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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

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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 an 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.

RECs Aren’t “New”: Should Corporates Buy China’s New Green Power Certificates

As corporate social responsibility drives multinationals to support renewable energy development, many found themselves confined to on-site renewable projects that are too small to create significant fuel switching or financial return. Until now.

This month, China’s central government announced a new green power certificate program, similar to the U.S. renewable energy certificates (RECs), set to start in July. This mechanism allows corporates to purchase renewable energy “attributes” from off-site projects, introducing a faster and scalable procurement option that is not limited to companies’ building sizes. Companies in pursuit of more significant environmental impact and financial benefits, however, have in recent years moved beyond RECs in developed markets, and rely on Power Purchase Agreements (PPAs) to finance concrete new projects. We recommend corporates taking a combined approach to meet their renewable energy commitments.

The Mechanism

 Electricity on our power grids come from all sorts of sources: coal, nuclear, natural gas, and renewables. Once the electrons are on the grid, they are all blended together. So, an end user cannot tell where that exact electron comes from. The Green Power Certificates are a mechanism to separate the electrons and their renewable attributes, and make the latter tradable. By purchasing the certificates and “combining” them with the non-attributed electrons, companies can claim that they are using renewable energy or are supporting renewable development.

In China’s upcoming mechanism:

  • The certificates will be verified and issued by China’s Renewable Energy Information Management Center, a government body that can ensure the authenticity and accountability of each certificate.
  • The energy sources that can generate green power certificates include: inland wind and utility-scale solar projects. Distributed solar and other forms of renewable energy are so far excluded from this mechanism.
  • Earmarking 1MWh of wind or solar energy, each certificate is unique. It can only be purchased once and cannot be resold.
  • The subscription price of a certificate is determined upon buyer-seller negotiation or via bidding. The price cannot be any higher than the subsidies the government would normally pay for that clean energy source. Wind or solar generators that sell the certificates will no longer receive subsidies for the corresponding electricity.
  • Trading of the certificates will be voluntary starting from 1 July and will become mandatory “at an appropriate time” in 2018.


The Motivation

The Chinese government is introducing the trial primarily to help reduce its subsidy burden. The current renewable energy subsidies are financed through an additional charge included in electricity fees. The funding pool, however, is facing an estimated RMB 60 billion ($9 billion) gap at the end of 2016. The green power certificate is a mechanism to allow other sources of capital to fill that gap. Once the government makes it mandatory for power generators or utilities to provide a portion of their electricity from renewable sources, green power certificates are expected to replace government subsides as the only source for renewable generators to receive additional revenue.

On the surface, green power certificates are priced at or below the level of the subsidy that a generator can receive. But as some of China’s renewable energy generators are currently facing a subsidy payment delay stretching over two or three years, they might be willing to sell certificates for faster cash flow, provided that the prices are not too low.

 The Drawbacks

 Since the early 2000s, corporates have been using RECs in the U.S. and several European countries to show their commitment to renewable energy and carbon reduction. However, these early markets have moved beyond RECs in recent years, some even calls RECs as “the lowest bar,” for two major reasons:

  • Many corporations seek to demonstrate a more significant environmental impact – often by bringing new projects online, a process also known as “additionality.” With this view, purchasing unbundled RECs (i.e., the environmental attributes but not the energy) generally will not have any additionality value. Companies like Walmart even go so far to explicitly mention that “under normal circumstances, we prefer not to simply offset our non-renewable power by purchasing standalone renewable energy credits (RECs) or other certificates.” These markets and companies have since favored purchases of renewable energy through PPAs or virtual PPAs.
  • Corporations interested in purchasing renewable energy want to see a financial benefit. Purchasing unbundled RECs is a cost – albeit a modest one – without direct financial return. However, solar and wind costs are at historically low levels, allowing for very competitive PPA pricing and offering an intriguing economic opportunity. PPAs promise to reduce costs, as well as to provide a long-term hedge against rising and volatile energy prices, future REC prices, and any eventual price on carbon. 

The Impact on Corporate Procurement Strategy

The certificates are a flexible tool to help achieve clean energy goals and support the renewable energy market. With lower cost, wider selection of suppliers, and simplified transactions, the certificates are an important mechanism for corporates in China to meet renewable energy goals.

However, because the certificates do not include the underlying electricity, the customers cannot access the fixed-price benefits of renewable energy with them. Such unbundled purchases are falling out of favor with some corporations seeking additionality in their investment in renewable energy, i.e., that seek to promote development of new renewable energy sources to displace non-renewable energy in the energy marketplace.

For companies with urgent renewable targets to meet, Seeder recommends a combined approach of both on-site projects and off-site certificate purchase. As virtual PPAs are not yet a matured product in China, on-site projects, whether financed through a PPA or corporate investment, are still the most concrete way to build new renewable energy sources. Meanwhile, companies can purchase certificates fulfill the rest of their commitments to renewable energy.

Seeder helps our clients to structure on-site solar projects through PPAs or direct investment. And will be able to help them purchase green power certificates. To quickly see your solar capacity and potential savings, start with our solar calculator to get real-time results.

Looking Forward to 2017!

In total, 2016 saw Seeder setting foot in six Chinese provinces and generating 29 potential projects totaling 46MW and are ready to close in 2017. We also expanded our partnerships and now have access to 5 top panel manufacturers, EPCs with experience developing over 5 GW of solar projects, and more than $4.3 billion in project capital seeking distributed solar projects.

    Where Do We Go From Here?

Alex Shoer
CEO at Seeder Clean Energy
Alex Shoer
Seeder has been an evolving model since our earliest days building a collaborative network for the green building industry, followed by a green building technology market place, and for the last two years, a rooftop solar broker and integrator. We will continue to identify quality buildings for rooftop solar, educate the building owners and connect them with the best engineers and investors and taking care of all of the work, making solar no-cost and hassle-free.As we enter 2017 we are very fortunate that the industry is evolving so quickly. The problems of access to innovative solar financing models we were solving only a year ago are no longer such a challenge, so we’re now moving up the value chain to offer more comprehensive services an expanded sales network and turn-key solutions as the market is more robust with better quality players.Plenty of large systemic challenges still exist but we’re in a much better position to tackle them with our strong solar investment and development partners, 46 MW of solar project leads, our proprietary financial model, our online solar calculator, deep sales networks and stringent investor and EPC qualification criteria. Right now we are focused on projects with over 2,000 sqm of rooftop space and an average daytime electricity price of more than .7rmb /kWh but eventually we hope to open up solar financing to even smaller rooftops as we decrease the transaction cost and time for each project and help new capital reach the market.
Meet Team SEEDER! China, USA, Belgium, and Sweden represented here.  
The core Seeder team having some fun at our holiday party…
We wish you a happy, healthy and clean 2017!

Seeder Wrap Up: 2016 Highlights!