China is relaxing regulations that could slow down the global photovoltaic boom

(Bloomberg) — China has allayed fears that growing grid congestion could hamper the record pace of renewable energy installations by loosening restrictions on the amount of renewable energy that can be used in energy-rich areas.

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The move is one of a series of government policies released Wednesday aimed at promoting clean energy. Others include accelerating battery installations and accelerating the construction of power lines. Beijing has also called for a stricter approval process for some types of clean energy production amid overcapacity that has slashed corporate profits.

The new policy serves China’s current goals of reducing nationwide energy consumption and carbon dioxide emissions per unit of GDP in 2024 by 2.5% and 3.9%, respectively. The government’s top economic planning agency admitted at a briefing Thursday that it has missed its targets and will likely miss the 13.5% reduction in energy intensity by 2025 envisioned in the current five-year plan.

Shares of Chinese clean energy companies rose significantly on the back of the policies outlined in the State Council’s action plan. Polysilicon producer GCL Technology Holdings Ltd. rose as much as 10% in Hong Kong, while wind farm operator China Longyuan Power Group Corp. gained as much as 6.1%.

Power losses

The plan introduces a widespread change to the rules governing the amount of renewable energy that can be wasted due to grid capacity constraints. For wind and solar farms in “better resource areas”, production can now be reduced by as much as 10%, compared to the previous limit of 5%. China has seen greater restrictions this year after breaking records for solar and wind installations in 2023.

The change will enable more renewable energy sources to be deployed in places where the grid would be considered congested. That could mean China installing an additional 30 gigawatts of solar panels this year, Albert Miao, head of Asia energy transition research at Macquarie Capital, said in a note.

At the same time, it could put pressure on the profits of renewable plants, which could see more of their production cut off, said Dennis Ip, an analyst at Daiwa Capital Markets. Still, these utilities will likely benefit from other clean energy enablers in the government’s plan, he added.

The plan also calls for better use of new production capacity for a range of new energy metals, including silicon for solar energy and lithium for batteries. It also prohibits preferential energy rates for energy-intensive sectors, which will likely benefit GCL’s low-energy polysilicon production methods, Ip said.

Other policies include increasing battery capacity to 40 gigawatts by 2025 from the previous target of 30 gigawatts.

(Updates with new details and share prices throughout)