China's 13th Five-Year Plan for renewable energy Development sets a target of 680 million kW of renewable power generation in 2020, and 750 million kW of renewable energy installed in 2019, meeting the planned target ahead of schedule.

If the "13th Five-Year Plan" in various fields of energy is like a middle-distance race, renewable energy represented by photovoltaic and wind power is undoubtedly the leader in this race, which is not only reflected in the growth of installed capacity, but also in quality development, technology improvement, cost reduction, mechanism construction and many other aspects. The development of renewable energy has achieved a leap in the 13th Five-Year Plan period.

All the quantitative indicators put forward in the plan, including the installed capacity, generation capacity and proportion of renewable energy power generation, and cost reduction, have been achieved ahead of schedule. Some of the targets in the power generation field that have not reached the target are expected to be achieved in 2020. The wind abandon rate and light abandon rate of the national and key areas related to the consumption also reached the target one year ahead of schedule, and the national reduction was less than 5%, and there is still room for further optimization in some key areas.

Plan proposed by the quantitative targets, during the period of "much starker choices-and graver consequences-in" renewable energy development and utilization of target system, renewable energy generation full of affordable acquisition management method, clean energy, renewable energy electricity given given action plan security key mechanisms such as releasing, instructive, binding, voluntary complementary mechanism of renewable power system has been formed. At the same time, the establishment and implementation of wind power investment monitoring and early warning and photovoltaic power market environmental monitoring mechanisms have also effectively played a role in guiding and standardizing market development.

The rapid growth of the market and industry has also brought some problems that need to be straightened out. In the second half of 2019, the NPC conducted a law enforcement inspection on the implementation of the Renewable Energy Law of the People's Republic of China. According to the inspection report, remarkable progress has been made in the development of renewable energy and the effect of law enforcement has been obvious. But there are still other planning has not yet been fully cohesion, the given pressure is still large, full of affordable renewable energy acquisition system implementation is not yet in place, the electricity price compensation and development fund problem is serious, and the related tax policy cohesion is not enough, such as land environmental protection and renewable energy policy in non-electric application support is short board, still need to strengthen the development and application of renewable energy technology, renewable energy industry Tube strength is not enough and so on eight problems.

To solve the above problem is security of renewable energy was the key to the sustainable and healthy development, implementation of landing given security mechanism, promoting continuously reduce costs, improve market surveillance and bidding mechanism, completes the parity and bidding for project construction is the breakthrough point, in 2020 the "final", the main task of the "much starker choices-and graver consequences-in" to realize to the smooth transition of "difference".

Dig deep cost reduction space to take the second step of parity

According to the 13th Five-Year Plan for renewable energy development, wind power will compete with coal-fired power generation by 2020, and photovoltaic power generation will be connected at a price on the sales side.

From the perspective of the development of the renewable energy industry, its future potential and policy orientation, the path to parity for renewable energy is a clear three-step strategy.

The first step is the demonstration stage. In 2017, the National Energy Administration launched 13 onshore wind power parity projects with a total of 705,000 kW, and some projects were completed in 2019. In 2018, the 6 million kW onshore wind power affordable demonstration project in Ulanqab Phase I, Inner Mongolia, was approved by the State Power Investment Corporation, which made it clear that the electricity could be consumed in Beijing, Tianjin and Hebei without subsidies. It was the first large-scale non-subsidized affordable base project. In terms of photovoltaic power generation, in addition to household photovoltaic, distributed photovoltaic that can have a certain proportion of electricity self-use has become economic without the subsidy of kilowatt-hour around 2018.

The second step is the scale promotion stage. In January 2019, the National Development and Reform Commission and the National Energy Administration issued the Notice on Actively Promoting the Work of Unsubsidized Parity Access of Wind Power and Photovoltaic Power Generation, which clarified the scope of application for projects scheduled in 2019 and 2020. And the affordable project can enjoy 20 years of power purchase agreement, participation in market transactions, full consumption, sale of green certificates and other 8 support policies. In 2019, the National Energy Administration confirmed the first batch of parity projects in the scale promotion stage of 4.51 million kW wind power, 14.78 million kW photovoltaic power and 1.47 million kW distributed market transactions. In March 2020 and clear before the end of April local will submit the 2020 parity project.

