, ,

Large-Scale Renewable Energy Procurement Opportunities

Lately, the China power market has made global headlines for the massive volume of distributed generation (DG) solar installed in 2017: 13 GW through July. However, in certain circles, another electricity supply mechanism is generating greater buzz: renewable energy direct purchase (REDP). 

In fact, at a recent “China Renewable Energy Buyer & Suppliers’ Workshop” in Beijing organized by Rocky Mountain Institute, DG solar was seldom mentioned by the Fortune 500 MNC representatives. (Many corporations already understand this solution and are executing large-scale procurement programs.) The discussion instead was focused on power sector reform, newly-established Power Trading Centers, and the outlook for large-scale RE solutions over the grid, known as renewable energy direct purchase (REDP).


So, what should corporations interested in pursuing the 100% RE goal in China be aware of regarding REDP? Here are a few thoughts:


As a brief background, China power sector reform kicked off in 2015 and has commanded the attention of energy market participants. The means by which electricity is scheduled, generated, transported, and transacted are changing quickly and significantly. One mechanism that has emerged is known as “direct energy purchase”, which allows for an industrial consumer to purchase electricity directly from a power generator (or intermediary electricity retail company) through a provincial Power Trading Center. This new mechanism has empowered customers with greater electricity supply options. Renewable energy is available via this mechanism in select provinces (REDP). Where available, REDP offers up to 20% discounts from local grid rates, is transacted via low-risk 1-year tenor purchase agreements, and allows for a claim on electricity generated from a specific power asset. This sounds too good to be true—why aren’t all factories buying cheap wind power around the country?


Currently, REDP is available in fewer than 10 of the 34 provinces of China. These provinces border China’s north, northwest, and southwest, where wind, solar and hydro (respectively) are installed in abundance and significantly curtailed. Although these outer provinces host far fewer industrial zones compared with the developed east coast attractive REDP opportunities exist there and can even allow for reduced electricity costs.


So what are the prospects for REDP in eastern provinces spanning Beijing to Guangdong? We must first consider the objectives of power sector reform set forth by the relevant administrative bodies, and then examine the conditions that allow for REDP. These objectives include the competitive unlocking and sale of curtailed power capacity and the reduction of grid transmission and distribution costs. Both aims are being pursued across the country: once-curtailed power is being traded via new Power Trading Centers in nearly every province, and provincial grid companies are receiving less revenue for their transmission and distribution services [Z1] (specifically for power transacted via Power Trading Centers). “Missing” in east coast power pools, however, is locally-curtailed renewable power capacity. In fact, multiple NDRC and NEA policies issued in 2016 and 2017 require that grid companies prioritize consumption of renewables over coal generation. Due to these policies, and in combination with continued power demand growth, official NEA data indicates near-zero curtailment rates for renewables along the east coast (excepting 9% curtailment for wind in Hebei, a figure on a downward trend). Therefore, with little-to-no curtailed renewables near eastern industrial zones, availability of REDP appears limited to pilot projects and special one-off demonstration transactions.


Despite that, there are today several options and mechanisms corporations might explore in pursuit of the 100% RE goal:


(1)    Pilot projects. Pilot projects are a hallmark of Chinese policy rollout. The government’s pragmatic approach is to first test policy measures in small scale, in what may be considered as “policy R&D”. Successful measures continue with refinement and broader implementation. Pilot REDP projects are emerging around the country. For example, in Zhangjiakou, a city nearby Beijing that will host the 2022 Winter Olympics, wind and solar power are on offer to local consumers as an incentive to attract new industry. Chinese power sector stakeholders across the country recognize: renewable energy is a central piece of the power sector’s future; power trading from intermittent sources is a practical reality which must be prepared for; and that direct procurement of renewable energy is increasingly important to large, influential corporations. Provincial grid companies, Power Trading Centers, NRDC and NEA stakeholders are open to structuring pilot REDP solutions with motivated industrial consumers.


