IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v132y2019icp404-417.html
   My bibliography  Save this article

The profitability of onshore wind and solar PV power projects in China - A comparative study

Author

Listed:
  • Tu, Qiang
  • Betz, Regina
  • Mo, Jianlei
  • Fan, Ying

Abstract

Despite the rapid development of renewable energy power in China, the sector is facing significant challenges in the form of declining feed-in tariffs (FIT) and serious curtailment problems. However, in the long-run the nationwide carbon emission trading system may provide a new economic incentive to invest in renewable energy projects in China. Against this background, we assess the effect of gradually declining FIT on the profitability of renewable energy power projects in China and evaluate the potential of a carbon price to overcome the resulting financial gap. Based on a dataset of 1552 onshore wind and 414 solar PV power projects from 2010 to 2015, we first estimate the levelized cost of electricity (LCOE) for onshore wind and solar PV investments. We then estimate profitability using different carbon prices and varying levels of FIT. Our findings suggest that revenues from selling certified carbon emissions reductions in the carbon market can compensate partially for the revenue losses caused by declining FIT. However, the current carbon prices of China's carbon-emission trading pilot schemes are not sufficiently high to compensate for revenue losses. For 90% of PV projects to remain profitable with lower FIT, the carbon price would need to rise to USD 64/t of CO2. For on-shore wind plants, lower carbon price levels of up to USD 41/t CO2 would be sufficient.

Suggested Citation

  • Tu, Qiang & Betz, Regina & Mo, Jianlei & Fan, Ying, 2019. "The profitability of onshore wind and solar PV power projects in China - A comparative study," Energy Policy, Elsevier, vol. 132(C), pages 404-417.
    • Handle: RePEc:eee:enepol:v:132:y:2019:i:c:p:404-417
    DOI: 10.1016/j.enpol.2019.05.041
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421519303453
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2019.05.041?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wang, Qiang & Chen, Yong, 2010. "Barriers and opportunities of using the clean development mechanism to advance renewable energy development in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(7), pages 1989-1998, September.
    2. Ling, Yu & Cai, Xu, 2012. "Exploitation and utilization of the wind power and its perspective in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 2111-2117.
    3. Ouyang, Xiaoling & Lin, Boqiang, 2014. "Levelized cost of electricity (LCOE) of renewable energies and required subsidies in China," Energy Policy, Elsevier, vol. 70(C), pages 64-73.
    4. Jian-Lei Mo & Lei Zhu, 2014. "Using Floor Price Mechanisms to Promote Carbon Capture and Storage (Ccs) Investment and Co2 Abatement," Energy & Environment, , vol. 25(3-4), pages 687-707, April.
    5. Lema, Adrian & Lema, Rasmus, 2016. "Low-carbon innovation and technology transfer in latecomer countries: Insights from solar PV in the clean development mechanism," Technological Forecasting and Social Change, Elsevier, vol. 104(C), pages 223-236.
    6. Zhang, Dahai & Wang, Jiaqi & Lin, Yonggang & Si, Yulin & Huang, Can & Yang, Jing & Huang, Bin & Li, Wei, 2017. "Present situation and future prospect of renewable energy in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 76(C), pages 865-871.
    7. Murata, A. & Liang, J. & Eto, R. & Tokimatsu, K. & Okajima, K. & Uchiyama, Y., 2016. "Environmental co-benefits of the promotion of renewable power generation in China and India through clean development mechanisms," Renewable Energy, Elsevier, vol. 87(P1), pages 120-129.
    8. Zou, Hongyang & Du, Huibin & Ren, Jingzheng & Sovacool, Benjamin K. & Zhang, Yongjie & Mao, Guozhu, 2017. "Market dynamics, innovation, and transition in China's solar photovoltaic (PV) industry: A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 197-206.
    9. Reichenberg, Lina & Hedenus, Fredrik & Odenberger, Mikael & Johnsson, Filip, 2018. "The marginal system LCOE of variable renewables – Evaluating high penetration levels of wind and solar in Europe," Energy, Elsevier, vol. 152(C), pages 914-924.
