Necesidad de Reforma de la Extinción del Patrimonio Familiar

Recent developments have furthered the integration of distributed power, which can help take pressure off centralised power generation assets. In October 2012, SGCC announced it would begin providing technological assistance and waived fees for grid connections for solar PV systems less than 6 MW. Further announcements expanded this policy to other energy sources and indicated that SGCC would provide meters for net metering, waive backup power fees (for small-scale solar PV and wind) and grant grid-connection permissions in a timely manner (25 working days for solar PV; 40 days for other sources) (Wang, 2013). These moves, combined with announced generation incentives for self-

RENEWABLE ELECTRICITY:NON-OECD

consumption, should act as a major enabler for residential and commercial solar PV deployment. Still, some challenges remain, including the application of these policies in practice on a nationwide basis and the negotiation of suitable rooftops between developers and building owners.

Current policy environment for renewable energy

Over the past year, the policy environment has evolved in a generally supportive fashion, though developments carry some uncertainty in the near term. Deployment of renewable power sources in China is still driven by official governmental targets published in the FYPs. Feed-in tariffs are in place for onshore wind, solar PV and bioenergy generation. Power producers receive the tariffs as capped feed-in premiums (FIPs) added to the coal-benchmarked price of electricity. While there is a policy in place to guarantee priority dispatch, grid companies do not always apply this in practice. The government is drafting a policy to establish a non-hydro renewable energy quota requirement, which would vary by province and would create formalised obligations for renewable generation and supply for utilities, grid operators and local governments. Still, the quota policy has yet to be finalised, and implementation details are uncertain at the time of writing.

Table 59 China main targets and support policies for renewable electricity

Targets and quotas Support scheme Other support 12th FYP for Renewable

Energy Development:

11.4% of non-fossil resources in primary energy consumption by 2015 (and 15% by 2020). Indicative cumulative capacity targets: 290 GW hydro by 2015 and 420 GW by 2020 (incl. pumped storage); 100 GW wind by 2015 and 200 GW by 2020 (of which offshore: 5 GW by 2015 and 30 GW by 2020); 21 GW solar by 2015 and 50 GW by 2020 (of which solar thermal – 1 GW by 2015 and 3 GW by 2020); 13 GW biomass power by 2015 and 30 GW by 2020; 100 MW geothermal and 50 MW ocean by 2015. Feed-in tariffs:

Apply to onshore wind, solar PV and biomass. Effectively they are FIPs over province- specific prices of coal-based power.

Incentives for small-scale generation:

Grid-connection fees waived and net metering provided for distributed systems <6 MW. For solar PV <6 MW, government is drafting a policy to provide a FIP on top of net metering for self-consumption and a FIP to the local coal-benchmarked price for electricity fed into the grid.

Golden Sun programme:

Subsidies per watt installed to grid- connected and off-grid solar PV projects.

Import duty & value-added taxes removal:

Applies to key technological equipment, including hydro and wind equipment.

Strategic planning:

Offshore Wind Development Plan.

Grid access and priority dispatch:

Projects approved by government are granted access to grid in the Renewable Energy Law. Priority dispatch guaranteed by law, but often not applied in practice.

Note: for further information, refer to IEA Policies and Measures Database: www.iea.org/policiesandmeasures/renewableenergy/.

Other developments have focused on balancing policy cost-effectiveness with increased deployment of small-scale systems and the absorption of some of China’s large solar PV manufacturing capacity. In late 2012, the government approved 2.8 GW of new small-scale solar projects under the Golden Sun programme, which provides capital subsidies for up-front system costs. Concerns over the durability of the programme have arisen given difficulties in project monitoring and assuring quality control. At the time of writing, there was no official word over the continuation of the programme beyond 2013.

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Meanwhile, the government is drafting a new feed-in tariff (FIT) policy for large-scale solar PV and new generation-based incentives for distributed systems. Projects under the former would bid for 20-year FITs; benchmark incentives would now be differentiated by region, with some set lower than the current uniform national FIT, to reflect resource availability. Distributed solar PV systems would receive a FIP on top of net metering for self-consumption and a FIP to the local coal-benchmarked price for electricity fed into the grid. By better tying incentives to generation, together these measures are likely to improve overall solar project quality as they stimulate new deployment. Still, policy implementation timing and details remain uncertain at the time of writing.