(2)    Cross-province REDP. Cross-province, or inter-provincial REDP, is another current hot topic. This is a mechanism via which power generators with otherwise-curtailed power sell wholesale to power-hungry eastern provincial grid operators, or even directly to large industrial consumers, via one of the two national-level Power Trading Centers. For instance, hydropower from southwestern Sichuan is increasingly making its way eastward, the buyer typically being a provincial grid operator (e.g., Zhejiang State Grid Company). But perhaps most interesting is the January 2016 case of 30 Shandong large industrial power consumers that purchased 9,000 GWh from 824 power generators—58% solar, 33% wind, 8% coal—from Shaanxi, Gansu, Qinghai, and Ningxia via the Beijing Power Trading Center. This transaction served as a pilot for how to structure delivery of low-cost clean power from resource-rich western regions to the east coast of China. In a similar vein, in late 2018 a 1100 KV ultra-high-voltage DC transmission line will connect the northwestern Xinjiang province—rich in solar and wind resource and installed generation capacity—to the eastern and industrialized Anhui province. This power transmission project, with a cost of ¥41 billion RMB, is the highest voltage, largest capacity (24,000 MW), and longest distance (3,324 km) of its kind in the world. Once operating this transmission line will send large volumes of solar and wind power across the country for consumption.


(3)    Creative solutions & re-bundling. Last, there are other intermediary solutions that corporations might consider on the path to 100% RE in China. To share one simple idea: if REDP is not available in a specific province (e.g., Jiangsu), but there are significant savings to be achieved via direct fossil purchase, industrial consumers are going to transact simply for economic reasons. Why not have Sustainability leadership and China Procurement leadership coordinate to funnel direct purchase cost savings toward the purchase of China Green Certificates (or a different green token), thereby re-bundling the green attribute to form a cost-neutral “synthetic REDP” solution? Re-bundling in this manner can allow for significant percentages of RE purchase, and several multinational corporations are currently investigating this option.


In conclusion, there is much reason for optimism for the RE 100 goal in China. Given the magnitude of power sector reform, the market has progressed at lightning speed over the past two and a half years, along with it opening new possibilities for RE procurement. There are significant cost savings and new green energy options available in every province today, and opportunities to achieve 100% RE in a handful of provinces. Creative solutions and pilot REDP initiatives are inline with stakeholder interests and are open to first-moving corporations wanting to seize the opportunity.

, , ,

Fortune 500: Climate Goals Leads To Improved Bottom Lines

Private companies have continued to make significant contributions to achieving the 2015 Paris Climate Agreement goal of limiting global temperature increase to below 2 degrees, despite the setback made by President Trump — pulling the U.S. out of the Agreement. The commitment from Fortune 500s to emit fewer greenhouse gases (GHG) has never been so strong, with 23 companies committing to be 100% powered by renewables and 48% of Fortune 500 companies with at least one climate or clean energy target, representing a 5% increase from 2014, a recent report by the WWF, CERES, Calvert Research and CDP reveals.Fortune 500 companies broadly embrace renewables and energy efficiency


Looking at the biggest companies reveals an even stronger commitment, with 63% of Fortune 100 companies leading the trend to address climate change. Leading companies include Apple, Bank of America, Facebook, Google, and Walmart.


Despite the relatively smaller absolute percentage in the bottom quintiles, Fortune 401 – 500 companies, the smallest in the cohort, have shown significant improvement. Compared with 2014, the percentage of companies with targets rising from 25% in 2014 to the current 44%, a total increase of 19%. This improvement in the smaller Fortune 500 companies reflects the shift in corporate attitudes towards renewables. Like Marty Spitzer, Senior Director of Climate and Renewable Energy at WWF said: “American businesses are leading the transition to a clean economy because it’s smart business and it’s what their customers want.” Setting renewables target expands from larger companies to companies of relatively smaller scale might represent a positive trend and it is likely that companies outside of the Fortune 500 will continue the increase in renewable targets.

Buying clean energy is becoming a trend 

The rapid increase in corporate renewable energy PPAs and other direct contracts points to the overall trend that large companies are increasingly looking to more direct forms of procurement over unbundled RECs to maximize both the business and environmental benefits of these purchases.


53 companies have set goals to buy or invest in renewable energy, such as solar or wind. The approaches include unbundled Renewable Energy Certificates (RECs) purchases, onsite installations (mostly solar), and larger-scale, off-site purchases, the latter of which has seen significant growth in recent years. According to the Solar Energy Industries Association, corporates have now installed more than one gigawatt of onsite solar capacity in the U.S. Since 2014, nearly 7GW in new, direct, off-site corporate renewable energy contracts have been signed by 33 companies (most, but not all are in the Fortune 500)


The trend is set because direct procurement (onsite installations and offsite procurement where the company is involved in some way in the energy sales transaction in addition to taking title to the RECs) allows companies to both access fixed-priced renewable energy, which can save on energy costs over time, and to cause new generation to be built over what would have been driven by regulation, enhancing the emissions reduction impact of the company’s investment. The plummeting price of wind and solar allows companies to achieve more than just GHG emission reduction targets. The purchase also brings reduced operating costs, long-term price stability, and a diversified energy supply.


