Published: Tuesday, May 21, 2024
JINAN, China – Shi Mei’s husband and she earn a good living growing millet and corn on their small farm located in the eastern province of Shandong. They decided to diversify their business in 2021 by investing into solar energy. A contract was signed to install 40 panels on the roof of the farm to provide energy to grid.
Shi can now track the amount of money Shi and her husband earn by tracking the wattage of electricity that they produce. This is the equivalent of about $10,000 per year.
Shi said, “When the sun shines you can make money.”
The Shi family has been at the forefront of a solar boom that is sweeping China. China has long been a leader in solar manufacturing, but it didn’t install much of it domestically. The government is now focusing on the urgent need to reduce its world-leading greenhouse gas emissions while growing its green economy. China wants to generate one-fifth its electricity from renewable sources by 2025. It has offered many subsidies to businesses and local governments.
Shi’s rooftop installation and industrial solar are working so well, the grid can’t handle all of the power. Shi got in early, as some cities, including Shi’s village, have stopped new rooftop solar installations.
Solar companies and analysts agree that the future is bright for China if it can adapt quickly to the oversupply. Companies and utilities are scrambling for battery capacity to store the energy generated. They would like to see flexible energy pricing to match demand and supply. They’d also like to see technology that allows coal power to be started and stopped more easily so that solar power is not the only source of clean energy that’s “curtailed,” in industry-speak, when the grid cannot take any additional supply.
Grace Gao is a Climate and Energy Senior Campaigner for Greenpeace China. She said, “China has a great opportunity and potential to achieve its carbon peak in its power sector by 2025.” “I look forward to seeing Shandong become a true leader in renewable energies and show off its best practices to other parts of China,” said Grace Gao, a Climate and Energy senior campaigner at Greenpeace.
Solar is being installed in China at a rapid pace and with a large scale, as it has been for many other infrastructure projects. According to China’s National Energy Administration, the country added 216 gigawatts in solar power in 2023. A little more than half of that was in large solar farms. According to Wood Mackenzie’s research, China added more than half the solar power installed worldwide last year.
Gao stated that a gigawatt solar energy is sufficient to meet the needs of 320,000 Chinese homes for an entire year.
Shandong Province added 14 gigawatts solar power in 2023. The province can now produce more energy than it needs at certain times of the day. The province is the leader in renewable energy, but it also faces the challenges of rapid growth.
Peng Peng is the secretary general for China New Energy Investment and Financing Alliance.
After China announced subsidies in 2014 for rooftop solar and industrial solar, Shandong with its advanced manufacturing industry was a candidate to lead the way in solar development in comparison to provinces that were less populous like Qinghai or Inner Mongolia.
Wang Xingyong, who installs and maintains solar panels on rooftops for clients ranging in size from villagers to large factories, said that his business has grown every year since 2016.
He said, “At first, we might do just one project, for a farmer. It would be worth 10000 yuan or 50000,” “Later we would do a few hundred thousand or millions for one project.”
Many companies, like Wang’s, offer to rent roofs from villagers or factories. Villagers purchase the systems, and receive payouts by selling electricity to the grid. Wang is paid to maintain and build solar systems for factories who use the electricity generated.
Wang explained that the concept of generating electricity was initially difficult to sell, as few people believed the government would reimburse them. Wang explained that he gradually won over people, first with his friends and family, then by putting up the money to buy the equipment. He then moved on to other villages.
Few people talk about the big ideas, such as the target set by the government to reach a carbon emission peak in 2030. The bottom line is cash in the pockets of people. Shi, the farmer said that her neighbors had installed solar panels on roofs as a result of her success.
She said that the return on investment was higher than if you put your money into a savings account. She’s still making money thanks to her contract until 2021 even though the village no longer allows new installations.
Liu Wenping is an investor who invests in solar companies. He said that a second model would allow families to get paid rent for allowing solar to be installed. This could amount to as much as $414 a month. As an added incentive, they may also receive a refrigerator or air conditioner for free. They will also earn a small percentage of the electricity sales, but not as much money as those who purchase solar equipment.
Chinese battery manufacturers, EV makers and utilities all race to develop more advanced batteries for storing the electricity generated by solar panels. Batteries may be getting cheaper but they still have an impact on the profitability of the model. The Shandong Provincial Government is running a Dezhou pilot program with lithium iron-phosphate batteries. These batteries can store energy during times of peak production, and then feed it into the province’s grid as needed.
Another fix is to move to spot market pricing where the price fluctuates on an open market. China uses electricity prices that are set by regulators and updated following extensive research. China cannot lower prices at off-peak hours to encourage customers to switch to these times.
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Last year, Shandong regulators introduced trough prices, which saw electricity prices drastically reduced to encourage people use it when there was a surplus of electricity but low usage — in this instance, during the lunch hour, when most factories take a break. The factories responded by shifting their usage to take advantage of the cheaper electricity.
Solar analysts expect China to move eventually towards a market-driven price structure for the grid.
China, meanwhile, is determined to improve its grid. In February, the National Development and Reform Council (NDRC), which is responsible for economic policy and implementation in China, called on the provinces to increase grid flexibility. The council also called for retrofitting old coal plants with modern technology to allow them to power up and down more quickly. The council wants to create a “smart grid” that can decide quickly when the best time is to distribute power generated.
“Every country around the world, which is installing large amounts of renewables, and is then faced with the challenges that come from all this intermittent variable generation, is looking for intelligent AI-enabled, or at least model backed approaches, to distribute and use this power in the most efficient way,” said David Fishman. He is a senior consultant at the Lantau Group, who tracks China’s Energy Industry. “Certainly, that’s the direction China is headed.”
The solar construction in China is not slowing down. Other provinces of the south are attracting companies that aren’t quite as advanced as Shandong.
In Shandong, Wang the solar installer is still optimistic about his future despite the stoppage of new projects because he has industrial clients. He has already planned to upgrade transformers. He’s also intrigued by the trend sparked by China’s electric-car explosion: all-in one stations that combine solar power generation, battery storage, and electric vehicle charging.
He said, “I am confident that the future will only be better.”