Economic attractiveness of renewable energy and financing

Though non-hydro renewable generation costs are still generally higher than coal-fired generation, the levels of FITs should make them economically attractive. In practice though, it is difficult to make assessments of the financial viability of renewable energy even under the presence of FITs. For incumbent generators, due to a lack of priority dispatch in practice, renewable projects are not guaranteed access to the grid and operators have few incentives to grant it, given their preference to sell coal-based generation. This situation would improve with the introduction of a renewable quota system, effectively offering a better guarantee of operating hours for renewable projects, particularly for onshore wind. Still, it is difficult to evaluate the extent of this driver without further details on the nature of the obligation and enforcement mechanisms.

Figure 68 China renewable energy investment during the 12th FYP, 2011-15

0 20 40 60 80 100

Solar water heaters and ground pumps

Biomass Solar Wind Small hydropower Pumped storage Large/medium hydropower USD billion

Note: USD = 6.33 CNY. Source: China NEA, 2012.

The economic attractiveness of self-consumption from solar PV appears to be improving with the introduction of grid access measures, announced financial incentives and a continued fall in system prices. For commercial entities and high-consumption households, which face relatively higher end-user prices, small-scale solar PV is likely to compete well versus retail power prices over the medium term. By contrast, the economic attractiveness of the relatively less mature technologies CSP and offshore wind has improved relatively little. Both areas face supply chain constraints and limited deployment experience.

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China’s financing environment should continue to enable renewable energy development. In 2012, investment in renewable energy rose to about USD 68 billion, from USD 57 billion in 2011. Investment needs for renewable generation are large, with requirements under the FYP implying USD 57 billion annually over 2011-15, including renewable heat. Domestic banks act as a significant source of loans; foreign investors play a role mainly in joint ventures with Chinese partners. As part of the government’s list of strategic industries, “New Energy” technologies benefit from perceived lower risks and a degree of prestige for investors. As such, Chinese banks compete strongly with one another to finance renewable energy projects, which consequently benefit from attractive financing terms. Regional banks can further enhance terms with projects to be built in their region. Overall, the liquidity position looks favourable for renewable energy deployment in China. Still, the administrative push that renewable energy enjoys may increase risks that even non-viable projects get financed.

In addition, the China Development Bank offers low-interest loans to both renewable generation projects and associated manufacturing. Finally, international development banks, notably the World Bank (through the China Renewable Energy Scale-up Programme) and the Asian Development Bank, add a further layer of funds. However, this financing tends to go to demonstration and scale-up programmes. At present these focus on small biomass, biogas and CSP projects, helping these technologies to bridge pre-commercialisation funding gaps.

Conclusions for renewable energy deployment: baseline case

China’s generation needs as well as a favourable policy environment should drive strong renewable growth over the medium term. Renewable capacity is seen growing by almost 310 GW as it rises from 340 GW in 2012 to almost 650 GW in 2018. This forecast is more ambitious than the 12th FYP targets, notably for onshore wind and solar PV. It also assumes the implementation of a renewable quota system, which will act as a driver for the improved integration of renewable generation, and that the new, draft solar PV generation incentives will come into force sometime in 2013. Still, the development and operation of the grid as well as a general lack of robust and functioning market signals in the power sector will act as challenges.

Table 60 China renewable electricity capacity and projection (GW)

2011 2012 2013 2014 2015 2016 2017 2018 Hydropower 233.0 248.9 270.0 285.0 300.0 320.0 340.0 360.0 Bioenergy 7.0 8.0 10.0 13.0 16.0 19.0 22.0 25.0 Wind 62.7 75.7 91.8 109.8 129.1 149.6 171.3 193.3 Onshore 62.4 75.3 91.3 108.3 126.3 145.3 165.3 185.3 Offshore 0.3 0.4 0.5 1.5 2.7 4.2 6.0 8.0 Solar PV 3.5 7.0 14.5 25.0 35.0 46.0 57.0 69.0 Solar CSP 0.0 0.0 0.1 0.2 0.3 0.6 1.0 1.4 Geothermal 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 Ocean 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 Total RES-E 306.2 339.6 386.5 433.1 480.5 535.3 591.5 648.9

Notes: wind capacity corresponds to installed capacity. In practice, grid-connected capacity may be lower due to delays.

