Analysts have been left dumbfounded after China last month released official 2020 wind and solar installation figures that were seemingly too big to be true.
The Chinese National Energy Administration (NEA) “stunned the world” when it announced total wind and solar capacity additions of 120 gigawatts, according to Wood Mackenzie senior analyst Xiaoyang Li.
Notwithstanding uncertainty over COVID-19’s impact on the supply chain, China had been expected to report big numbers for last year. The International Energy Agency, for example, had predicted the country would add around 32 GW of wind and 50 GW of solar.
But the magnitude of the official figures caught even seasoned China watchers off guard. BloombergNEF had forecast 36 GW each of new solar and wind in 2020, and the official figure for PV capacity additions was 48 GW (AC).
That’s equivalent to almost two-thirds of all the solar power that the U.S. had installed up until the end of 2019. And it included 22 GW of installations last December alone, roughly double the amount installed in the same month in 2019.
Still, “the solar number is kind of explainable, or at least within imagination,” Beijing-based BloombergNEF analyst Jonathan Luan Dong said in an interview. BloombergNEF had been expecting to increase its solar forecast, perhaps up to around 40 GW, he said.
And end-of-year installation peaks are normal for the market, “especially over the past couple of years when there’s [been] a tariff drop after the end of the year,” he explained. So 48 GW was surprising but “not too much of a shock."
“In comparison, the wind numbers just challenged our imagination,” he said.
Did China really install more wind than the entire rest of the world?
The NEA reported almost 72 GW of new wind for 2020, which is more than bodies such as the Global Wind Energy Council were expecting to see installed in the entire world.
“December activity alone may have topped 47 GW, which is higher than total Chinese wind capacity additions from 2018 and 2019 combined,” noted Wood Mackenzie’s Li in an email.
The apparent magnitude of China’s 2020 renewables build-out puts observers in a bind. “Even though we don’t have conclusive evidence to say the government is not telling the truth, it’s just not possible,” said Luan.
Not only are the Chinese figures outrageous by comparison to other markets and China’s own historical records, but they do not match up to observations on the ground.
Installing 47 GW of wind in December would have led to severe supply-chain constraints, according to Luan. But there has been little evidence of that. Nor does there appear to have been an appreciable increase in the appearance of new wind farms.
Indeed, in many parts of China the soil is frozen over in December, so it is difficult for any significant construction work to take place, he said.
Nevertheless, it also seems unlikely that the Chinese NEA is plucking figures out of thin air.
“I would assume government officials are more sophisticated than that,” said Luan. “Putting out a number that is jaw-dropping for the entire industry is silly.”
The most obvious explanation, he said, is that there has been a change in accounting techniques. Luan said the Chinese Wind Energy Association theorized that the official figures had included capacity installed in earlier years but not previously connected to the grid.
Partially completed projects may have skewed the figures
While this may be a factor, BloombergNEF’s view is that the Chinese NEA included partially completed projects in its 2020 figures. If so, some wind developers could be in for a disappointment.
“The Ministry of Finance links the subsidy level of a wind project to its commissioning date, and subsidy qualification must be verified by the NEA, grid companies and [the China National] Renewable Energy Centre, respectively,” said Li at Wood Mackenzie.
“Therefore, projects found to be partially installed in 2021 may be challenged during these reviews and lose their subsidy qualification, despite having been counted in the 2020 tally.”
Curiously, the NEA has not yet provided its customary annual geographical breakdown of installation data, said Luan Dong at BloombergNEF. The China Electricity Council, which usually produces a separate set of figures, has also delayed publication of its report.
Analyst firms are drawing their own conclusions based on bottom-up analyses, with BloombergNEF due to publish an independent assessment of China’s 2020 wind installations later this month and Wood Mackenzie planning an updated analysis and outlook in March.
Few industry observers doubt that this is the last time that hard-to-believe figures will come out of China, however.
“In light of China’s 2060 carbon-neutral target and 2030’s cumulative renewable target of 1,200 GW, Wood Mackenzie expects the wind market will maintain momentum for the remainder of the decade,” Li said.