How much can wind power the grid

By American Scientist


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This past August, the House of Representatives passed a bill intended to spur the adoption of renewable-energy sources for powering the country's electricity grids.

Known as the Udall-Platts amendment, the legislation calls for more than 10 percent of the nation's electric power to come from renewables by 2020. Whether the Senate will endorse this idea remains to be seen, but many states have already put in place similar, if not more aggressive, "renewable portfolio standards," as they are called, without waiting for the federal government to act.

Currently, 25 states have mandated that a sizeable fraction of the electric power their utilities produce come from renewable sources, such as wind turbines, photovoltaic panels and the combustion of landfill gas. The economics of these technologies suggest that wind generation is bound to play the largest role of the three, but the inherent intermittency of the wind remains a major stumbling block. How much can wind turbines be relied on without causing havoc when the breeze stops?

Advocates for wind energy tend to cast the answer in terms of the amount of energy being provided to the grid. If the "penetration" of wind energy is less than some threshold, they argue, the system can manage it at negligible cost, just as it handles the unavoidable variability in the load.

Beyond some modest penetration level, however, electric utilities are bound to get into trouble if they don't carefully plan how to integrate wind into the mix of power sources. Judging the degree of penetration that can be accommodated is tricky, but wind-energy proponents like to point out that Denmark currently gets about a fifth of its electrical energy from the wind.

Joseph F. DeCarolis, of the Atmospheric Protection Branch of the U. S. Environmental Protection Agency's Office of Research and Development, takes issue with this picture of the situation.

DeCarolis studied the problem in depth for his Ph.D. in engineering and public policy. He says that when he began his research at the turn of the millennium, most people were relying on nothing more than "back-of-the-envelope calculations." He points out that some analysts had concluded that the intermittency of the wind didn't much matter if the turbines were distributed over a sufficiently wide geographic area.

But that notion "didn't really sit right" with DeCarolis and his thesis advisor, David W. Keith, now of the University of Calgary, so they created a numerical model to put the assertion to the test.

From their model runs, they concluded that there is always some intermittency cost, even if wind provides just a tiny fraction of the total power on the grid.

DeCarolis estimates that the penalty would, in general, be something between one and two cents for each kilowatt-hour of energy produced in this way. That's a small but still significant component, given that the price of wind-generated electricity would otherwise be something like five cents per kilowatt-hour.

Denmark has managed to integrate a large number of wind farms into its electric grid because, as DeCarolis says, "there's a ton of hydro on it, and it's very easy to dispatch hydro to make up the difference."

In particular, Denmark's electric grid is connected to that of Norway and Sweden, where hydroelectric plants can easily cut back on production when Danish winds are strong and boost their output when the breezes to the south abate. Balancing wind and hydroelectric power generation in this way allows the two renewable-energy sources together to provide cheap and reliable power to the grid at all times.

But what can an electric utility do with wind if its grid lacks river-spanning hydroelectric-power plants like those found in Norway and Sweden? Plenty.

It can, for example, turn to what's known in the industry as "pumped hydro," whereby water generates power as it flows through turbines from a reservoir at high elevation to a lower one. The same water can be pumped back upward using the electricity available at times of lessened demand, allowing the excess energy to be stored. The Bath County pumped-storage station in the Allegheny mountains of Virginia, built in the wake of the 1970s energy crisis, is one prominent example of such an installation.

Another well-known technique for dealing with variability on the electrical grid is called compressed-air energy storage. The basic strategy is to use excess electric power to run compressors that inject air into underground storage fields. The air is held there in a manner similar to the way natural gas is routinely stored underground. Then, when electricity is needed, this compressed air is fed into turbine generators that burn natural gas. Such gas turbines normally expend much of the energy in their fuel compressing the air prior to combustion.

Using pre-compressed air allows them to save anywhere from one-half to two-thirds of their fuel costs.

"In today's environmental world, you don't have much luck finding a place where you can bulldoze the top of a mountain to create a reservoir," explains Kent Holst, former general manager of the municipal electric utility company in Traer, Iowa. Holst is currently working with the Iowa Association of Municipal Utilities to develop a hybrid facility in his state where the energy from a wind farm will be used to compress air for later use in gas turbines.