The projection in 2017 is seen 17 GW higher than in the MTRMR 2012, due to upward revisions in solar PV. The significantly stronger outlook for solar PV stems from a combination of a stronger policy push, improved financial incentives and grid access for small-scale projects. Solar PV is seen growing 2013

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by 62 GW over 2012-18. The outlook for other technologies has changed only modestly versus the MTRMR 2012. Onshore wind is seen expanding by 110 GW (installed capacity) from 2012 to 2018. Future developments will likely include increased additions away from grid-congested areas in the north, at relatively lower wind-speed areas closer to demand centres in the south. While grid- connected capacity will still remain below the cumulative installed capacity in the near term, this differential is expected to narrow over time. Grid expansions and the adoption of a renewable quota system should help improve project generating hours over time. China’s offshore wind plans remain ambitious, given current, low deployment levels. The offshore wind policy environment remains complex, given the governance of offshore areas involving multiple government agencies. In general, developments are moving farther from the coast to comply with regulatory rules. Capacity growth is likely to remain less than 8 GW over 2012-18 due to supply chain and construction challenges. Hydropower additions over the medium term are expected to remain robust, in line with FYP targets. Notably, China’s second-largest hydropower plant, Xiluodo (12.6 GW), is expected to come on line over 2013-14. Additions in bioenergy for power, at 17 GW, remain small with respect to the scale of China’s system, but are strong in the context of global bioenergy growth. The forecast is somewhat lower than in the MTRMR 2012 due to slower-than-expected additions in 2012 and public acceptance challenges for waste-to-energy plants. Still, renewable waste-to-energy plants are likely to play an important role in development, given limited landfill space in many Chinese cities. Other technologies – CSP, geothermal and ocean – are expected to grow only modestly. CSP’s contribution, if realised, would be large on a global scale (over 10% of cumulative global capacity).

Table 61 China main drivers and challenges to renewable energy deployment

Drivers Challenges

• strong government backing through FYPs with expected implementation of a renewable quota system;

• eased rules for grid connections and announced generation incentives for small-scale projects; • ample availability of low-cost financing;

• robust, dedicated manufacturing and technology development.

• lack of market pricing, in general, and priority dispatch, in practice, for renewable generation; • grid planning and upgrading to integrate

increased variable renewable power;

• supply chain bottlenecks and lack of deployment history for less mature technologies, e.g. offshore wind and CSP.

Renewable energy deployment under an enhanced case

Institutional reform as well as a more integrated approach to policy and planning could further increase deployment of renewable energy in China. To some extent, China is already moving in this direction, with the anticipated creation of a renewable quota system and improved grid connections, licensing procedures and financial incentives for distributed generation. Still, further implementation details, including enforcement mechanisms, on the quota system are needed. Moreover, China’s deployment environment would benefit from a move towards market-based electricity pricing. Improved grid operations could facilitate the grid integration of variable renewables. Further development of CSP, whether hybrid designs with coal or pure solar, would also be a positive mechanism for providing storage and flexibility. Quantifying the upside potential for China remains challenging, especially given its size. While an enhanced case assumes progress towards resolving the issues laid out in the preceding paragraphs, grid constraints will persist. Hydropower deployment remains the same under both the enhanced and baseline cases. Better progress on-grid upgrades and faster offshore development could spur an

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additional 8 GW of wind capacity (onshore and offshore combined) by 2018. Faster-than-expected uptake in distributed systems could translate into over 100 GW of cumulative solar PV by 2020, implying an additional 5 GW by 2018. By contrast, the upside for CSP in 2018 looks more limited at 0.4 GW – even with a push for more flexibility and storage into the grid, the deployment gains are likely to be felt more over the long term, due to long project lead times. Finally, the encouragement of decentralised generation could help bioenergy to improve by 3 GW versus the base case, mainly through more small-scale biogas and waste-to-energy developments.

India

Power demand outlook

Buoyed by robust economic and population growth, India’s power demand should expand strongly over the medium term. The latest IMF outlook sees Indian real GDP growing on average by 6.5% annually over 2012-18. Power demand is forecast to increase by 5.9% annually over 2012-18. Demand continues to be constrained overall by supply availability. Part of the constraint stems from cross-subsidised power prices – with industrial users paying more to support agricultural and other consumers – that do not generally cover the costs of generation, in addition to grid losses and geographical mismatches between demand and power capacity. India also continues to suffer from high supply and distribution losses. Through January 2013, the Central Electricity Authority (CEA) reported that the power sector fell short on average by 9.0% in meeting peak demand (135 GW) for fiscal year (FY) 2012/13. While still high, this figure is lower than the 10.9% shortfall versus the peak (128 GW) over the same period in FY 2011/12.

