This is Dana Perkins and you're listening to Switched on the BNAF podcast. The Chinese government has introduced one of the world's most ambitious renewable energy plans, targeting one thousand, two hundred gigawatts of wind and solar installations. To help them get there, over the past three years, China has announced three successive batches of projects which will rely on some very very large renewable energy projects called megabases. Each
megabase will produce a minimum of one gigawat. To put this in context, you could expect to see a project in Germany at around fifteen megawats, or in the US it perhaps maybe fifty megawatts. So between now and twenty thirty, China's nearer term goal is to have these megabases add up to four hundred and fifty five gigawatts of clean energy. The projects will largely include wind and solar, but they'll be aided by new or retrofitted coal fired power stations
to help with intermittency. To tell us about these megabases, I am joined by two analysts from b and EF's Beijing office, Shan Yu Chen and Tianni Zoo. They're going to explain what's included in these three batches of projects, and they're going to get into some of the implications such as the impact that these projects have had on
solar module and wind turbine manufacturers. To access the report titled China's Unprecedented four hundred and fifty five gigawatt Energy Megabase Plan B and EF subscribers are going to be able to find it at BNF dot com or at bn EF on the Bloomberg terminal. Subscribe to the show for updates and give us a review to share us with others. Right now, let's jump into our conversation with Chen Yu and Tianni. Welcome to switch. Sean, nice to have you here, tian.
Ye, nice to be here with you.
Dana and Han You welcome to the show as well.
Hello Dana, good to be here.
So we're here to talk about megabases, and let's start with the definition. What what makes something a megabase?
Yes, so megabases refer to all those wind and solar projects that is over one gigawatts per projects and they are mainly located in deserts and wastelands in China.
So the Chinese government have targets for renewable energy rollout can you first of all define what those targets are and then explain how megabases fit into reaching these.
Yes, Chinese government sets a very ambitious target of reaching cumulative one thousand and two hundred gigawatts of wind and solar installation by twenty thirty and off this target, the aim is to roll out four hundred and fifty five gigawtts of wind and solar megabases before twenty thirty and Chinese governments aim to install the first two hundred gigawatts renewable megabase between twenty twenty one to twenty five and to install the remaining two hundred and fifty five gigawatt's
renewable megabase between twenty twenty six to twenty thirty.
So we all know in order to actually reach a target there need to be several policies in place in order to create the incentives for companies to actually do the things that are required for this level of installation. So what are the national policies in China that were introduced to drive the rollout of renewables to reach the targets?
As the pivotone national strategy to boost renewable capacity, megabases are mentioned in all of China's government key carbon and renewable policies. China's National Development and Reform Commission and the National Energy Administration announced the first badge of megabased projects in twenty twenty one, which required a total of ninety seven gigawats of wind and solar projects to be commissioned
in twenty twenty three. Project list of the second badge was delivered about half a year later in twenty twenty two, and in February twenty two three, the list of the third badge was issued, different from the first batch, which had a total capacity disclosed in public. The letter. Two badges had not been disclosed on national levels, so we have no idea how many capacities included in these two badges.
To now, BNEF has tracked thirty eight gigawatts in the second batche and fifty three giquads in the third from the public sources. As for the detailed policies, there have been three key points on the national level that highlighted
megabases so far. The first one Action Plan for Carbon pig before twenty thirty, released by the State Council and aligned to develop megabases to contribute to China's target to have one thousand, two hundred gig board of wind and solar capacity by twenty thirty and the second one is also from the NDERC and the AA issue the fourteenth five year Modern Energy System Plan, which goes for acceleration of the establishment of renewable megabases on deserts and wastelands
a lesbian list also from the NDRC and the AA, together with other administrations from the central level. The fourteenth five year Renewable Plan maps out the Megabase pipeline across seven regions of Chriss, China and states that clean power should account for over half of transmitted electricitic volume on All new lines planned were commissioned during twenty twenty one and twenty twenty five.
So batches were announced in twenty twenty one, twenty twenty two, and again in twenty twenty three. Do you expect that there will be an additional batch announced in twenty twenty four or is what has already been planned? Essentially what is going to be built?
The three batches that has already been announced add up to one eighty eight gigawatts that corresponds to the two hundred gigawatts I mentioned earlier that is set to be installed between twenty two and one to five. We do believe that there will be future batches of megabases, but we don't know exactly when.
So the first batch of megabases was actually set for completion by the end of twenty twenty three. Can you talk about the different composition of renewables that went into this, I mean pretty much how much of it was solar and how much of it was wind.
So from the first batch of megabases, it contains forty five gigawtts of wind, fifty one giglets of PV, and one gigotts of solar thermal, and most of these power sources are separate, not collocated. The wind capacity mostly locate in inner Mongolia where the wind resources are very strong, and.
As Sharing has stated on the prev capacity of fifty one gigats in the first batch, the northwestern provinces, which enjoys more sunshine and greater land availability, account for sixty three percent of the total plant solar capacity.
