China: Growing uncertainty over renewable power plant use

The China Energy Administration recently changed the structure of its monthly report, omitting key data on wind and solar power plant utilization rates. Previously, these reports detailed average operating hours by generation type, such as hydro, thermal, nuclear, wind and solar. From now on, the report will only include global data for the period January to May, without distinguishing by source.
The change comes after previous data showed a steady decline in wind and solar utilization rates. Between January and April, average wind hours fell by 77 hours to 789 hours, while average solar hours fell by 42 hours to 373 hours. Hydroelectric and thermal power plants, on the other hand, saw their hours rise, underscoring a shift in power generation dynamics.

Impact of new regulations

This change in transparency coincides with a major regulatory adjustment in May, when the Chinese government raised the renewable energy cut limit from 5% to 10%. This mechanism, used by grid operators to balance supply and demand, could allow for the integration of more renewable capacity, but at potentially lower utilization rates. In effect, the cut means that some renewable energy production will be withheld to keep the grid balanced.
The increase in this limit is intended to encourage the construction of new renewable energy facilities. However, it may also mean that installed capacity is not optimally used, creating challenges in terms of profitability and return on investment for operators in the sector.

Consequences for the energy sector

The decision to stop publishing this critical data raises important questions about the transparency and traceability of renewable infrastructure performance. The development comes at a time when China is investing heavily in modernizing its power grid, particularly with ultra-high-voltage transmission lines designed to better integrate renewable energy sources.
Investors and market operators must now adapt to this new reality, with limited visibility into the specific performance of different energy sources. The ability to accurately assess the performance of renewable energy investments then becomes crucial for strategic planning and decision-making.

Strategy and perspectives

For industry players, understanding the implications of these changes is key. The decline in available data makes it harder to assess the performance of new renewable installations. That’s why investors need to be doubly cautious and diligent in navigating this uncertain landscape.
In the longer term, China’s strategy may seek to balance rapid renewable energy growth with the stability of the national grid. Increasing ultra-high-voltage transmission capacity and adjusting curtailment rules are steps toward a more resilient infrastructure. But the success of this transformation will depend on the ability to maintain high utilization rates of new facilities while ensuring attractive returns for investors.