China axis renewable energy signs of challenges for solar energy developers

The prices of solar energy in the first provincial auction of China under its new price mechanism of renewable energy were so low that new investments in projects in the country could discourage, analysts said.

The auction of last week held in the province of Shandong, considered a thermometer for national auctions, indicates that the prices of renewable energies in the future will be lower than the previous system, although not necessarily low such as in Shandong, where excessive investments in sun energy have caused the fall of prices.

Based on the results, “I would not be very optimistic in other provinces, unless it is in the coastal provinces with a strong growth of (demand for) energy,” said Alan Lau, Jeffries’ analyst.

The auction is part of a renewal announced in February to introduce a market price on the largest world renewable energy producer.

Previously, renewable energy projects in China had a guaranteed return rate, connected to the carbon reference price. This offered developers a precious predictability, but was at risk of generating excessive investments.

From June, the operators of the local transmission network will grant contracts to new renewable energy projects based on the auctions that determine a regulation price based on the highest offer after selecting the smaller proposals to the largest until the provincial generation objective is achieved.

Renewable generators should sell on the market, but will be compensated if the price drops below the auction compensation price or the operating price.

Shandong, one of the main provinces for renewable energy, was the first to auctions.

The price of regulation for solar energy was 225 iuanes (US $ 31.58) of Megawatt-Hora (MWH), according to a state media report on Friday, citing Shandong’s network operator. The developers could present proposals between 123 iuanes/MWh and 350 iuanes/MWh.

Investors would have difficulty obtaining an acceptable return rate at this price, Lau said.

Many of the Shandong projects were already completed and therefore they were “desperate” to sell their energy to a fixed rate, said Lauri Myllyvita, co -eklist of the Center for Research on Energy and Clean Air, based in Helsinki.

The system offers more safety of the alternative to sale in the SHANDONG commercial market.

Source: Terra

Rose

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