And as for the wing megabase projects, we don't think that all of the wind megabased projects will achieve the step line that Dana you mentioned earlier. At the end of twenty foy three because of land use issues. For example, there's a two gigawoods megabase projects in west Inner Mongolia. The developer violated the forest land use regulation and they need to resolve those issues before they can get fully commissioned. So from our database, our database show that this project
is still under construction and not commissioned. Apparently they've missed the deadline at the end of twenty foury three.
So you mentioned that these megabases are being built on areas that are otherwise not used for something else, and you actually referenced the project in Inner Mongolia. Can you talk about where they are located for the most part of most of them in Mongolia or most of them further west, further east, and really how far away are the megabases from ultimately the end consumers who are going to be requiring this power.
From our analysis, we've found that out of the three batches of megabases, fifty eight percent of the capacity is used for local consumption and forty two of them is used for transporting to other provinces. Most of the wind and solar megabased projects are located in the northwest areas of China, where there are a lot of wastelands and deserts.
Up until this point, we have largely talked about that first batch that was coming out. Let's talk now about the second batch. So what is the composition of that in terms of wind and solar?
As is stated previously, there is no official number under total capacity for the second batche. From provincial governments and public sources, we have tracked thirteen nine gigawots, comprising of fifteen gigawotes of wind and twenty three giguards of PV and point four giga wots of solar thermal. Most projects in the second badge are located in northern China and fifty four percent of project in capacity will generation to Centro and eastern China.
And that brings us to the third, the most recently announced batch. What is likely to happen there?
The third betch megabase projects are mainly located along the Yellow River and as of July twenty twenty three, there has been fifty three gigowotes disclosed, including twenty point six gigotts of wind, thirty two gigle wots of PV and point point gigots of solar thermal. Of these, there was four point nine gigottes of offshore PV projects from Townshup Province.
So I think that's really interesting because we're talking now about offshore PV. I mean, you'd already established that these require vast amounts of land, so they've had to locate them further west than maybe most of the population actually lives. But then this one in yang Zoo Province, and for those who are not familiar with the geography, that's on the east coast of China, actually bordering the Yellow Sea, and there is an offshore solar megabase planned for that location.
Can you tell us a little bit more about that?
Again with a quick background for those who are not familiar with Tansu Province, this province is one of the most densely populated provinces in the country, containing major cities like Nanjing and Chanzho. Due to the rapid solar deployment in recent years, land constraints have urged developers to look
offshore to accommodate solar farms. However, the prevalent design in China's offshore PV projects is fixed pile foundation and built in intertitle areas rather than the floating system in deep water and large provinces along the eastern coast have very big plans on offshore PV. Shando only aims to have twelve gigawottes of this kind by twenty twenty five. Jamsho plants have five gigawatts of offshore PV by twenty twenty
five and another five gigaottes by twenty twenty seven. Other provinces like Changing and Juddsown have also released relevant policies and pilot projects. We'll seeking what level of shore PV installation from the coastal provinces in the near future, but there are still big challenges to be tackled, such as the corrosive salt and constantly moving water presenting technical problems for equipment, construction, operation, and maintenance.
So tell me a little bit about the companies that are actually developing these megabases.
Most developers of the first batch of wind and solar projects are state owned enterprises affiliated to either central government or local government. Based on our analysis, central or local state owned enterprises accounts for eighty eight percent of the total wind installations and ninety two percent of solar, and private developers are only twelve percent of wind and nine percent of solar.
So This is an incredible amount of generation capacity that's going to be installed and invariably then that means we need to have a equally capable grid to connect to it. So with the introduction of high voltage grids, which is something that actually our colleagues and Jee mentioned on a previous show about grid connectivity, can you just talk a little bit about what some of the plans are for grid rollout and really whether or not you expect it to keep pace with the megabase buildout.
The ultra high VOLDE transmission lines are critical to connect megabased projects to demand centers. The central government planned to send sefty five percent of megabase generation outside of where they're located. Nine new lines potentially utilized for the first batch have been in place, with fourteen nine yugowot's out of ninety seven gigs supplying to other regions, and most of these lines have the utilization rate under sixty percent
in twenty twenty two. The commissioning of the first batch will drive up the utility rate, but not very in a significantly way, so there is little fear of having curtailment caused by transmission lines. Besides the existing nine uchevieliance. We ask may their stident needs another eighteen to twelve
uchvieliance to support the future badges. By the end of twenty twenty three, the Central officials have approved seven new lines for megabases, which are all targeted to be commissioned by twenty twenty five.
So you had mentioned kurtailment, but I actually want to talk about the other end of the spectrum, which has to do with the risk posed by renewables to security of supply. If there is a large wind farm or a large solar farm and we don't have the right amount of sun, or the wind isn't blowing as hard, and there is a large number of people and companies that are dependent upon the power coming out of these megabases, what is the plan to handle supply?
That is a great question, Dane, because winded solar energy is unstable, and especially wind is more unpredictable. So for great safety and stability, megabased projects that exports to other regions are required to collocate with round the clock dispatchable technologies such as coal and energy storage, and a guidance from National Energy and Administration says that the capacity of supporting coal plants should be less than thirty percent of
collocated renewable energy capacity. So in total, we counted seventy nine gigawads of megabased projects that are exporting their generation. Therefore, it'll include up to twenty three point seven gigawats of supporting coal plants to be collocated with them.