Save the planet while capturing business value


Achieving clean energy targets means saving money and growing profits. In 2016 alone to totals $3.7 billion, up from $1.7 billion in 2013, were saved by nearly 80,000 emissions-reducing projects implemented in 190 countries. In the meanwhile, companies also decreased their annual emissions by 155.7 million metric tons of CO2 equivalent, which is equal to taking 45 coal-fired power plants offline for a year. This number was only 26.7 million in 2013. During three years of time, companies increased their savings by $2 billion and 129 million metric tons of CO2 equivalent. The improved impact to the environment is all the more significant.


The environmental impact is more certain as more companies adopt science-based methodologies to inform and monitor their renewable targets. A significant number of these companies are increasing their ambition by aligning their carbon reduction goals with climate science, such as Walmart’s Gigaton commitment.

The company aims to reduce its carbon dioxide emissions from upstream and downstream sources by one billion tons (a gigaton) between 2015 and 2030.

A science-based target utilizes the best available scientific data to define a company’s appropriate share of emission reductions required to limit global temperature increases to below two degrees Celsius. Various methodologies to inform their science-based targets have been developed and are constantly evolving. For instance, the decarbonization pathways by the Intergovernmental Panel on Climate Change (IPCC) have been adopted by several companies. Implementing science-based methodology implies more commitment and ambition.

, , ,

168 Hours on 100% Renewables

168 Hours on 100% Renewables: Qinghai’s Trail Means More Potential for Governments and Companies to Go Green.

For seven days — from June 17th to 23rd — China’s Qinghai province ran on 100% renewable energy, including solar, wind, and hydropower. During that time, the province generated 1.1 billion kilowatt hours of energy for over 5.6 million residents. That’s equal to burning 535,000 tons of coal.

The week was part of a trial conducted by the State Grid Corporation of China, which aims to test the viability of relying on renewables long-term. This successful experiment in part proves China’s dedication to fulfill its commitment to the Paris Agreement, peaking its coal consumption and reducing its carbon intensity by 60%-65% by 2030, as well as its hope to produce 20% of its electricity from renewable sources by 2030. It also demonstrates that running largely on renewable power — at least in certain places — is technically feasible. We hope this will embolden governments and companies to envision a future with more renewables in their energy mix.

Big Hydro and Weak Demand Critical

The geographic location of Qinghai is rich in solar and hydro resources. Out of Qinghai’s 23.4 GW of total power generation capacity, around 82% is from renewable sources (including hydro). Solar alone accounts of 29.1% of all capacity installed, registering as the second largest power source of the province. By 2020, the province plans to expand its clean energy capacity to 35 GW, which could supply 110 TWh of clean energy annually. Ample summer rainfall is a significant contributor, as hydropower accounted for approximately 72% of the electricity generated during the seven days.

Apart from strong hydro output, Qinghai’s low power demand is also an important reason for this trail to success, something difficult for other places to replicate. The average daily power demand is 150 million kWh, only 15% of that of the much more developed Zhejiang province (1 billion kWh daily demand) for example.

Running on solar, wind and hydro, Qinghai has shown the technical viability of going 100% renewable and it proved that the grid is stable when supported by a variety of renewable sources. This test helped China’s grid operators to accumulate technical experience in deciding how much power should be supplied by which sources.

More renewable energy also makes economic sense for Qinghai. “On-grid price of hydro power is 0.201 yuan/kWh, while coal power is 0.325 yuan/kWh. Coal is 0.124 yuan more expensive than hydro per kWh. It´s also cheaper for grid companies obviously. In another word, it is economically viable.” Xiaoping Xie, president of Huanghe Hydropower Development Company said in an interview.

Calling Higher Ambitions

Yunnan, Sichuan and other provinces rich in renewable resources, that have installed many renewables are also in the condition of accomplishing something similar, although they have not announced such intentions as of yet. Such government-led pilot schemes have shown that the Chinese government is willing to fulfill its commitment to clean energy.

