects called megabases. Each
Speaker 1: megabase will produce a minimum of one gigawat. To put
Speaker 1: this in context, you could expect to see a project
Speaker 1: in Germany at around fifteen megawats, or in the US
Speaker 1: it perhaps maybe fifty megawatts. So between now and twenty thirty,
Speaker 1: China's nearer term goal is to have these megabases add
Speaker 1: up to four hundred and fifty five gigawatts of clean energy.
Speaker 1: The projects will largely include wind and solar, but they'll
Speaker 1: be aided by new or retrofitted coal fired power stations
Speaker 1: to help with intermittency. To tell us about these megabases,
Speaker 1: I am joined by two analysts from b and EF's
Speaker 1: Beijing office, Shan Yu Chen and Tianni Zoo. They're going
Speaker 1: to explain what's included in these three batches of projects,
Speaker 1: and they're going to get into some of the implications
Speaker 1: such as the impact that these projects have had on
Speaker 1: solar module and wind turbine manufacturers. To access the report
Speaker 1: titled China's Unprecedented four hundred and fifty five gigawatt Energy
Speaker 1: Megabase Plan B and EF subscribers are going to be
Speaker 1: able to find it at BNF dot com or at
Speaker 1: bn EF on the Bloomberg terminal. Subscribe to the show
Speaker 1: for updates and give us a review to share us
Speaker 1: with others. Right now, let's jump into our conversation with
Speaker 1: Chen Yu and Tianni. Welcome to switch. Sean, nice to
Speaker 1: have you here, tian.
Speaker 2: Ye, nice to be here with you.
Speaker 1: Dana and Han You welcome to the show as well.
Speaker 3: Hello Dana, good to be here.
Speaker 1: So we're here to talk about megabases, and let's start
Speaker 1: with the definition. What what makes something a megabase?
Speaker 3: Yes, so megabases refer to all those wind and solar
Speaker 3: projects that is over one gigawatts per projects and they
Speaker 3: are mainly located in deserts and wastelands in China.
Speaker 1: So the Chinese government have targets for renewable energy rollout
Speaker 1: can you first of all define what those targets are
Speaker 1: and then explain how megabases fit into reaching these.
Speaker 3: Yes, Chinese government sets a very ambitious target of reaching
Speaker 3: cumulative one thousand and two hundred gigawatts of wind and
Speaker 3: solar installation by twenty thirty and off this target, the
Speaker 3: aim is to roll out four hundred and fifty five
Speaker 3: gigawtts of wind and solar megabases before twenty thirty and
Speaker 3: Chinese governments aim to install the first two hundred gigawatts
Speaker 3: renewable megabase between twenty twenty one to twenty five and
Speaker 3: to install the remaining two hundred and fifty five gigawatt's
Speaker 3: renewable megabase between twenty twenty six to twenty thirty.
Speaker 1: So we all know in order to actually reach a
Speaker 1: target there need to be several policies in place in
Speaker 1: order to create the incentives for companies to actually do
Speaker 1: the things that are required for this level of installation.
Speaker 1: So what are the national policies in China that were
Speaker 1: introduced to drive the rollout of renewables to reach the targets?
Speaker 2: As the pivotone national strategy to boost renewable capacity, megabases
Speaker 2: are mentioned in all of China's government key carbon and
Speaker 2: renewable policies. China's National Development and Reform Commission and the
Speaker 2: National Energy Administration announced the first badge of megabased projects
Speaker 2: in twenty twenty one, which required a total of ninety
Speaker 2: seven gigawats of wind and solar projects to be commissioned
Speaker 2: in twenty twenty three. Project list of the second badge
Speaker 2: was delivered about half a year later in twenty twenty two,
Speaker 2: and in February twenty two three, the list of the
Speaker 2: third badge was issued, different from the first batch, which
Speaker 2: had a total capacity disclosed in public. The letter. Two
Speaker 2: badges had not been disclosed on national levels, so we
Speaker 2: have no idea how many capacities included in these two badges.