This "Iowa Stored Energy Plant," as it is dubbed, is still in early planning stages, but Holst reports that feasibility studies suggest it will have good economic return. And it will help Iowa utilities in a way that is less easy to put a dollar value on: "We feel a strong obligation to do what our customers want—and our customers want greener energy."

In other parts of the world, proposals for storing the energy from the wind sometimes take a completely different shape. For example, managers of the Sorne Hill Wind Farm, which was erected in Ireland in 2004, are planning to install a huge battery to help even out variations in generation.

The device they plan to use is known as a vanadium redox flow battery, which in some ways resembles a giant fuel cell, except that it can be charged and discharged repeatedly. A recent feasibility study suggests that the building-size battery, which will be able to hold 12 megawatt-hours of energy, should pay for itself within 10 or 15 years.

Although DeCarolis is skeptical that such batteries could solve the problem at the largest scales, he is convinced that the variation in the output of wind turbines is something that can be managed, one way or another.

"You can compensate for the intermittency at very reasonable cost," he says, suggesting that the on-again-off-again quality of this resource should not constitute a major roadblock.

But considerable resistance will surely continue to come from people, including some environmentalists, who object to the visual appearance of wind turbines on the horizon—a sight that others find quite pleasing.

It seems the future of this emerging industry may depend more on aesthetics than on economics.

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NEW Hydro One shares down after Ontario government says CEO, board out

Hydro One Leadership Shakeup unsettles investors as Ontario government ousts CEO and board, pressuring shares; analysts cite political and regulatory risk, stock volatility, trimmed price targets, and dividend stability at the regulated utility.

 

Key Points

An abrupt CEO exit and board overhaul at Hydro One, driving share declines and raising political and regulatory risk.

✅ Shares fall as CEO retires and board resigns under provincial pressure.

✅ Analysts cut price targets; warn of political, regulatory risks.

✅ New board to pick CEO; province consults on compensation.

 

Hydro One Ltd. shares slid Thursday with some analysts sounding warnings of greater uncertainty after the new Ontario government announced the retirement of the electrical utility's chief executive and the replacement of its board of directors.

 After sagging by almost eight per cent in early trading on the Toronto Stock Exchange, following news that Q2 profit plunged 23% amid weaker electricity revenue, shares of the company were later down four per cent, or 81 cents, at $19.36 as of 11:42 a.m. ET.

On Wednesday, after stock markets had closed for the day, Ontario Premier Doug Ford announced the immediate retirement of Hydro One CEO Mayo Schmidt. He leaves with a $400,000 payout in lieu of post-retirement benefits and allowances, Hydro One said.

Doug Ford's government forces out Hydro One '$6-million man'

During the recent provincial election campaign, Ford vowed to fire Schmidt, who earned $6.2 million last year and whose salary wouldn't be reduced despite calls to cut electricity costs.

Paul Dobson, Hydro One's chief financial officer, will serve as acting CEO until a new top executive is selected.

Ford also said the entire board of directors of the utility would resign. Hydro One said a new board — four members of which will be nominated by the province — will select the company's next CEO, and the province will be consulted on the next leader's compensation.

A new board is expected to be formed by mid-August.

The provincial government is the largest single investor in Hydro One, holding a 47 per cent stake. The company was partly privatized by the former Liberal government in 2015, while the NDP has proposed to make hydro public again in Ontario to change course.

 

Doug Ford promises to keep Pickering nuclear plant open until 2024

In response to the government's move to supplant the utility's board and CEO, some analysts cautioned investors about too many unknowns in the near-term outlook, citing raised political or regulatory risks.

Analyst Jeremy Rosenfield of iA Securities cut his rating on Hydro One shares to hold from buy, and reduced his 12-month price target for the stock to $24 from $26.

Rosenfield said the stock is still a defensive investment supported by stable earnings and cash flows, good earnings growth and healthy dividend.

However, he said in a research note that "the heightened potential for further political interference in the province's electricity market and regulated utility framework represent key risk factors that are likely to outweigh Hydro One's fundamentals over the near term."

 

Potential challenge to find new CEO

Laurentian Bank Securities analyst Mona Nazir said in a research note that the magnitude of change all at once was "surprising but not shocking."

She said the agreement that will see Hydro One consult with the provincial government on matters involving executive pay could have an impact on the hiring of a new CEO for the utility.

"Given the government's open and public criticism of the company and a potential ceiling on compensation, it may be challenging to attract top talent to the position," she wrote.