The third step is to fully parity stage, at present, have made it clear that the new arrangement of onshore wind project since 2021 to subsidize and achieve parity, according to the current situation and recent pv industry development dynamic, technological progress and industrial upgrading cost of photovoltaic (pv) and decline in space, photovoltaic power generation in the initial period of "difference" have possessed parity conditions, In 2019, there have been projects in the PV leading award base that are lower than the benchmark price of coal power.

Therefore, according to the above parity path, 2020 is an important second stage, which needs to achieve the scale promotion target, and lay the foundation for the full parity stage after that. The premise of scale promotion is that enterprises and projects can obtain relatively reasonable income. In the case of no subsidies, digging deep to reduce the cost space is the key to take the second step.

The first is the cost of technology.

In the total cost of renewable energy projects, technology costs account for a large proportion, and the fastest rate of decline. Taking photovoltaic as an example, thanks to the competition of various technical routes, the cost of two core equipment, photovoltaic module and inverter, decreased rapidly and continuously during the "13th Five-Year Plan" period, and the average KWH cost decreased rapidly. In 2019, the average KWH subsidy level of the bidding project was only 0.065 yuan/KWH. At the beginning of 2020, the electricity demand measured by the Energy Research Institute dropped to 0.35-0.5 yuan/KWH or even lower.

Recently, there has been an increase in the concentration of technology types on the silicon, battery and component sides. For example, the proportion of PERC batteries has increased rapidly in the past two years, but a variety of new technologies are competing at the same time. Under the pressure to reduce costs in 2020, while it is difficult to predict exactly which new technology will win the market in the future, it is expected that more efficient products with greater power generation capacity will create fierce competition and achieve the goal of reducing system costs.

Second, the space for non-technical costs also remains to be explored.

Non-technical cost is another focus of the industry in recent years, and the control of the level of non-technical cost is also considered to be an indispensable condition for the realization of comprehensive affordable Internet access. In recent years, national energy authorities and industry have been demanding and calling for reducing the burden of enterprises' investment and operation, such as paying reasonable land taxes, putting an end to unreasonable local charges, reducing the financing burden, power grid enterprises to bear the connection cost or buy back the connection line, and has achieved certain results.

In addition, in addition to the above-mentioned non-technical costs, we also need to pay attention to some easily neglected non-technical costs, such as the costs caused by the large number of investment entities.

For small-scale distributed power generation projects, especially distributed photovoltaic power generation projects, the proportion of such costs is relatively high. Many small projects are multi-stakeholder business models: the building owner provides the roof, the project development or service company invests and operates, and the electricity company consumes the electricity.

From the perspective of financial evaluation, this model can make the project get a good profit. But in practice, multi-agent participation is actually a fragile model. Poor internal communication mechanism and poor external economic situation may affect the operating ability of investors, the consumption ability of electricity enterprises and the trust degree of owners to other relevant parties. Additional investment, additional communication and other non-technical costs resulting in corresponding increase, become the main factors affecting the project income and increase the risk of income.

To solve this problem, one way is to refer to the foreign model, that is, to reduce the intermediate investment, financing and other complex links, and let the owners with investment ability invest and operate by themselves. The original investment development company focuses on providing turn-key project construction in the early stage and operation and maintenance services in the later stage. For owners, the initial return rate of this model may not be too high, but it can reduce intermediate links, reduce communication costs and potential risks, and generate relatively stable long-term returns. Another approach is to quickly address the issue of network fees and remove the barriers to market-based trading of distributed renewable power generation projects, known as "power through the wall".

We will improve the market mechanism to make investment more attractive

If the affordable Internet is the "internal repair", then the optimization of the market is a more critical "external practice" in 2020.