Speaker 2: To now, BNEF has tracked thirty eight gigawatts in the
Speaker 2: second batche and fifty three giquads in the third from
Speaker 2: the public sources. As for the detailed policies, there have
Speaker 2: been three key points on the national level that highlighted
Speaker 2: megabases so far. The first one Action Plan for Carbon
Speaker 2: pig before twenty thirty, released by the State Council and
Speaker 2: aligned to develop megabases to contribute to China's target to
Speaker 2: have one thousand, two hundred gig board of wind and
Speaker 2: solar capacity by twenty thirty and the second one is
Speaker 2: also from the NDERC and the AA issue the fourteenth
Speaker 2: five year Modern Energy System Plan, which goes for acceleration
Speaker 2: of the establishment of renewable megabases on deserts and wastelands
Speaker 2: a lesbian list also from the NDRC and the AA,
Speaker 2: together with other administrations from the central level. The fourteenth
Speaker 2: five year Renewable Plan maps out the Megabase pipeline across
Speaker 2: seven regions of Chriss, China and states that clean power
Speaker 2: should account for over half of transmitted electricitic volume on
Speaker 2: All new lines planned were commissioned during twenty twenty one
Speaker 2: and twenty twenty five.
Speaker 1: So batches were announced in twenty twenty one, twenty twenty two,
Speaker 1: and again in twenty twenty three. Do you expect that
Speaker 1: there will be an additional batch announced in twenty twenty
Speaker 1: four or is what has already been planned? Essentially what
Speaker 1: is going to be built?
Speaker 3: The three batches that has already been announced add up
Speaker 3: to one eighty eight gigawatts that corresponds to the two
Speaker 3: hundred gigawatts I mentioned earlier that is set to be
Speaker 3: installed between twenty two and one to five. We do
Speaker 3: believe that there will be future batches of megabases, but
Speaker 3: we don't know exactly when.
Speaker 1: So the first batch of megabases was actually set for
Speaker 1: completion by the end of twenty twenty three. Can you
Speaker 1: talk about the different composition of renewables that went into this,
Speaker 1: I mean pretty much how much of it was solar
Speaker 1: and how much of it was wind.
Speaker 3: So from the first batch of megabases, it contains forty
Speaker 3: five gigawtts of wind, fifty one giglets of PV, and
Speaker 3: one gigotts of solar thermal, and most of these power
Speaker 3: sources are separate, not collocated. The wind capacity mostly locate
Speaker 3: in inner Mongolia where the wind resources are very strong, and.
Speaker 2: As Sharing has stated on the prev capacity of fifty
Speaker 2: one gigats in the first batch, the northwestern provinces, which
Speaker 2: enjoys more sunshine and greater land availability, account for sixty
Speaker 2: three percent of the total plant solar capacity.
Speaker 3: And as for the wing megabase projects, we don't think
Speaker 3: that all of the wind megabased projects will achieve the
Speaker 3: step line that Dana you mentioned earlier. At the end
Speaker 3: of twenty foy three because of land use issues. For example,
Speaker 3: there's a two gigawoods megabase projects in west Inner Mongolia.
Speaker 3: The developer violated the forest land use regulation and they
Speaker 3: need to resolve those issues before they can get fully commissioned.
Speaker 3: So from our database, our database show that this project
Speaker 3: is still under construction and not commissioned. Apparently they've missed
Speaker 3: the deadline at the end of twenty foury three.
Speaker 1: So you mentioned that these megabases are being built on
Speaker 1: areas that are otherwise not used for something else, and
Speaker 1: you actually referenced the project in Inner Mongolia. Can you
Speaker 1: talk about where they are located for the most part
Speaker 1: of most of them in Mongolia or most of them
Speaker 1: further west, further east, and really how far away are
Speaker 1: the megabases from ultimately the end consumers who are going
Speaker 1: to be requiring this power.
Speaker 3: From our analysis, we've found that out of the three
Speaker 3: batches of megabases, fifty eight percent of the capacity is
Speaker 3: used for local consumption and forty two of them is
Speaker 3: used for transporting to other provinces. Most of the wind
Speaker 3: and solar megabased projects are located in the northwest areas
Speaker 3: of China, where there are a lot of wastelands and deserts.
Speaker 1: Up until this point, we have largely talked about that
Speaker 1: first batch that was coming out. Let's talk now about
Speaker 1: the second batch. So what is the composition of that
Speaker 1: in terms of wind and solar?