Laurentian cut its rating on the Hydro One to hold and reduced its price target to $21 from $24.

Analysts at CIBC World Markets said investors face an uncertain future, noting parallels with debates at Manitoba Hydro over political direction.

"In particular, we are are concerned about the government meddling in with [power] rates," wrote Robert Catellier and Archit Kshetrapal in a research note, adding they believe the new provincial government is aiming for a 12 per cent reduction in customers' power bills.

CIBC reduced its price target on Hydro One's shares to $20.50 from its previous target of $24.

 

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Cheaper electricity rate for customers on First Nations not allowed, Manitoba appeal court rules

Manitoba Hydro Court Ruling affirms the Public Utilities Board exceeded its jurisdiction by ordering a First Nations rate class, overturning an electricity rates appeal tied to geography, poverty, and regulatory authority in Manitoba.

 

Key Points

A decision holding the PUB lacked authority to create a First Nations rate class, restoring uniform electricity pricing.

✅ Court says PUB exceeded jurisdiction creating on-reserve rate

✅ Equalized electricity pricing reaffirmed across Manitoba

✅ Geography, not poverty, found decisive in unlawful rate class

 

Manitoba Hydro was wrongly forced to create a new rate class for electricity customers living on First Nations, the Manitoba Court of Appeal has ruled. 

The court decided the Public Utilities Board "exceeded its jurisdiction" by mandating Indigenous customers on First Nations could have a different electricity rate from other Manitobans. 

The board made the order in 2018, which exempted those customers from the general rate increase that year of 3.6 per cent.

"The directive constituted the creation and implementation of general social policy, an area outside of the PUB's jurisdiction and encroaching into areas that are better suited to the federal and provincial government," says the decision, which was released Tuesday.

Hydro's appeal of the PUB's decision went to court earlier this year.

At the time, the Crown corporation acknowledged many Indigenous people on First Nations live in poverty, but it argued the Public Utilities Board was overstepping its authority in trying to address the issue by creating a new rate class.

It also argued it was against provincial law to charge different rates in different areas of the province.

The PUB, however, insisted that legislation gives it the right to decide which factors are relevant when considering electricity prices, such as social issues. 

Special Manitoba Hydro rate class needed to offset challenges of living on First Nations, appeal court hears
Manitoba Hydro can appeal order to create special First Nation rate
The board had heard evidence that some customers were making "unacceptable" sacrifices to keep the lights on each month.

Decision 'heavy-handed': AMC
The Assembly of Manitoba Chiefs, an intervener in the appeal, had backed the utility board's position. It said on-reserve customers are disproportionately vulnerable to rate hikes over time.

Grand Chief Arlen Dumas said Wednesday he was surprised by the court's ruling. 

He argued Indigenous people are unduly excluded in the setting of electricity rates in Manitoba.

"I will be speaking with my federal and provincial counterparts on how we deal with this issue, because I think it's the wrong [decision]. It's heavy-handed and we need to address it."

The appeal court judges said there is past precedent for setting equal electricity rates, regardless of where customers live. Legislation to that effect was made in the early 2000s and a few years ago, the PUB recognized that geographical limitations should not be imposed on a class of customers.

Since the board's new order didn't extend the same savings to First Nations members who don't live on reserve but face similar financial circumstances, it is clear the deciding factor was geography, rather than poverty or treaty status, the judges said.

Manitoba Hydro temporarily cutting 200 jobs, many of them front-line workers
"In my view, the PUB erred in law when it created an on-reserve class based solely on a geographic region of the province in which customers are located," the decision read.

While Manitoba Hydro objected to the PUB's order in 2018, it still devoted money to create the new customer class.

Spokesperson Bruce Owen said the utility is still studying the impact of the court's decision, but it appreciates the ruling.  

"We all recognize that many people on First Nations have challenges, but our argument was solely on whether or not the PUB had the authority to create a special rate class based on where people live."

Owen added that Hydro recognizes electricity rates can be a hardship on individuals facing poverty. He said those considerations are part of the discussions the corporation has with the utilities board.

 

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Nissan accepting electricity from EVs as payment for parking

Nissan V2G Parking lets EV drivers pay with electricity via bidirectional charging at the Yokohama Nissan Pavilion, showcasing vehicle-to-grid, smart energy trading, and integrated mobility experiences like Ariya rides and Formula E simulators.

