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China is leading the way in renewable energy growth

Renewables’ relentless march on grid power is just getting started and there will be no stopping it

Almost one year ago, I wrote that most of the growth in renewable energy will happen in China, Latin America, the Middle East, and parts of the world that still lack access to reliable electricity, like India and Africa.

We now have some evidence of just how stunning that growth will be.

In 2014, according to government statistics, China added about 18.7 gigawatts (GW) of new wind capacity – more than twice as much as the next five nations combined, and about 42% of wind additions globally. The Asian nation is the world leader in grid-connected capacity, with 95.8 GW, or about 30% of the global total in 2013. (The US generates more power from wind than China does, but that may be a short-lived status. China plans to increase its wind capacity to a massive 200 GW by 2020.)

China has likewise become a global powerhouse in solar power. Since 2009, it has increased its capacity by 6,000%, and has become the world’s top producer of solar photovoltaic (PV) equipment. It is now second only to Germany in solar power capacity. But it plans to triple its solar capacity by 2017 to cut its reliance on coal, which will make it the global solar leader by far.

Steep rise

Latin America posted a 370% increase in solar PV capacity in 2014, with 625 megawatts installed, according to Greentech Media’s Latin American analyst Adam James. Installations in the region are expected to more than triple again in 2015 to 2.5 GW. But even that stunning growth pales in comparison with the 30 GW of PV in the project pipeline. Much of it isn’t even driven by incentives; five of the 51 utility-scale solar plants now operating are merchant plants, selling unsubsidised power into competitive marketplaces alongside other conventional generators. Over three-quarters of the Latin American installations are in Chile, but James sees Mexico’s installations growing at an 84% annual rate, to reach 3.3 GW by 2018.

Solar seems poised at last to realise longstanding hopes for a renaissance in the Middle East as well. Dubai recently awarded a contract to build a $330 million, 200 MW solar generating plant to a group led by Saudi Arabia’s Acwa Power International.
The deal made global headlines because it guaranteed unsubsidised solar power at just 5.85 cents per kilowatt-hour (kWh), a new world-record low. Acwa submitted alternative bids to build larger projects, including a 1 GW system that would sell power for just 5.4 cents/kWh.

That price point suggests that big banks like Citigroup, UBS, and Deutsche Bank are right on the money for forecasting that unsubsidised solar will become the cheapest form of new power generation by 2020. In many developing nations, it’s already cheaper than conventional fossil-fuelled grid power. In the US, the cost of power from utility-scale PV nearly halved from 2010 to 2013, and should easily hit grid parity at $0.06/kWh before 2020.

Where the grid doesn’t yet exist for many people – particularly Africa and India – a variety of pay-as-you-go solar providers, small off-grid system providers, and standalone solar-powered devices (like lanterns) are growing rapidly. Companies like SolarNow, OMC Power, and Off Grid Electric are finding that solar is a very attractive option, even to the world’s poorest, when their main alternative is buying expensive and health-damaging diesel fuel.

A new initiative of the Obama administration called Beyond the Grid aims to leapfrog the transmission grid, and drive $1 billion in investment into off-grid and small-scale clean energy solutions in just five years, to bring Africans out of energy poverty.

Slow progress

All of this ferment and rapid change does not sit well with the plodding utility industry, of course. In the US, a full-scale, partisan, legislative war has been under way for several years as clean-energy advocates seek ever-higher renewable portfolio standards, while those wedded to the fossil-fuel incumbency seek to roll them back.

In Democratic California, long a leader in clean energy and energy efficiency, lawmakers want to force utilities to generate at least 50% of their electricity from renewable sources by 2030. In states like Ohio, Oklahoma, Kansas, and West Virginia, Republicans are working to kill their renewable portfolio standards, while in others, like Arizona, they are trying to impose punitive fees that would render rooftop solar systems uneconomic. In New York, a bold new initiative called Reforming the Energy Vision seeks to rewrite the regulated utility industry from scratch, establishing a truly level playing field where renewables, efficiency, and demand-response providers can compete with conventional power generators.

The situation is a bit different in Europe, where several nations are already obtaining significant fractions of their power from renewables.

In Germany, which has the world’s largest solar capacity and the third-largest wind capacity (after China and the US), 30% of the country’s power is now generated by renewables, and the largest utilities are coming to terms with the inevitable. RWE and E.ON, having seen their market valuations plunge by roughly three-quarters since 2008, are looking to ditch their conventional power plants and switch to renewables.

Denmark, which obtained a world-record 39% of its power from wind in 2014 and is aiming to be entirely fossil-fuel free by 2050, is looking to accelerate its phase-out of coal from 2030 to 2025.

Even nuclear powerhouse France is looking to cut nuclear’s share of electricity generation from 75% to 50% by 2025, and obtain 40% of its power from renewables by 2030. What the ultimate composition of the power grid of the future will look like remains to be seen. Will it be a network of highly democratised and decentralised renewable generators where utilities are mainly in the grid management, not generation, business?

Or will the utilities commit themselves to move away from fossil fuels, and retain their grip on the grid? Or will the success of off-grid renewable power in the developing world gradually leak back to the developed world, as many experts predict, and lead to an entirely different topography of interconnected, distributed micro-grids?

One thing is clear: Renewables have reached a tipping point, and there’s no going back.

Chris Nelder is an energy analyst and consultant. He is the author of Profit from the Peak and the co-author of Investing in Renewable Energy

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