Speaker 2: As is stated previously, there is no official number under
Speaker 2: total capacity for the second batche. From provincial governments and
Speaker 2: public sources, we have tracked thirteen nine gigawots, comprising of
Speaker 2: fifteen gigawotes of wind and twenty three giguards of PV
Speaker 2: and point four giga wots of solar thermal. Most projects
Speaker 2: in the second badge are located in northern China and
Speaker 2: fifty four percent of project in capacity will generation to
Speaker 2: Centro and eastern China.
Speaker 1: And that brings us to the third, the most recently
Speaker 1: announced batch. What is likely to happen there?
Speaker 2: The third betch megabase projects are mainly located along the
Speaker 2: Yellow River and as of July twenty twenty three, there
Speaker 2: has been fifty three gigowotes disclosed, including twenty point six
Speaker 2: gigotts of wind, thirty two gigle wots of PV and
Speaker 2: point point gigots of solar thermal. Of these, there was
Speaker 2: four point nine gigottes of offshore PV projects from Townshup Province.
Speaker 1: So I think that's really interesting because we're talking now
Speaker 1: about offshore PV. I mean, you'd already established that these
Speaker 1: require vast amounts of land, so they've had to locate
Speaker 1: them further west than maybe most of the population actually lives.
Speaker 1: But then this one in yang Zoo Province, and for
Speaker 1: those who are not familiar with the geography, that's on
Speaker 1: the east coast of China, actually bordering the Yellow Sea,
Speaker 1: and there is an offshore solar megabase planned for that location.
Speaker 1: Can you tell us a little bit more about that?
Speaker 2: Again with a quick background for those who are not
Speaker 2: familiar with Tansu Province, this province is one of the
Speaker 2: most densely populated provinces in the country, containing major cities
Speaker 2: like Nanjing and Chanzho. Due to the rapid solar deployment
Speaker 2: in recent years, land constraints have urged developers to look
Speaker 2: offshore to accommodate solar farms. However, the prevalent design in
Speaker 2: China's offshore PV projects is fixed pile foundation and built
Speaker 2: in intertitle areas rather than the floating system in deep
Speaker 2: water and large provinces along the eastern coast have very
Speaker 2: big plans on offshore PV. Shando only aims to have
Speaker 2: twelve gigawottes of this kind by twenty twenty five. Jamsho
Speaker 2: plants have five gigawatts of offshore PV by twenty twenty
Speaker 2: five and another five gigaottes by twenty twenty seven. Other
Speaker 2: provinces like Changing and Juddsown have also released relevant policies
Speaker 2: and pilot projects. We'll seeking what level of shore PV
Speaker 2: installation from the coastal provinces in the near future, but
Speaker 2: there are still big challenges to be tackled, such as
Speaker 2: the corrosive salt and constantly moving water presenting technical problems
Speaker 2: for equipment, construction, operation, and maintenance.
Speaker 1: So tell me a little bit about the companies that
Speaker 1: are actually developing these megabases.
Speaker 3: Most developers of the first batch of wind and solar
Speaker 3: projects are state owned enterprises affiliated to either central government
Speaker 3: or local government. Based on our analysis, central or local
Speaker 3: state owned enterprises accounts for eighty eight percent of the
Speaker 3: total wind installations and ninety two percent of solar, and
Speaker 3: private developers are only twelve percent of wind and nine
Speaker 3: percent of solar.
Speaker 1: So This is an incredible amount of generation capacity that's
Speaker 1: going to be installed and invariably then that means we
Speaker 1: need to have a equally capable grid to connect to it.
Speaker 1: So with the introduction of high voltage grids, which is
Speaker 1: something that actually our colleagues and Jee mentioned on a
Speaker 1: previous show about grid connectivity, can you just talk a
Speaker 1: little bit about what some of the plans are for
Speaker 1: grid rollout and really whether or not you expect it
Speaker 1: to keep pace with the megabase buildout.
Speaker 2: The ultra high VOLDE transmission lines are critical to connect
Speaker 2: megabased projects to demand centers. The central government planned to
Speaker 2: send sefty five percent of megabase generation outside of where
Speaker 2: they're located. Nine new lines potentially utilized for the first
Speaker 2: batch have been in place, with fourteen nine yugowot's out
Speaker 2: of ninety seven gigs supplying to other regions, and most
Speaker 2: of these lines have the utilization rate under sixty percent
Speaker 2: in twenty twenty two. The commissioning of the first batch
Speaker 2: will drive up the utility rate, but not very in
Speaker 2: a significantly way, so there is little fear of having
Speaker 2: curtailment caused by transmission lines. Besides the existing nine uchevieliance.