In December 2019, Shanxi Province solicited opinions on the "2020 Provincial Adjustment Power Generation Enterprise Generation Regulation Target Plan (Draft for Comments)" and proposed that "1200 hours of benchmark utilization of wind turbines and 900 hours of photovoltaic units should be arranged, and all electricity except the benchmark electricity price should participate in market transactions". Photovoltaic leader if in accordance with the implementation, for some projects, parity, surfing the Internet, and runs counter to the policy of the regulations of the state before, for other projects, and is generally lower than the provisions of the state of full acquisition of minimum number of hours of affordable, the short term impact on project and earnings, the long term, or will affect the subsequent development of renewable energy in Shanxi Province.

The local practice of lowering the scenery minimum guarantee acquisition hours is not limited to Shanxi. Ningxia, Gansu, Xinjiang and other provinces have had similar cases for several years, according to an inspection of the law's enforcement. This situation shows that many places on the one hand want to promote the market of renewable energy, but in how to create a healthy development of the market in the direction of the problem.

A sound market development requires, above all, a stable investment environment.

In 2019, although the global renewable energy policy trend is to reduce electricity prices and de-subsidize, the investment risk in the renewable energy sector, especially in the photovoltaic sector, has been significantly reduced due to the large decline in power generation costs. Thanks to this, the European photovoltaic market appeared a new round of warming. According to SolarPower Europe, EU countries installed 16.7 GW of new photovoltaic power in 2019, up 104% from the previous year.

But in the same period, the photovoltaic industry in China has entered a period of investment burnout. In the 22.79 million kW bidding projects newly arranged by the state in 2019, the proportion of private enterprise investment is significantly lower than in the past, and the number of projects scheduled to be connected to the grid at the end of 2019 is not as expected by the policy, which leads to this situation. The late introduction and implementation of the new mechanism of bidding in 2019, the tight time of photovoltaic project construction and grid connection is one of the factors. However, some private enterprises do not have high enthusiasm, and even after obtaining the qualification of project construction, they are unable to invest and obtain financing. Financial institutions to photovoltaic lending significantly tightened, the overall attractiveness of the industry for capital decline.

However, in fact, under the situation of greatly reduced subsidy dependence, the economic risks of renewable energy power generation projects are also greatly reduced. To maintain the investment capacity of the photovoltaic power market and the sustainable and stable investment in the era of full parity after 2021, it is necessary to take actions or make policy mechanism preparations in 2020.

The healthy development of the market also has the mechanism closed loop characteristics.

Take the affordable access mechanism. According to the policy, the parity projects scheduled for 2019-2020 only specify the project approval time limit, but not the project grid connection time limit, The Notice of the National Energy Administration on the Construction of Wind Power and photovoltaic Power Projects in 2020 (No.17 [2020]) stipulates that the parity projects must be approved and started construction before the end of 2020. Project from the perspective of policy making, parity, does not need to state subsidies, there is no need for rules hooked up to the deadline, but with the two year window project can apply eight support policy, also should set up corresponding closed period, planning ahead can make investment enterprises, uniform, made in 2019 and 2020 arrangement of parity project completed at the beginning of the "difference", Play a role in balancing market size and stabilizing industrial development.

In March 2020, the beautiful scenery of the country's 2020 project construction policy, mechanism basic continued in 2019, the main ideas, principles and practices, more highlights based on given network as a whole and carry out the plan, the scenery, will be released in the end of March 2020, new scenery given ability, to give industry a clear expectations, and the effect on the disease could, To be considered and explained in the official interpretation of the policy.

Compared with 2019, scenery policy as early as 2020, ahead of schedule, mechanism and the practice continues, the local government and enterprises have a years of experience, in March have already start the project of the preparation conditions and policy basis, is critical in subsidies TuiPo stage in 2020, the domestic photovoltaic market in 2020 is expected to return to growth, New wind power installations are expected to reach 30 gigawatts, while new photovoltaic installations are expected to reach 40 gigawatts.