 

Key Points

A program where EV owners use V2G to pay for parking by discharging power at Nissan's Yokohama Pavilion.

✅ Pay for parking with EV energy via V2G

✅ Powered by Nissan LEAFs and solar at the Pavilion

✅ Showcases Ariya, Formula E, ProPILOT, and I2V tech

 

Nissan is letting customers pay for parking with electricity by discharging power from their electric car’s battery pack, a concept similar to how EV owners sell electricity back to the grid in other programs. In what the company claims to be a global first, owner of electric cars can trade energy for a parking space at Nissan Pavilion exhibition space in Yokohama, Japan, echoing how parked EVs earn from Europe's grids in comparable schemes.

The venue that showcases Nissan's future technologies, opened its doors to public on August 1 and will remain so through October 23, underscoring how stored EV energy can power buildings in broader applications. “(It) is a place where customers can see, feel, and be inspired by (the company's) near-future vision for society and mobility," says CEO Makoto Uchida. “As the world shifts to electric mobility, EVs will be integrated into society in ways that go beyond just transportation."

Apart from the innovate parking experience, people visiting the pavilion can also virtually experience the thrill of Formula E electric street racing or go for a ride in the all-new Ariya electric crossover, similar to demos at the Everything Electric show in Vancouver. Other experiences include ProPILOT advanced driver assistance system as well as Nissan’s Invisible-to-Visible (I2V) technology, which combines information from the real and virtual worlds to assist drivers, themes also explored at an EV education centre in Toronto for public outreach.

A mobility hub in front of the Pavilion offers a variety of services including EV car-sharing. The Pavilion also operates a cafe operated on power supplied by Nissan LEAF electric cars and solar energy, showcasing vehicle-to-building charging benefits on site.

As part of its Nissan NEXT transformation plan, the company plans to expand its global lineup of EVs and aims to sell more than 1 million electrified vehicles a year by the end of fiscal 2023, aligning with the American EV boom and the challenge of scaling charging infrastructure.

 

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How Canada can capitalize on U.S. auto sector's abrupt pivot to electric vehicles

Canadian EV Manufacturing is accelerating with GM, Ford, and Project Arrow, integrating cross-border supply chains, battery production, rare-earths like lithium and cobalt, autonomous tech, and home charging to drive clean mobility and decarbonization.

 

Key Points

Canadian EV manufacturing spans electric and autonomous vehicles, domestic batteries, and integrated US-Canada trade.

✅ GM and Ford retool plants for EVs and autonomous production

✅ Project Arrow showcases Canadian zero-emission supply capabilities

✅ Lithium, cobalt, and battery hubs target cross-border resilience

 

The storied North American automotive industry, the ultimate showcase of Canada’s high-tensile trade ties with the United States and emerging Canada-U.S. collaboration on EVs momentum, is about to navigate a dramatic hairpin turn.

But as the Big Three veer into the all-electric, autonomous era, some Canadians want to seize the moment and take the wheel.

“There’s a long shadow between the promise and the execution, but all the pieces are there,” says Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.

“We went from a marriage on the rocks to one that both partners are committed to. It could be the best second chapter ever.”

Volpe is referring specifically to GM, which announced late last month an ambitious plan to convert its entire portfolio of vehicles to an all-electric platform by 2035.

But that decision is just part of a cascading transformation across the industry, marking an EV inflection point with existential ramifications for one of the most tightly integrated cross-border manufacturing and supply-chain relationships in the world.

China is already working hard to become the “source of a new way” to power vehicles, President Joe Biden warned last week.

“We just have to step up.”

Canada has both the resources and expertise to do the same, says Volpe, whose ambitious Project Arrow concept — a homegrown zero-emissions vehicle named for the 1950s-era Avro interceptor jet — is designed to showcase exactly that, as recent EV assembly deals in Canada underscore.

“We’re going to prove to the market, we’re going to prove to the (manufacturers) around the planet, that everything that goes into your zero-emission vehicle can be made or sourced here in Canada,” he says.

“If somebody wants to bring what we did over the line and make 100,000 of them a year, I’ll hand it to them.”

GM earned the ire of Canadian auto workers in 2018 by announcing the closure of its assembly plant in Oshawa, Ont. It later resurrected the facility with a $170-million investment to retool it for autonomous vehicles.

“It was, ‘You closed Oshawa, how dare you?’ And I was one of the ‘How dare you’ people,” Volpe says.