In addition to the government’s role, companies around the world have stepped up  their effort by setting renewable targets. 23 Leading Fortune 500 companies have gone a step further by integrating a 100% renewable energy commitment into their business strategy. For example, Google has promised that by 2018, every click on Google will be powered by renewable energy.

Qinghai’s 100% renewable energy trail provides an important signal to governments and companies alike, that high percentage of renewable energy power mix is no longer just a vision but a reality, and that adoption will only grow higher going forward. For companies that care about their energy footprint, this trial — and the broader direction it signals — not only mean that their own effort to procure clean energy will create synergies with government initiatives, but also that electricity generated from their renewable projects will be better absorbed by their grids and communities, allowing them to reduce curtailment risks and contribute more to local communities.

, , , , ,

Future Energy: China leads world in solar power production

Article originally published in the BBC: http://www.bbc.com/news/business-40341833

Ten years ago, Geof Moser had just graduated with a master’s degree in solar energy from Arizona State University – but he didn’t feel much opportunity lay at his feet in his home country.

So he headed for China.

“The solar industry was fairly small and there weren’t a lot of jobs,” he remembers. “Just a few for installation.” But the Chinese government had big ambitions to expand solar and Moser saw his chance.

He spent some years accumulating knowledge about the Chinese solar industry, before co-founding Symtech Solar, which designs solar panel systems using Chinese parts.

Market access

The idea is to make it easy for organisations outside China to access components without the hassle of having to source and assemble lots of different parts.

“You don’t want to buy a car door or a car engine, you want to buy a car,” he explains.

Symtech now has a portfolio of small projects dotted around the world and it is hoping to increase installations in the Middle East, thanks to a new office in Oman.

Moser isn’t the only US entrepreneur who turned to China. Alex Shoer, of Seeder, helped to launch a business that brings solar panels to the roofs of buildings within the country.

He deals with foreign businesses who, say, want to make their Beijing office a little greener. The firm says it has so far erected three megawatts’ worth of solar installations, with another 28 megawatts on the way for various clients.

“We will source the capital to finance, pay for the whole project and then sell the power at a discount,” Shoer says. Again, the model relies on sourcing the right parts at a favourable cost.

These kind of installations are known as “distributed generation” projects, in which electricity is produced on a small scale, at or very near to a specific point of consumption.

Within China, distributed generation is growing at an extraordinary rate, driven in large part by farmers who use the panels to power agricultural equipment that might not be connected to the grid.

Shoer comments that he was attracted by Beijing’s commitment to the solar industry. For years it has encouraged local authorities to do what they can to boostproduction, research and development.

Renewables growth

China’s rapid expansion of renewable energy facilities has since caught headlines around the world.

According to the International Energy Agency (IEA), the country installed more than 34 gigawatts of solar capacity in 2016 – more than double the figure for the US and nearly half of the total added capacity worldwide that year.

Early figures for 2017 show China has added another eight gigawatts in the first quarter alone.

“It’s a huge market,” says Heymi Bahar at the IEA. Most of the world’s solar cells are made in China and Taiwan, he adds – more than 60%.

The impressive scale doesn’t stop there. The largest solar farm in the world – Longyangxia Dam Solar Park, all 30sq km of it – is a Chinese project. And the country recently opened the world’s largest floating solar farm, in Huainan, Anhui Province.

It has been constructed over an old coal mine, which over the years had filled with rainwater. Sungrow, the Chinese firm that provided solar cells for the venture, says its system automatically monitors current and voltage generated by the cells, along with humidity, which can affect their efficiency.

Because of the abundant water nearby, cleaning the panels – an endless task for solar farmers – will be easier, according to those behind the facility.

These mega projects have become possible, and indeed more common, thanks to the rapidly falling cost of solar cells.

“What we were all hoping for 20 years ago when the idea of cheap solar was just a dream, was that someone would come into this on an industrial scale and drive down the cost,” recalls Charles Donovan, at Imperial College Business School.

“That is exactly what China has done.”

But today, solar energy production accounts for just 1% of China’s total energy demand. A huge 66% of demand still comes from coal, something that the country’s National Energy Administration wants to change drastically by 2050 – not least because of China’s well-known air pollution problems.