    10. Yang, Mian & Patiño-Echeverri, Dalia & Yang, Fuxia, 2012. "Wind power generation in China: Understanding the mismatch between capacity and generation," Renewable Energy, Elsevier, vol. 41(C), pages 145-151.
    11. Tian Tang & David Popp, 2016. "The Learning Process and Technological Change in Wind Power: Evidence from China's CDM Wind Projects," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(1), pages 195-222, January.
    12. Duan, Hongbo & Mo, Jianlei & Fan, Ying & Wang, Shouyang, 2018. "Achieving China's energy and climate policy targets in 2030 under multiple uncertainties," LSE Research Online Documents on Economics 86481, London School of Economics and Political Science, LSE Library.
    13. Couture, Toby & Gagnon, Yves, 2010. "An analysis of feed-in tariff remuneration models: Implications for renewable energy investment," Energy Policy, Elsevier, vol. 38(2), pages 955-965, February.
    14. Zhang, Dayong & Cao, Hong & Zou, Peijiang, 2016. "Exuberance in China's renewable energy investment: Rationality, capital structure and implications with firm level evidence," Energy Policy, Elsevier, vol. 95(C), pages 468-478.
    15. Mo, Jianlei & Schleich, Joachim & Fan, Ying, 2018. "Getting ready for future carbon abatement under uncertainty – Key factors driving investment with policy implications," Energy Economics, Elsevier, vol. 70(C), pages 453-464.
    16. Ueckerdt, Falko & Hirth, Lion & Luderer, Gunnar & Edenhofer, Ottmar, 2013. "System LCOE: What are the costs of variable renewables?," Energy, Elsevier, vol. 63(C), pages 61-75.
    17. Lin, Boqiang & Li, Jianglong, 2015. "Analyzing cost of grid-connection of renewable energy development in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1373-1382.
    18. Ji, Qiang & Zhang, Dayong, 2019. "How much does financial development contribute to renewable energy growth and upgrading of energy structure in China?," Energy Policy, Elsevier, vol. 128(C), pages 114-124.
    19. Liu, Wen & Lund, Henrik & Mathiesen, Brian Vad & Zhang, Xiliang, 2011. "Potential of renewable energy systems in China," Applied Energy, Elsevier, vol. 88(2), pages 518-525, February.
    20. Li, Canbing & Shi, Haiqing & Cao, Yijia & Wang, Jianhui & Kuang, Yonghong & Tan, Yi & Wei, Jing, 2015. "Comprehensive review of renewable energy curtailment and avoidance: A specific example in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1067-1079.
    21. Mo, Jian-Lei & Agnolucci, Paolo & Jiang, Mao-Rong & Fan, Ying, 2016. "The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment," Energy Policy, Elsevier, vol. 89(C), pages 271-283.
    22. Ge Gao & Mo Chen & Jiayu Wang & Kexin Yang & Yujiao Xian & Xunpeng Shi & Ke Wang, 2019. "Sufficient or insufficient: Assessment on the Intended Nationally Determined Contributions (INDCs) of world¡¯s major emitters," CEEP-BIT Working Papers 125, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    23. Djiby Thiam, 2011. "An energy pricing scheme for the diffusion of decentralized renewable technology investment in developing countries," Post-Print hal-01135616, HAL.
    24. Duan, Hongbo & Mo, Jianlei & Fan, Ying & Wang, Shouyang, 2018. "Achieving China's energy and climate policy targets in 2030 under multiple uncertainties," Energy Economics, Elsevier, vol. 70(C), pages 45-60.
    25. Saed Alizamir & Francis de Véricourt & Peng Sun, 2016. "Efficient Feed-In-Tariff Policies for Renewable Energy Technologies," Operations Research, INFORMS, vol. 64(1), pages 52-66, February.
    26. Thiam, Djiby Racine, 2011. "An energy pricing scheme for the diffusion of decentralized renewable technology investment in developing countries," Energy Policy, Elsevier, vol. 39(7), pages 4284-4297, July.