Figure 69 India power Figure 70 India domestic electricity

demand versus GDP growth supply and distribution losses

-8% -4% 0% 4% 8% 12% 500 1 000 1 500 2 000 2006 2008 2010 2012 2014 2016 2018 Y-o-Y chg TWh

Demand Demand, Y-o-Y (RHS)

GDP, Y-o-Y (RHS) 0% 20% 40% 60% 80% 100% 0 200 400 600 800 1 000 1 200 2000 2002 2004 2006 2008 2010 TWh

Domestic electricity supply % losses (RHS)

Power sector structure

Generation and capacity

India’s power capacity, both renewable and non-renewable, is expanding strongly to try to meet its demand needs. As of December 2012, total power capacity stood at 210 GW, up from 187 GW a year prior. Still, actual generation remains constrained relative to installed capacity. Fossil fuels continue India sees strong renewable energy deployment across a portfolio of renewable sources. Policy uncertainties and grid integration challenges weigh upon the outlook, however.

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to dominate capacity additions, but rising needs for relatively costly imported coal and liquefied natural gas make generation from these sources economically tenuous in the face of regulated end- user prices. In FY 2012/13, fossil fuels accounted for over 80% of total generation. Hydropower, the largest renewable source, saw its share drop to 10%, with low reservoir levels causing generation to decline by 13% year-on-year. A combination of insufficient coal and natural gas generation, reduced hydropower availability, and ineffective load management contributed to the large-scale power outages that affected the northern part of the country in July 2012.

Figure 71 India power generation by source and renewable share of total power generation

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0 200 400 600 800 1 000 1 200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 TWh

Coal Oil Natural gas Nuclear

Hydro Bioenergy Wind Solar PV

CSP Geothermal % renewables (right axis)

Notes: data refer to fiscal year (April to March); 2011 data are estimated based on monthly data of CEA.

Wind power has continued to expand robustly. In FY 2012/13, it accounted for 2.7% of generation as installed capacity rose from 16.1 GW in December 2011 to 18.4 GW in December 2012. Still, capacity additions slowed during the year – only 1.7 GW were added during FY 2012/13 to reach a cumulative capacity of 19.1 GW by April 2013 – with the expiration of some key financial incentives. Bioenergy grew to 2.8% of total generation as capacity rose by 0.6 GW during the calendar year 2012, mostly from additions in biogass-fired co-generation. Solar PV remained small but its capacity rose by almost 0.8 GW. While CSP remained small in 2012, larger additions are expected in 2013 with the start of delivery of phase 1 projects under the Jawaharlal Nehru National Solar Mission (JNNSM). Off-grid renewable systems (included in total renewable capacity data) are playing a growing role in helping to electrify rural areas and meet captive industry needs. As of December 2012, combined off-grid biomass and biogas capacity stood at almost 0.6 GW, while off-grid solar PV topped 0.1 GW.

Over the medium term, India’s 12th FYP (final draft released in December 2012) foresees an increase in total, grid-connected generation assets of over 118 GW, with 11 GW coming from large hydropower and 30 GW from other renewable sources (outside of large hydropower), by 2017. Notably, additions in relatively flexible gas-fired generation are seen at only 2.5 GW. Private investment will be a major key to achieving these goals, particularly given the cash-strapped positions of state generation companies, many of which are unable to recoup their generation costs through the electricity pricing system. Development of renewable sources, which largely exceeded deployment goals under the 11th Plan, has mostly occurred via private sector entities. The 12th Plan sees nearly 53% of new total capacity coming from private sector investment versus an expectation of only 19% under the 11th Plan.

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Table 62 India power generation capacity targets under the FYPs (GW)

11th Plan, FY 2007/12 11th Plan, FY 2007/12 12th Plan, FY 2012/17

Targeted additions Achieved additions Targeted additions

Thermal (coal and gas) 59.6 48.5 72.3

Nuclear 3.3 0.8 5.3

Large hydropower 15.6 5.5 10.8

Wind 9.0 10.2 15.0

Solar 0.1 0.9 10.0

Other renewables 3.1 3.5 5.0

Total power capacity 90.9 69.5 118.5

Source: Planning Commission, 2012.

Grid and system integration

The upgrade and expansion of India’s grid will continue to represent a significant challenge to the integration of renewable generation over the medium term. In 2012, the government’s Power Grid Corporation, which develops and manages inter-state transmission, announced its “Green Energy Corridors” strategy that seeks to invest around USD 8 billion in the grid through 2017. About 44% of this investment will go towards the inter-state transmission system, with 48% directed to state-level grids,