“Well, now that they’ve reopened Oshawa, you sit there and you open your eyes to the commitment that General Motors made.”

Ford, too, has entered the fray, promising $1.8 billion to retool its sprawling landmark facility in Oakville, Ont., to build EVs.

It’s a leap of faith of sorts, considering what market experts say is ongoing consumer doubt about EVs and EV supply shortages that drive wait times.

“Range anxiety” — the persistent fear of a depleted battery at the side of the road — remains a major concern, even though it’s less of a problem than most people think.

Consulting firm Deloitte Canada, which has been tracking automotive consumer trends for more than a decade, found three-quarters of future EV buyers it surveyed planned to charge their vehicles at home overnight.

“The difference between what is a perceived issue in a consumer’s mind and what is an actual issue is actually quite negligible,” Ryan Robinson, Deloitte’s automotive research leader, says in an interview.

“It’s still an issue, full stop, and that’s something that the industry is going to have to contend with.”

So, too, is price, especially with the end of the COVID-19 pandemic still a long way off. Deloitte’s latest survey, released last month, found 45 per cent of future buyers in Canada hope to spend less than $35,000 — a tall order when most base electric-vehicle models hover between $40,000 and $45,000.

“You put all of that together and there’s still, despite the electric-car revolution hype, some major challenges that a lot of stakeholders that touch the automotive industry face,” Robinson says.

“It’s not just government, it’s not just automakers, but there are a variety of stakeholders that have a role to play in making sure that Canadians are ready to make the transition over to electric mobility.”

With protectionism no longer a dirty word in the United States and Biden promising to prioritize American workers and suppliers, the Canadian government’s job remains the same as it ever was: making sure the U.S. understands Canada’s mission-critical role in its own economic priorities.

“We’re both going to be better off on both sides of the border, as we have been in the past, if we orient ourselves toward this global competition as one force,” says Gerald Butts, vice-chairman of the political-risk consultancy Eurasia Group and a former principal secretary to Prime Minister Justin Trudeau.

“It served us extraordinarily well in the past … and I have no reason to believe it won’t serve us well in the future.”

Last month, GM announced a billion-dollar plan to build its new all-electric BrightDrop EV600 van in Ingersoll, Ont., at Canada’s first large-scale EV manufacturing plant for delivery vehicles.

That investment, Volpe says, assumes Canada will take the steps necessary to help build a homegrown battery industry — with projects such as a new Niagara-region battery plant pointing the way — drawing on the country’s rare-earth resources like lithium and cobalt that are waiting to be extracted in northern Ontario, Quebec and elsewhere.

Given that the EV industry is still in his infancy, the free market alone won’t be enough to ensure those resources can be extracted and developed, he says.

“General Motors made a billion-dollar bet on Canada because it’s going to assume that the Canadian government — this one or the next one — is going to commit” to building that business.

Such an investment would pay dividends well beyond the auto sector, considering the federal Liberal government’s commitment to lowering greenhouse gas-emissions, including a 2035 EV mandate, and meeting targets set out in the Paris climate accord.

“If you make investments in renewable energy and utility storage using battery technology, you can build an industry at scale that the auto industry can borrow,” Volpe says.

Major manufacturing, retail and office facilities would be able to use that technology to help “shave the peak” off Canada’s GHG emissions and achieve those targets, all the while paving the way for a self-sufficient electric-vehicle industry.

“You’d be investing in the exact same technology you’d use in a car.”

There’s one problem, says Robinson: the lithium-ion batteries on roads right now might not be where the industry ultimately lands.

“We’re not done with with battery technology,” Robinson says. “What you don’t want to do is invest in a technology that is that is rapidly evolving, and could potentially become obsolete going forward.”

Fuel cells — energy-efficient, hydrogen-powered units that work like batteries, but without the need for constant recharging — continue to be part of the conversation, he adds.

“The amount of investment is huge, and you want to be sure that you’re making the right decision, so you don’t find yourself behind the curve just as all that capacity is coming online.”

 

 

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What 2018 Grid Edge Trends Reveal About 2019

2019 Grid Edge Trends highlight evolving demand response, DER orchestration, real-time operations, AMI data, and EV charging, as wholesale markets seek flexibility and resiliency amid tighter reserve margins and fossil baseload retirements.