But by that key date of 2050, a very different mix of energies could be powering China, should some projections become reality. One government report even suggested that renewables could supply 86% of the country’s energy needs, with solar providing around a third of that.

Can China do it? According to one expert observer, the answer is, “maybe”.

“What China is trying to do is rationalise a very large, fast growing system,” explains Jeffrey Ball at Stanford University’s Center for Energy Policy and Finance. Ball is the lead author of a recent report that details China’s success as an innovator in the solar panel industry.

Lofty ambitions

But as Ball points out, the revolution has not been without teething issues. For one thing, Chinese subsidies, which some argue are unsustainable, have not always been smoothly administered. The “feed-in tariff”, for example, often offered to solar companies that generate electricity, has sometimes been paid late.

“The government is often a year or more late in delivering that revenue – that wreaks havoc with the financials on a project,” says Ball.

The value of subsidies has recently been cut, too. What’s more, China’s large solar farms are largely in less densely populated areas in the west of the country, far from population centres like Beijing or Shanghai, in the east.

Building extra grid capacity to transfer it is time-consuming and expensive. This leads to a problem known as curtailment – a solar farm produces, say, 20 megawatts of electricity but can only find buyers for 15 megawatts.

More from Future Energy

“Depending on who you talk to in the provinces that have by far the largest amount of solar production, curtailment rates are 30% and in some cases significantly higher than 30% – that’s extraordinary and that’s a real problem,” explains Ball.

Whether China can achieve its lofty ambitions for renewable energy remains to be seen – but it has certainly proved its ability to foster a world-leading solar industry. For US entrepreneurs like Geof Moser, that’s enough to propel his own business towards further growth for now.

“The reality is that renewable energy is very cheap – especially solar energy,” he says. “And the reason is China.”

Article originally published in the BBC: http://www.bbc.com/news/business-40341833

, , , , , , , , ,

China Paves Way to Allow Clean Energy Purchase from Nearby Distributed Sources

Corporations keen to source clean energy understand the advantages of distributed generation. Apple, a leader in corporate renewable energy purchase, wrote in its Environmental Responsibility Report that “Apple’s renewable energy approach goes a step further to make sure we ‘deposit’ on the same grid as the energy we are ‘withdrawing.’” This preference is because distributed generation (DG) faces less power loss during transmission, no curtailment risks, and corporates can contribute to local economies and communities.

But China’s not-so-liberal power market has so far prevented a consumer from buying electricity from nearby distributed generators. Electricity from a rooftop solar project, for example, can either be used by the building directly beneath or be sold back to the grid – and dispatched just like electrons from any other source.

This past month, China’s National Energy Administration (NEA) finally made a big step to break that restriction, by introducing a draft policy on “distributed power trading pilots.” In the draft, distributed energy projects can sell power to nearby consumers, and the grid company will charge a “transmission fee” when delivering power. Some preliminary details below:

  • For the first batch of pilots, power retail would only be allowed in very small areas. Power sellers and buyers should be in the same 35kV power supply network – which is normally a district in cities like Shanghai – or the same 110kV network when it is the lowest voltage network, such as in industrial parks.

  • Distributed power generators can sell power in three ways: 1) They can trade directly with an end consumer within a 110kV network; 2) They can also delegate the grid company to sell power; 3) Or they can choose not to participate in the retail market and have the grid company purchase all of its electricity. For a buyer, this means it can purchase power from a DG source directly or from the grid for DG electricity.

  • The government will acknowledge clean energy purchased through this mechanism when measuring a company’s clean energy and energy-saving efforts. For carbon credits, the buyer and seller can settle attribution among themselves directly.

  • The policy is subject to distributed power projects with installed capacity below 20MW. City- and province-level grid companies will set up trading platforms.

Testing the water cautiously, the government will announce the first batch of pilots by May 31st, and trading is to start on July 1st. At the end of 2017, it will decide whether and how to expand the pilot area.

We expect power retail pilots to be set up in limited areas at first – an easy starting point would be in industrial parks where power networks are more independent. Even with the small scale, this is an encouraging sign that Beijing is opening up power retail specifically for the distributed market. Furthermore, NEA specifically mentioned that the retail policy will not affect the current subsidy scheme for distributed renewables.

For corporations, this policy means that in the near future, more clean energy sourcing options will be available. Corporates will be able to support distributed projects that will create environmental and economic value locally.