    27. Tu, Qiang & Betz, Regina & Mo, Jianlei & Fan, Ying & Liu, Yu, 2019. "Achieving grid parity of wind power in China – Present levelized cost of electricity and future evolution," Applied Energy, Elsevier, vol. 250(C), pages 1053-1064.
    28. Xunpeng Shi & Hengsi Chen & Yang Yu & Fushuan Wen, 2018. "Development of variable renewable energy policy in developing countries: a case study of Sri Lanka," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 14(1/2), pages 10-29.
    29. Pei, Wei & Chen, Yanning & Sheng, Kun & Deng, Wei & Du, Yan & Qi, Zhiping & Kong, Li, 2015. "Temporal-spatial analysis and improvement measures of Chinese power system for wind power curtailment problem," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 148-168.
    30. Zifa Liu & Wenhua Zhang & Changhong Zhao & Jiahai Yuan, 2015. "The Economics of Wind Power in China and Policy Implications," Energies, MDPI, vol. 8(2), pages 1-18, February.
    31. Duan, Hongbo & Zhang, Gupeng & Wang, Shouyang & Fan, Ying, 2019. "Integrated benefit-cost analysis of China's optimal adaptation and targeted mitigation," Ecological Economics, Elsevier, vol. 160(C), pages 76-86.
    32. Shi, Xunpeng & Liu, Xiying & Yao, Lixia, 2016. "Assessment of instruments in facilitating investment in off-grid renewable energy projects," Energy Policy, Elsevier, vol. 95(C), pages 437-446.
    33. Shi, Xunpeng & Sun, Sizhong, 2017. "Energy price, regulatory price distortion and economic growth: A case study of China," Energy Economics, Elsevier, vol. 63(C), pages 261-271.
    34. Zeng, Ming & Li, Chen & Zhou, Lisha, 2013. "Progress and prospective on the police system of renewable energy in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 20(C), pages 36-44.
    35. Zou, Hongyang & Du, Huibin & Brown, Marilyn A. & Mao, Guozhu, 2017. "Large-scale PV power generation in China: A grid parity and techno-economic analysis," Energy, Elsevier, vol. 134(C), pages 256-268.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Finke, Jonas & Bertsch, Valentin & Di Cosmo, Valeria, 2023. "Exploring the feasibility of Europe’s renewable expansion plans based on their profitability in the market," Energy Policy, Elsevier, vol. 177(C).
    2. Zhang, Ruirui & Wang, Guiling & Shen, Xiaoxu & Wang, Jinfeng & Tan, Xianfeng & Feng, Shoutao & Hong, Jinglan, 2020. "Is geothermal heating environmentally superior than coal fired heating in China?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 131(C).
    3. Tu, Qiang & Mo, Jianlei & Liu, Zhuoran & Gong, Chunxu & Fan, Ying, 2021. "Using green finance to counteract the adverse effects of COVID-19 pandemic on renewable energy investment-The case of offshore wind power in China," Energy Policy, Elsevier, vol. 158(C).
    4. Xin-gang, Zhao & Lei, Xu & Ying, Zhou, 2022. "How to promote the effective implementation of China’s Renewable Portfolio Standards considering non-neutral technology?," Energy, Elsevier, vol. 238(PB).
    5. Liu, Fa & Sun, Fubao & Wang, Xunming, 2023. "Impact of turbine technology on wind energy potential and CO2 emission reduction under different wind resource conditions in China," Applied Energy, Elsevier, vol. 348(C).
    6. Samper, M. & Coria, G. & Facchini, M., 2021. "Grid parity analysis of distributed PV generation considering tariff policies in Argentina," Energy Policy, Elsevier, vol. 157(C).
    7. Tu, Qiang & Mo, Jianlei & Betz, Regina & Cui, Lianbiao & Fan, Ying & Liu, Yu, 2020. "Achieving grid parity of solar PV power in China- The role of Tradable Green Certificate," Energy Policy, Elsevier, vol. 144(C).