 

Key Points

Shifts toward DER-enabled demand response and real-time, behind-the-meter flexibility.

✅ Real-time DER dispatch enhances reliability during tight reserves

✅ AMI and ICT improve forecasting, monitoring, and control of resources

✅ Demand response shifts toward aggregated behind-the-meter orchestration

 

Which grid edge trends will continue into 2019 as the digital grid matures and what kind of disruption is on the horizon in the coming year?

From advanced metering infrastructure endpoints to electric-vehicle chargers, grid edge venture capital investments to demand response events, hundreds of data points go into tracking new trends at the edge of the grid amid ongoing grid modernization discussions across utilities.

Trends across these variables tell a story of transition, but perhaps not yet transformation. Customers hold more power than ever before in 2019, with utilities and vendors innovating to take advantage of new opportunities behind the meter. Meanwhile, external factors can always throw things off-course, including the data center boom that is posing new power challenges, and reliability is top of mind in light of last year's extreme weather events. What does the 2018 data say about 2019?

For one thing, demand response evolved, enabled by new information and communications technology. Last year, wholesale market operators increasingly sought to leverage the dispatch of distributed energy resource flexibility in close to real time. Three independent system operators and regional transmission organizations called on demand response five times in total for relief in the summer of 2018, including the NYISO.

The demand response events called in the last 18 months send a clear message: Grid operators will continue to call events year-round. This story unfolds as reserve margins continue to tighten, fossil baseload generation retirements continue, and system operators are increasingly faced with proving the resiliency and reliability of their systems while efforts to invest in a smarter electricity infrastructure gain momentum across the country.

In 2019, the total amount of flexible demand response capacity for wholesale market participation will remain about the same. However, the way operators and aggregators are using demand response is changing as information and communications technology systems improve and utilities are using AI to adapt to electricity demands, allowing the behavior of resources to be more accurately forecasted, monitored and controlled.

These improvements are allowing customer-sited resources to offer  flexibility services closer to real-time operations and become more reactive to system needs. At the same time, traditional demand response will continue to evolve toward the orchestration of DERs as an aggregate flexible resource to better enable growing levels of renewable energy on the grid.

 

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Solar Now ‘cheaper Than Grid Electricity’ In Every Chinese City, Study Finds

China Solar Grid Parity signals unsubsidized industrial and commercial PV, rooftop solar, and feed-in tariff guarantees competing with grid electricity and coal power prices, driven by cost declines, policy reform, and technology advances.

 

Key Points

Point where PV in China meets or beats grid electricity, enabling unsubsidized industrial and commercial solar.

✅ City-level analysis shows cheaper PV than grid in 344 cities.

✅ 22% can beat coal power prices without subsidies.

✅ Soft-cost, permitting, and finance reforms speed uptake.

 

Solar power has become cheaper than grid electricity across China, a development that could boost the prospects of industrial and commercial solar, according to a new study.

Projects in every city analysed by the researchers could be built today without subsidy, at lower prices than those supplied by the grid, and around a fifth could also compete with the nation’s coal electricity prices.

They say grid parity – the “tipping point” at which solar generation costs the same as electricity from the grid – represents a key stage in the expansion of renewable energy sources.

While previous studies of nations such as Germany, where solar-plus-storage costs are already undercutting conventional power, and the US have concluded that solar could achieve grid parity by 2020 in most developed countries, some have suggested China would have to wait decades.

However, the new paper published in Nature Energy concludes a combination of technological advances, cost declines and government support has helped make grid parity a reality in Chinese today.

Despite these results, grid parity may not drive a surge in the uptake of solar, a leading analyst tells Carbon Brief.

 

Competitive pricing

China’s solar industry has rapidly expanded from a small, rural program in the 1990s to the largest in the world, with record 2016 solar growth underscoring the trend. It is both the biggest generator of solar power and the biggest installer of solar panels.

The installed capacity of solar panels in China in 2018 amounted to more than a third of the global total, with the country accounting for half the world’s solar additions that year.

Since 2000, the Chinese government has unveiled over 100 policies supporting the PV industry, and technological progress has helped make solar power less expensive. This has led to the cost of electricity from solar power dropping, as demonstrated in the chart below.


