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China restricts solar, wind power projects in inland waters, cites flood control
China has prohibited several types of wind and solar photovoltaic (PV) projects located on inland water bodies, citing flood control, a move analysts said signals Beijing's intention to protect the country's ecosystems while expanding renewables capacity.
Late in May, the Ministry of Water Resources said on its website the deployment of wind and PV farms on rivers, lakes, and reservoirs is banned in order to protect the water bodies' ecological integrity. The ban can be applied to existing projects.
"We are still seeing river and lake waters violated and overly developed," the ministry said in a policy communiqué, adding that those issues could obstruct water flows and damage dikes. "Even as China pursues its decarbonization goals … no PV and wind projects should negatively affect flood management."
For solar and wind farms located in nearby areas, the ministry said local governments should study their ecological impact and make sure they do not affect drainage.
"We need to have rigorous control for those projects based on scientific studies," according to its communiqué.
With the country prone to severe flooding that could displace millions of people, Chinese laws ban any man-made construction that affects flood management. The ministry suggested its communiqué intends to clarify how the rules should be enforced.
China, the world's largest GHG emitter, has established goals of reaching peak CO2 emissions by 2030 and carbon neutrality by 2060 while planning a large renewables expansion to decarbonize its economy.
In a planning paper released earlier this month, the Chinese government said it is seeking to raise renewable power generation from 2,210 TWh in 2020 to 3,300 TWh in 2025, including from hydropower. It set a target to double wind and solar generation between 2021 and 2025—in 2020, wind generation reached 467 TWh and PV output 261 TWh.
For the longer term, China wants its combined solar and wind power capacity to surpass 1,200 GW by 2030, up from 530 GW at the end of 2020.
But wind and solar projects tend to take up a lot of space, and Beijing has been seeking to refine regulations to mitigate their ecological impact in recent years.
Liu Hongqiao, an independent environmental consultant, said the government has sought to balance multiple priorities that include water protection, flood prevention and control, and renewable energy expansion.
"[The water ministry's] guidance demonstrates that exemptions on ecological and environmental protection shouldn't and won't be made to renewable energy projects despite the noble cause," Liu tweeted.
Scientists believe climate change could lead to more flooding due to extreme weather events in China. Recently, the government issued several flood alerts after heavy rainfall reportedly led to some economic and life losses.
Xinyi Shen, a researcher at the Centre for Research on Energy and Clean Air, said the ministry's policy announcement points to "one of the reasonable restrictions" for renewables.
"It is part of the government's regulations to manage the [amount of space used by] wind and solar installations," Shen told Net-Zero Business Daily by S&P Global Commodity Insights.
The Tiangang case
The government restrictions are not expected to affect China's wind power expansion. The country's wind farms are generally land-based or offshore projects.
But Chinese utilities are relatively keen on developing floating PV projects atop lakes, reservoirs, fish farms, and mining pits. According to S&P Global's Floating Solar deal tracker, China had 1.7 GW of floating PV capacity installed as of the end of last year, or 57% of the global total.
While announcing the restriction, the water ministry swiftly moved to target a large project in Sihong County in eastern China's Jiangsu province.
The Huaihe River Commission, part of the ministry, ordered the Tiangang Lake solar farm to remove equipment that obstructed flood drainage by the end of May and adjust its deployment in other areas for better ecological protection by the year's end.
The PV farm, approved by the National Energy Administration, has completed its environmental impact review. But the ministry said it didn't receive permission from the water authorities based on Chinese regulations.
The Tiangang project has a capacity of 1 GW with a total investment of CNY 8 billion ($1.2 billion), according to the local government. Project developers include solar player Linyang, and major utilities China General Nuclear Power and China Three Gorges Renewables.
The commission and the companies did not respond to emails seeking further comments.
Norman Waite, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, said the restriction could have long-term benefits despite its impact on floating solar deployment.
"Going forward, the additional costs involved to gather appropriate approvals and permits would probably only marginally impact the overall cost of the project, although [the restriction] could extend the time to execution given additional hurdles," Waite told Net-Zero Business Daily.
He suggested China's investment environment will improve if all regulators involved—not just energy and environmental agencies, but also water authorities—are able to enforce the laws consistently for renewables developers, as this will lead to more predictability.
"This only helps … as it levels the playing field. If there are multiple players looking at a site for floating solar, it is in everyone's interest to be playing by the same rules—consumers, investors, and regulators," Waite added.
Overall, analysts believe the restriction will not affect China's renewables expansion. Floating projects accounted for just 0.6% of China's total installed PV capacity as of the end of 2021, according to calculations based on S&P Global and government figures.
"The policy may affect some operating projects in southern China in particular. However, we believe it will have limited impact on China's renewable investment and capacity expansion," said Lara Dong, senior director for Greater China power and renewables at S&P Global.
For China to reach its near-term target of doubling wind and solar power generation in the five years from the end of 2020, Waits estimated the country would need to add another 270 GW capacity between this year and 2025 but suggested it's achievable, given that its annual capacity additions exceeded 100 GW in the past two years.
Government data showed China's total renewables capacity amounted to 934 GW as of the end of 2020, and Dong said the country remains on track to at least double that in 2021-2025. S&P Global's latest forecast suggests the country's wind capacity will grow to 550 GW at the end of 2025 from 282 GW five years earlier and PV capacity to 750 GW from 253 GW, meeting its 2030 goal five years ahead of schedule.
Some expect the expansion to be driven by large sites in sparsely-populated in western China in the coming years.
"Almost all capacity additions required for China to attain its 2030 wind and solar target will come from" those sites, thinktank Ember's Senior Electricity Analyst Muyi Yang said.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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