Amidst the chorus of frequent capital withdrawals from power plant investments, the development of distributed photovoltaics in China has reached a crossroads.
In mid November, Power Investment Energy, a subsidiary of State Power Investment Corporation, announced that the company had approved a proposal to write off a 40MW household distributed photovoltaic project in Arukerqin Banner, Chifeng City. According to previous announcements, the total investment of the project is 163 million yuan, and the financial internal rate of return of the capital is 8.53%. According to the latest requirements for the investment return rate of distributed photovoltaic projects, the conditions for further promotion are no longer met, and it is recommended to write them off.
The distributed photovoltaic project with an expected yield of 8.53%, which significantly exceeded the industry average, was cancelled and terminated, which shocked the outside world. However, several people engaged in new energy investment told First Financial reporters that this situation had already begun to emerge at least six months ago. In the situation where grid connection procedures are becoming increasingly difficult to pass, market entry profit risks are intensifying, and most central power enterprises have completed relevant construction indicators ahead of schedule, enterprises are becoming more cautious in investing in distributed photovoltaics, with many cases of transfer and sale.
But on the other hand, as the most closely related renewable energy source to people's lives, the existence of distributed photovoltaics has its own unique value and development logic. Several industry insiders emphasized that breaking through the bottleneck period of industry development requires systematic and comprehensive policy guidance, advanced technology and model promotion, as well as strong support from financial instruments.
Recently, the international environmental organization Greenpeace and the School of Economics and Management at Beijing Institute of Technology jointly released the report "High Quality Development of Distributed Photovoltaics in China - Exploring the Pioneering Role of Shandong Province and Jiangsu Province" (hereinafter referred to as the "Report"). Through field research on distributed photovoltaic projects in two key regions, multiple action plans were proposed to promote high-quality industrial development.
The report shows that Shandong and Jiangsu are the pioneers in the development of distributed photovoltaics in China. As of the first half of 2024, the cumulative grid connected capacity of distributed photovoltaics in Shandong Province and Jiangsu Province ranks first and second respectively in the country, and the two provinces have gradually explored the "Shandong Model" and "Jiangsu Model" that are in line with their own development characteristics in the process of development. The Shandong model is characterized by "household oriented - whole village development - centralized convergence - full grid connection", while the Jiangsu model is characterized by "industrial and commercial oriented - self use - surplus electricity grid connection". However, the two provinces have also exposed a series of representative challenges and difficulties, which are quite representative in the development of distributed photovoltaics nationwide.
According to the "Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation (Draft for Comments)" released by the National Energy Administration in October, general industrial and commercial distributed photovoltaics can choose to use all self generated or self generated surplus electricity for grid connection mode; Large scale industrial and commercial distributed photovoltaics must choose a fully self generated and self used mode, and project investors should achieve full self generated and self used electricity generation by configuring anti backflow devices. At the same time, policies introduced in multiple regions indicate that almost all electricity connected to the grid, except for natural person households, needs to participate in electricity market transactions. This means that the Shandong model, characterized by full internet access, will face significant impacts on grid connection and revenue.
The main author of the report and senior project director of Greenpeace Climate and Energy, Gao Yuhe, told First Financial reporters that the reason why distributed photovoltaics in Shandong, represented by the region, mainly adopt a full grid connection mode and have not achieved the initial positioning of distributed photovoltaics as mainly self use, is that the current demand for rural green electricity load has not been stimulated. Meanwhile, there is also some controversy in the industry regarding the centralized convergence model.
Gao Yuhe explained that centralized convergence can be understood as the centralized integration and development of the roofs of a certain village, where all photovoltaic projects are centralized into one or several step-up transformers, and finally connected to the grid through a 10 kV line. Compared to installing inverters in every household, the advantage of centralized convergence is that villagers do not have to invest in installing inverters themselves, the total installed capacity is more controllable, and the income is relatively stable. But the disadvantage is that this will increase the cost of integrating distributed power generation into the grid, and there are different opinions in the industry on whether it should be classified as distributed photovoltaics or more strictly regulated centralized photovoltaics for management.
Centralized convergence is often interconnected with full internet access. To change the mode of full access to the Internet, Gao Yuhe stressed that two key ideas are worth learning: on the one hand, make good use of the rural revitalization policy to increase the local green electricity consumption scene in rural areas; On the other hand, exploring the potential for distributed photovoltaic development in cities from multiple perspectives and levels.
A misconception that some industry professionals may fall into is that they focus solely on the supply of energy and overlook the broader issue of consumption. Our experience during the research process is that the consumption bottleneck encountered by distributed photovoltaics in rural areas is closely related to the lack of local industrial support and other suitable application scenarios. The opportunity to solve this problem lies in the fact that the country is vigorously promoting rural revitalization. Whether it is street lamps, smart agricultural facilities, new energy vehicle charging piles, or introduced industrial parks, they can comprehensively consider and expand the ways for rural green electricity to be consumed nearby, which is a good thing for farmers to increase income and reduce production and living electricity costs, "said Gao Yuhe.
In addition, Gao Yuhe pointed out that in sharp contrast to the dense distribution of distributed photovoltaic "red zones" in rural areas, there are still a large number of undeveloped distributed photovoltaic power plant scenarios in cities, which is a blue ocean market. Cities are closer to load centers and naturally more conducive to photovoltaic consumption than rural areas. Currently, a large number of industrial and commercial parks in Jiangsu have completed the construction of the Jiangsu model by utilizing their rooftop resources and electricity demand, which has not been fully promoted in other regions of the country. In the face of this market gap, local relevant departments, especially the power grid, need to strengthen their support in line construction and registration access.
It is worth mentioning that at the 20th International Forum on Distributed Energy held earlier, several experts mentioned that this year's government work report proposed for the first time to "promote the development and utilization of distributed energy", which shows that distributed energy is playing an increasingly important role in the national energy system. Despite facing development difficulties due to various reasons, they are not pessimistic about the future.
Yao Qiang, Vice Chairman of the Chinese Society of Electrical Engineering, proposed at the meeting that "expanding the power grid, scaling up industries, revitalizing rural areas, sharing local benefits, benefiting the public, and minimizing social costs" will be the basic logic for achieving sustainable development of energy, including distributed photovoltaics.