Speaker 2: We ask may their stident needs another eighteen to twelve
Speaker 2: uchvieliance to support the future badges. By the end of
Speaker 2: twenty twenty three, the Central officials have approved seven new
Speaker 2: lines for megabases, which are all targeted to be commissioned
Speaker 2: by twenty twenty five.
Speaker 1: So you had mentioned kurtailment, but I actually want to
Speaker 1: talk about the other end of the spectrum, which has
Speaker 1: to do with the risk posed by renewables to security
Speaker 1: of supply. If there is a large wind farm or
Speaker 1: a large solar farm and we don't have the right
Speaker 1: amount of sun, or the wind isn't blowing as hard,
Speaker 1: and there is a large number of people and companies
Speaker 1: that are dependent upon the power coming out of these megabases,
Speaker 1: what is the plan to handle supply?
Speaker 3: That is a great question, Dane, because winded solar energy
Speaker 3: is unstable, and especially wind is more unpredictable. So for
Speaker 3: great safety and stability, megabased projects that exports to other
Speaker 3: regions are required to collocate with round the clock dispatchable
Speaker 3: technologies such as coal and energy storage, and a guidance
Speaker 3: from National Energy and Administration says that the capacity of
Speaker 3: supporting coal plants should be less than thirty percent of
Speaker 3: collocated renewable energy capacity. So in total, we counted seventy
Speaker 3: nine gigawads of megabased projects that are exporting their generation. Therefore,
Speaker 3: it'll include up to twenty three point seven gigawats of
Speaker 3: supporting coal plants to be collocated with them.
Speaker 1: So let's stay on the topic of coal for a second.
Speaker 1: You're bringing this up as a source of flexible capacity,
Speaker 1: which is required in order to enable this entire complex
Speaker 1: project to actually happen. Can you talk about some of
Speaker 1: the ways the use of coal is actually quite different
Speaker 1: in this circumstance and what this means for the aging
Speaker 1: fleet of coal fired power stations across China.
Speaker 2: In the near term, China relies on copower to provide
Speaker 2: the firm capacity to deal with the intermittent renewable production
Speaker 2: in the power system. The main challenge is that most
Speaker 2: of current copower plans in China were designed to carry baseloads.
Speaker 2: Note for flexible service, China is do in the very
Speaker 2: early stages of retrofitting the traditional generators. The government does
Speaker 2: plan to retrofit two hundred gigle wots of the existing
Speaker 2: co fight capacity to provide flexible service.
Speaker 1: So you'd mentioned that these projects are being installed largely
Speaker 1: in part by the Chinese government, So talk to me
Speaker 1: a little bit about how energy prices are actually structured
Speaker 1: and agreed.
Speaker 2: As we have discussed previously, there are two types of
Speaker 2: power consumption for nigbased generation for local use and for
Speaker 2: transmission to other provinces. As for the power price, this
Speaker 2: generation for local use will have the coreference rate, which
Speaker 2: has very good economics for projects. In contrast, those four
Speaker 2: export to other regions. The power exchange administrations from the
Speaker 2: sending province and the receiving end they negotiate the power prices,
Speaker 2: which are normally lower than the coreference rate and affected
Speaker 2: by the fluctuation of power market prices in the receiving province.
Speaker 1: So, sticking on the topic of prices, we had a
Speaker 1: podcast we talked to our colleague Jenny Chase about solar
Speaker 1: and one of the things she brought up was that,
Speaker 1: in particular, the modules coming out of China were record
Speaker 1: low prices. One has to assume that megabases have had
Speaker 1: a role to play in creating demand for wind and solar.
Speaker 1: Can you talk a bit more about both of these
Speaker 1: industries and what that really means for manufacturers and for
Speaker 1: the prices of the wind and solar modules and turbines.