 

In their paper, Prof Jinyue Yan of Sweden’s Royal Institute of Technology and his colleagues explain that this “stunning” performance has been accelerated by government subsidies, but has also seen China overinvesting in what some describe as a clean energy's dirty secret of “redundant construction and overcapacity”. The authors write:

“Recently, the Chinese government has been trying to lead the PV industry onto a more sustainable and efficient development track by tightening incentive policies with China’s 531 New Policy.”

The researchers say the subsidy cuts under this policy in 2018 were a signal that the government wanted to make the industry less dependent on state support and shift its focus from scale to quality.

This, they say, has “brought the industry to a crossroads”, with discussions taking place in China about when solar electricity generation could achieve grid parity.

In their analysis, Yan and his team examined the prospects for building industrial and commercial solar projects without state support in 344 cities across China, attempting to gauge where or whether grid parity could be achieved.

The team estimated the total lifetime price of solar energy systems in all of these cities, taking into account net costs and profits, including project investments, electricity output and trading prices.

Besides establishing that installations in every city tested could supply cheaper electricity than the grid, they also compared solar to the price of coal-generated power. They found that 22% of the cities could build solar systems capable of producing electricity at cheaper prices than coal.

 

Embracing solar

Declining costs of solar technology, particularly crystalline silicon modules, mean the trend in China is also playing out around the world, with offshore wind cost declines reinforcing the shift. In May, the International Renewable Energy Agency (IRENA) said that by the beginning of next year, grid parity could become the global norm for the solar industry, and shifting price dynamics in Northern Europe illustrate the market impact.

Kingsmill Bond, an energy strategist at Carbon Tracker, says this is the first in-depth study he has seen looking at city-level solar costs in China, and is encouraged by this indication of solar becoming ever-more competitive, as seen in Germany's recent solar boost during the energy crisis. He tells Carbon Brief:

“The conclusion that industrial and commercial solar is cheaper than grid electricity means that the workshop of the world can embrace solar. Without subsidy and its distorting impacts, and driven by commercial gain.”

On the other hand, Jenny Chase, head of solar analysis at BloombergNEF, says the findings revealed by Yan and his team are “fairly old news” as the competitive price of rooftop solar in China has been known about for at least a year.

She notes that this does not mean there has been a huge accompanying rollout of industrial and commercial solar, and says this is partly because of the long-term thinking required for investment to be seen as worthwhile.


 

The lifetime of a PV system tends to be around two decades, whereas the average lifespan of a Chinese company is only around eight years, according to Chase. Furthermore, there is an even simpler explanation, as she explains to Carbon Brief:

“There’s also the fact that companies just can’t be bothered a lot of the time – there are roofs all over Europe where solar could probably save money, but people are not jumping to do it.”

According to Chase, a “much more exciting” development came earlier this year, when the Chinese government developed a policy for “subsidy-free solar”.

This involved guaranteeing the current coal-fired power price to solar plants for 20 years, creating what is essentially a low feed-in tariff and leading to what she describes as “a lot of nice, low-risk projects”.

As for the beneficial effects of grid parity, based on how things have played out in countries where it has already been achieved, Chase says it does not necessarily mean a significant uptake of solar power will follow:

“Grid parity solar is never as popular as subsidised solar, and ironically you don’t generally have a rush to build grid parity solar because you may as well wait until next year and get cheaper solar.”

 

Policy proposals

In their paper, Yan and his team lay out policy changes they think would help provide an economic incentive, in combination with grid parity, to encourage the uptake of solar power systems.

Technology costs may have fallen for smaller solar projects of the type being deployed on the rooftops of businesses, but they note that the so-called “soft costs” – including installation and maintenance – tend to be “very impactful”.

Specifically, they say aspects such as financing, land acquisition and grid accommodation, which make up over half the total cost, could be cut down:

“Labour costs are not significant [in China] because of the relatively low wages of direct labour and related installation overhead. Customer acquisition has largely been achieved in China by the mature market, with customers’ familiarity with PV systems, and with the perception that PV systems are a reliable technology. However, policymakers should consider strengthening the targeted policies on the following soft costs.”

Among the measures they suggest are new financing schemes, an effort to “streamline” the complicated procedures and taxes involved, and more geographically targeted government policies, alongside innovations like peer-to-peer energy sharing that can improve utilization.

As their analysis showed the price of solar electricity had fallen further in some cities than others, the researchers recommend targeting future subsidies at the cities that are performing less well – keeping costs to a minimum while still providing support when it is most needed.

 

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