    8. Li, Yunwei & Chen, Kui & Ding, Ruixin & Zhang, Jing & Hao, Yu, 2023. "How do photovoltaic poverty alleviation projects relieve household energy poverty? Evidence from China," Energy Economics, Elsevier, vol. 118(C).
    9. Yu, Xianyu & Wu, Zemin & Wang, Qunwei & Sang, Xiuzhi & Zhou, Dequn, 2020. "Exploring the investment strategy of power enterprises under the nationwide carbon emissions trading mechanism: A scenario-based system dynamics approach," Energy Policy, Elsevier, vol. 140(C).
    10. Yanbin Xu & Jiaxin Ma & Yuqing Wang & Ming Zeng, 2023. "Assessing the Effects of Tradable Green Certificates and Renewable Portfolio Standards through Demand-Side Decision-Making Simulation: A Case of a System Containing Photovoltaic Power," Energies, MDPI, vol. 16(8), pages 1-29, April.
    11. Shuai Wang & Yao Li & Junjun Jia, 2022. "How to promote sustainable adoption of residential distributed photovoltaic generation in China? An employment of incentive and punitive policies," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(2), pages 1-26, February.
    12. Tsiaras, Evangelos & Papadopoulos, Demetrios N. & Antonopoulos, Constantinos N. & Papadakis, Vagelis G. & Coutelieris, Frank A., 2020. "Planning and assessment of an off-grid power supply system for small settlements," Renewable Energy, Elsevier, vol. 149(C), pages 1271-1281.
    13. Xin-gang, Zhao & Pei-ling, Li & Ying, Zhou, 2020. "Which policy can promote renewable energy to achieve grid parity? Feed-in tariff vs. renewable portfolio standards," Renewable Energy, Elsevier, vol. 162(C), pages 322-333.
    14. Song, Yazhi & Liu, Tiansen & Ye, Bin & Li, Yin, 2020. "Linking carbon market and electricity market for promoting the grid parity of photovoltaic electricity in China," Energy, Elsevier, vol. 211(C).
    15. Wang, Rong & Hasanefendic, Sandra & Von Hauff, Elizabeth & Bossink, Bart, 2022. "The cost of photovoltaics: Re-evaluating grid parity for PV systems in China," Renewable Energy, Elsevier, vol. 194(C), pages 469-481.
    16. Dong, Weiwei & Zhao, Guohua & Yüksel, Serhat & Dinçer, Hasan & Ubay, Gözde Gülseven, 2022. "A novel hybrid decision making approach for the strategic selection of wind energy projects," Renewable Energy, Elsevier, vol. 185(C), pages 321-337.
    17. Wang, Yu & He, Jijiang & Chen, Wenying, 2021. "Distributed solar photovoltaic development potential and a roadmap at the city level in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 141(C).
    18. Zhang, Minhui & Zhang, Qin, 2020. "Grid parity analysis of distributed photovoltaic power generation in China," Energy, Elsevier, vol. 206(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tu, Qiang & Mo, Jianlei & Betz, Regina & Cui, Lianbiao & Fan, Ying & Liu, Yu, 2020. "Achieving grid parity of solar PV power in China- The role of Tradable Green Certificate," Energy Policy, Elsevier, vol. 144(C).
    2. Tu, Qiang & Betz, Regina & Mo, Jianlei & Fan, Ying & Liu, Yu, 2019. "Achieving grid parity of wind power in China – Present levelized cost of electricity and future evolution," Applied Energy, Elsevier, vol. 250(C), pages 1053-1064.
    3. Chen, Hao & Gao, Xin-Ya & Liu, Jian-Yu & Zhang, Qian & Yu, Shiwei & Kang, Jia-Ning & Yan, Rui & Wei, Yi-Ming, 2020. "The grid parity analysis of onshore wind power in China: A system cost perspective," Renewable Energy, Elsevier, vol. 148(C), pages 22-30.
    4. Wang, Ying & Zhang, Dayong & Ji, Qiang & Shi, Xunpeng, 2020. "Regional renewable energy development in China: A multidimensional assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 124(C).
