China struggles to capitalize on record renewables build-out as grid work lags
In the first half, the curtailment rate for solar rose to 5.7%, from 3% in the same period last year, according to the National Energy Administration. For wind, it was 6.6%, versus 3.9% in the first six months of 2024.
Curtailments measure how much electricity was generated without finding its way to customers. That happens when supply overwhelms demand, or bottlenecks in the grid interfere with power transmission — particularly over distance.
As a result, the worst offenders are the biggest renewables hubs in the sparsely populated interior, which rely on power lines stretching thousands of kilometers to the major cities of the east.
"The reason why curtailment has become an issue in China is simply because renewable power installation is too strong, far exceeding the growth rate of the power grid and energy storage,' said Diana Xia, an analyst at Fitch Ratings. "As a result, electricity generated by the additional capacity can't be consumed.'
China has raised its tolerance for curtailments to 10% from 5% to account for the lag between developing projects and connecting them to the grid. But the rates for western regions including Tibet, Xinjiang and Qinghai have blown past those limits, which could ultimately threaten the investment case for any further expansion unless the grid can quickly catch up.
To be sure, even the worst curtailment rates this year pale in comparison to those faced during China's earlier renewables booms. In 2016, for example, Gansu was forced to ditch nearly half the wind power generated in the province for six months. And grid operators have praised the huge build-out of renewables for helping the country meet a summer surge in demand.
But China's scaling up of clean energy is also posing a new set of challenges. In each of the last two years, the country has installed record amounts, including 277 gigawatts of solar last year. In May this year, it added more solar capacity in a single month than any other country did over the whole of 2024, according to BloombergNEF.
Upgrading the power network to cope involves enormous sums. The main operator, State Grid of China, said its spending will exceed 650 billion yuan ($90 billion) for the first time this year, with ultrahigh-voltage lines one of its biggest investments. China currently has 43 of those in operation.
For provinces such as Qinghai, home to a renewables park that's roughly the size of Singapore, the network can't be built fast enough. Local demand from a population of only 6 million is completely insufficient to mop up all the power generated.
Photovoltaic panels at a solar plant in Beijing |
Bloomberg
The province has one UHV line connecting to Henan province, and another two are planned to Guangxi and Guangdong, Zhu Yuanqing, a director with the local energy bureau, said in an interview in the capital Xining earlier in the summer. But the lead times are daunting.
It usually takes about five years to build a UHV line, said Fitch's Xia. Although a number of new lines should be operational in the next couple of years, it means there's unlikely to be a significant decrease in curtailment rates before 2027, she said.
The government's other measures to reduce waste include promoting the build-out of transmission lines that directly link companies with renewables projects. Regions like Qinghai are also constructing massive data centers to take advantage of their abundant clean energy supplies and cooler weather.
The NEA wants the grid to accommodate annual expansions of over 200 gigawatts of renewable power through 2027. But meeting that target while keeping curtailments below 10% will be challenging.
The coming months will test whether regulators can fast-track grid upgrades and accelerate power market reforms to keep renewable energy absorption stable, consultancy Trivium China said last month in a note.
"If these efforts fail, deteriorating renewable project returns from rising curtailment and plummeting power prices may lead to a significant investment slowdown,' said Trivium.
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