China will triple its installed capacity for solar if it meets ambitious new targets set out this week by its own government energy departments, the Chinese National Development and Reform Commission (NDRC) and National Energy Agency (NEA).

The new target of 70 gigawatts (GW) of installed solar capacity by 2017 puts at further risk Australian coal projects that rely on China as an import market, as renewable energy continues to encroach on markets traditionally dominated by thermal coal.

The Institute for Energy Economics and Financial Analysis (IEEFA) has analysed the financial viability of Australian coal projects particularly in the Galilee Basin, in the context of their likely import markets of China and India.

Tim Buckley, IEEFA’s Director of Energy Finance Studies, Australasia, said:

“With this ambitious new target and plans in place to meet and exceed it, China has cemented itself as a major player in the renewables sector, a strategic move that will have significant impacts for Australian coal exports.

“China’s increasing investment in renewable energy demonstrates it has clearly decided to address energy security concerns by dramatically increasing energy system diversity and reducing reliance on fossil fuel imports,” Mr Buckley said.

IEEFA forecasts show 80-90% of new electricity capacity installed in China over 2014-2020 is likely to be from fuel sources other than thermal coal.

“China has a strong record of meeting its targets for installed solar, doubling its installation in the year to 2011, then doubling again in 2012 and almost tripling in 2013.

“To put this 2013 achievement in historical context, the largest install rate of any country ever in the history of solar was Germany in 2012 (at 7.6GW), yet China nearly doubled that effort last year.

“This growth trend looks set to continue, as we’ve seen with the installation of 13-14GW of solar in 2013 alone, and the target for up to 14GW of new installations in 2014 as well as a major structural shift towards more distributed rooftop solar,” Mr Buckley said.

In China’s Five Year Plan to 2015, the cumulative solar install target was 15GW by 2015. In November 2012 this was raised to 21GW by 2015, and then in January 2013 raised again to 35GW by 2015. Now China expects to double this to 70GW by 2017.

“Based on China’s record, this new target for solar looks eminently achievable, and in fact if we consider existing plans for solar installation in China, it’s likely to be raised or exceeded.

“China is already 90% self-sufficient as the world’s largest producer and consumer of coal, so its need to continue importing thermal coal will be dramatically reduced in the years to 2020.

“Indeed, with falling net coal-fired power generating capacity forecast from 2017 onwards, China will be faced with either gradually reducing its domestic coal production, cutting imports and even possibly once again becoming an opportunistic exporter of thermal coal,” Mr Buckley said.

-ENDS-

Reference: The new targets: Frank Haugwitz, Director, Asia Europe Clean Energy (Solar) Advisory Co. Ltd, 16 May 2014.

Tim Buckley is the Director of Energy Finance Studies, Australasia for the Institute for Energy Economics and Financial Analysis. He has 25 years of financial markets experience, including 17 years with Citigroup culminating in his role as Managing Director and Head of Australasian Equity Research.

Mr Buckley has produced detailed reports on Adani and the Galilee Coal Basin. His report on the Galilee projects and the Indian coal import market is available here: http://www.ieefa.org/briefing-note-india-power-prices/