    5. Wild, Phillip, 2017. "Determining commercially viable two-way and one-way ‘Contract-for-Difference’ strike prices and revenue receipts," Energy Policy, Elsevier, vol. 110(C), pages 191-201.
    6. Ruhang Xu & Zhilin Liu & Zhuangzhuang Yu, 2019. "Exploring the Profitability and Efficiency of Variable Renewable Energy in Spot Electricity Market: Uncovering the Locational Price Disadvantages," Energies, MDPI, vol. 12(14), pages 1-30, July.
    7. Mo, Jian-Lei & Agnolucci, Paolo & Jiang, Mao-Rong & Fan, Ying, 2016. "The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment," Energy Policy, Elsevier, vol. 89(C), pages 271-283.
    8. Zhang, Tong & Shi, Xunpeng & Zhang, Dayong & Xiao, Junji, 2019. "Socio-economic development and electricity access in developing economies: A long-run model averaging approach," Energy Policy, Elsevier, vol. 132(C), pages 223-231.
    9. Fan, Xiao-chao & Wang, Wei-qing, 2016. "Spatial patterns and influencing factors of China׳s wind turbine manufacturing industry: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 482-496.
    10. Yu, Xianyu & Wu, Zemin & Wang, Qunwei & Sang, Xiuzhi & Zhou, Dequn, 2020. "Exploring the investment strategy of power enterprises under the nationwide carbon emissions trading mechanism: A scenario-based system dynamics approach," Energy Policy, Elsevier, vol. 140(C).
    11. Lam, J.C.K. & Woo, C.K. & Kahrl, F. & Yu, W.K., 2013. "What moves wind energy development in China? Show me the money!," Applied Energy, Elsevier, vol. 105(C), pages 423-429.
    12. Li, Mingquan & Patiño-Echeverri, Dalia & Zhang, Junfeng (Jim), 2019. "Policies to promote energy efficiency and air emissions reductions in China's electric power generation sector during the 11th and 12th five-year plan periods: Achievements, remaining challenges, and ," Energy Policy, Elsevier, vol. 125(C), pages 429-444.
    13. Wang, Rong & Hasanefendic, Sandra & Von Hauff, Elizabeth & Bossink, Bart, 2022. "The cost of photovoltaics: Re-evaluating grid parity for PV systems in China," Renewable Energy, Elsevier, vol. 194(C), pages 469-481.
    14. de Melo, Conrado Augustus & Jannuzzi, Gilberto de Martino & Bajay, Sergio Valdir, 2016. "Nonconventional renewable energy governance in Brazil: Lessons to learn from the German experience," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 222-234.
    15. Mukisa, Nicholas & Zamora, Ramon & Lie, Tek Tjing, 2021. "Store-on grid scheme model for grid-tied solar photovoltaic systems for industrial sector application: Benefits analysis," Renewable Energy, Elsevier, vol. 171(C), pages 1257-1275.
    16. Bin Xiong & Qi Sui, 2023. "Does Carbon Emissions Trading Policy Improve Inclusive Green Resilience in Cities? Evidence from China," Sustainability, MDPI, vol. 15(17), pages 1-16, August.
    17. Chen, Hao & Chen, Jiachuan & Han, Guoyi & Cui, Qi, 2022. "Winding down the wind power curtailment in China: What made the difference?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 167(C).
    18. Sun, Bing & Yu, Yixin & Qin, Chao, 2017. "Should China focus on the distributed development of wind and solar photovoltaic power generation? A comparative study," Applied Energy, Elsevier, vol. 185(P1), pages 421-439.
    19. Wu, Jie & Albrecht, Johan & Fan, Ying & Xia, Yan, 2016. "The design of renewable support schemes and CO2 emissions in China," Energy Policy, Elsevier, vol. 99(C), pages 4-11.
    20. Bao, Chao & Fang, Chuang-lin, 2013. "Geographical and environmental perspectives for the sustainable development of renewable energy in urbanizing China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 27(C), pages 464-474.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:132:y:2019:i:c:p:404-417. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.