So let's stay on the topic of coal for a second. You're bringing this up as a source of flexible capacity, which is required in order to enable this entire complex project to actually happen. Can you talk about some of the ways the use of coal is actually quite different in this circumstance and what this means for the aging fleet of coal fired power stations across China.
In the near term, China relies on copower to provide the firm capacity to deal with the intermittent renewable production in the power system. The main challenge is that most of current copower plans in China were designed to carry baseloads. Note for flexible service, China is do in the very early stages of retrofitting the traditional generators. The government does plan to retrofit two hundred gigle wots of the existing co fight capacity to provide flexible service.
So you'd mentioned that these projects are being installed largely in part by the Chinese government, So talk to me a little bit about how energy prices are actually structured and agreed.
As we have discussed previously, there are two types of power consumption for nigbased generation for local use and for transmission to other provinces. As for the power price, this generation for local use will have the coreference rate, which has very good economics for projects. In contrast, those four
export to other regions. The power exchange administrations from the sending province and the receiving end they negotiate the power prices, which are normally lower than the coreference rate and affected by the fluctuation of power market prices in the receiving province.
So, sticking on the topic of prices, we had a podcast we talked to our colleague Jenny Chase about solar and one of the things she brought up was that, in particular, the modules coming out of China were record low prices. One has to assume that megabases have had a role to play in creating demand for wind and solar. Can you talk a bit more about both of these industries and what that really means for manufacturers and for the prices of the wind and solar modules and turbines.
Let's begin with solar. The module assembly CAUs T has been expanded very fast during the last two years. Investors were stimulated by very ambitious targets from the official site. Signally, the downstream demand is certain and very large. In our latest PV market outlook published earlier this week, we estimate there were four hundred and forty four giglets of solar installed in twenty twenty three around the globe. China PV market hit another record by accounting for over sixty percent
of the global total. The strong momentum was mainly driven by the falling mojor prices as you stated, megabase push and the booming's moll scial market, and this for twenty twenty four, we expect the PV edition in China will increase two two hundred and fifty five gigots in alternating current or three hundred fifteen giglets in direct current. The oversupply has resulted in mojor price collapsing, making rooftop solar
more affordable. Low cost modules will enable growth in emerging markets like Africa and Latin America, where Brazil, for example, is seeing commercial residential PV boom, and if we go back to the one thousand, two hundred gig world go these target is merely the task by twenty thirty, which is far from supporting net zero by twenty six the project pipeline is sufficient. In China, benef project database shows at least three hundred giga lottes of solar projects and
the construction. This number has not counted this small scale market, which has contributed more than helf of the menual built since twenty twenty one. Generally, our expectation shows a growing trend throughout twenty thirty. In China market, a total of two tero loots of PV is to be installed from twenty twenty four to twenty thirty.
As for wind market, the biggest impact of megabase pro is that the implementation helped further drive down the average wind turbine price per megawatts in China.
First, the bigger.
Turbines can better capture strong wind resources in the deserts and wasteleands. Although it's more expensive per turbine, but it's actually cheaper permegobots. And as we mentioned many times before megabased projects are large, requiring a lot of large turbines and utilize the economic.
Of scale trauma.
Manufacturers can offer lower prices compare with supplying two smaller projects.
So these megabases are going in adding a huge amount of capacity. Does the demand for these projects actually exist? When it comes to than consumers.
There won't be a lot of troubles for the first badge generation consumed locally except Ceiling and Shinhai, which have limited power demand growth in the near term, but for the fulling badges, the consumption challenge will be severe as the local power or demand in Northwestern regions may not keep up with additional generation. BNF estimates sixty seven percent of generation in the second and third batch to be consumed locally. The officials are urged to attract more investment
on manufacturing industry to consume the megabas generations. JENNA is on the trajectory to hit one than two hundred gig votes in twenty twenty four, but due to this rapid deployment in recent years, there have already had curtailment in Northwestern provinces in the last year. It may aggrevate this year. The AAA is working on Loco great network system upgrade and urging more flexible capacities to be built collocated with renewable projects.
So final question with these batches that have been announced, when should the last of the announced batches actually be completed and online?
Dan, A very very good question. We don't know that, and so we know exactly when it'll be finished construction and online. But the total number is the four hundred and fifty five gig awards of Windows Solar mega based projects have to go online before twenty thirty.
So we will see what happens between now and twenty thirty and whether China overachieves their target and does it sooner. Tiany and Chianyu, thank you very much for coming on the show today and telling me more about these mega developments in solar and wind in China.
Thank you, Dana, thank you.
Switched On is produced by Cam Gray with production assistance from Kamala Shelling and Lushi Karunorate. Bloomberg ne EF is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed, as investment, a vice, investment recommendations, or a recommendation as to an investment or other strategy. BLOOMBERGUINNIAF should not be considered as information sufficient upon which to base an investment decision.
Neither Bloomberg Finance LP nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the information contained in this recording, and any liability as a result of this recording is expressly disclaimed