Speaker 2: Let's begin with solar. The module assembly CAUs T has
Speaker 2: been expanded very fast during the last two years. Investors
Speaker 2: were stimulated by very ambitious targets from the official site. Signally,
Speaker 2: the downstream demand is certain and very large. In our
Speaker 2: latest PV market outlook published earlier this week, we estimate
Speaker 2: there were four hundred and forty four giglets of solar
Speaker 2: installed in twenty twenty three around the globe. China PV
Speaker 2: market hit another record by accounting for over sixty percent
Speaker 2: of the global total. The strong momentum was mainly driven
Speaker 2: by the falling mojor prices as you stated, megabase push
Speaker 2: and the booming's moll scial market, and this for twenty
Speaker 2: twenty four, we expect the PV edition in China will
Speaker 2: increase two two hundred and fifty five gigots in alternating
Speaker 2: current or three hundred fifteen giglets in direct current. The
Speaker 2: oversupply has resulted in mojor price collapsing, making rooftop solar
Speaker 2: more affordable. Low cost modules will enable growth in emerging
Speaker 2: markets like Africa and Latin America, where Brazil, for example,
Speaker 2: is seeing commercial residential PV boom, and if we go
Speaker 2: back to the one thousand, two hundred gig world go
Speaker 2: these target is merely the task by twenty thirty, which
Speaker 2: is far from supporting net zero by twenty six the
Speaker 2: project pipeline is sufficient. In China, benef project database shows
Speaker 2: at least three hundred giga lottes of solar projects and
Speaker 2: the construction. This number has not counted this small scale market,
Speaker 2: which has contributed more than helf of the menual built
Speaker 2: since twenty twenty one. Generally, our expectation shows a growing
Speaker 2: trend throughout twenty thirty. In China market, a total of
Speaker 2: two tero loots of PV is to be installed from
Speaker 2: twenty twenty four to twenty thirty.
Speaker 3: As for wind market, the biggest impact of megabase pro
Speaker 3: is that the implementation helped further drive down the average
Speaker 3: wind turbine price per megawatts in China.
Speaker 2: First, the bigger.
Speaker 3: Turbines can better capture strong wind resources in the deserts
Speaker 3: and wasteleands. Although it's more expensive per turbine, but it's
Speaker 3: actually cheaper permegobots. And as we mentioned many times before
Speaker 3: megabased projects are large, requiring a lot of large turbines
Speaker 3: and utilize the economic.
Speaker 2: Of scale trauma.
Speaker 3: Manufacturers can offer lower prices compare with supplying two smaller projects.
Speaker 1: So these megabases are going in adding a huge amount
Speaker 1: of capacity. Does the demand for these projects actually exist?
Speaker 1: When it comes to than consumers.
Speaker 2: There won't be a lot of troubles for the first
Speaker 2: badge generation consumed locally except Ceiling and Shinhai, which have
Speaker 2: limited power demand growth in the near term, but for
Speaker 2: the fulling badges, the consumption challenge will be severe as
Speaker 2: the local power or demand in Northwestern regions may not
Speaker 2: keep up with additional generation. BNF estimates sixty seven percent
Speaker 2: of generation in the second and third batch to be
Speaker 2: consumed locally. The officials are urged to attract more investment
Speaker 2: on manufacturing industry to consume the megabas generations. JENNA is
Speaker 2: on the trajectory to hit one than two hundred gig
Speaker 2: votes in twenty twenty four, but due to this rapid
Speaker 2: deployment in recent years, there have already had curtailment in
Speaker 2: Northwestern provinces in the last year. It may aggrevate this year.
Speaker 2: The AAA is working on Loco great network system upgrade
Speaker 2: and urging more flexible capacities to be built collocated with
Speaker 2: renewable projects.
Speaker 1: So final question with these batches that have been announced,
Speaker 1: when should the last of the announced batches actually be
Speaker 1: completed and online?
Speaker 3: Dan, A very very good question. We don't know that,
Speaker 3: and so we know exactly when it'll be finished construction
Speaker 3: and online. But the total number is the four hundred
Speaker 3: and fifty five gig awards of Windows Solar mega based
Speaker 3: projects have to go online before twenty thirty.
Speaker 1: So we will see what happens between now and twenty
Speaker 1: thirty and whether China overachieves their target and does it sooner.
Speaker 1: Tiany and Chianyu, thank you very much for coming on
Speaker 1: the show today and telling me more about these mega
Speaker 1: developments in solar and wind in China.
Speaker 3: Thank you, Dana, thank you.
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