Located on China’s east coast, Shandong had a nominal GDP of $957bn in 2014, contributing about 9% to the overall economy. Shandong is one of the major industrial manufacturing hubs in China with a heavy reliance on coal-fired generation. However, in recent years the province has seen rapid growth in renewables thanks to a combination of surging electricity demand and growing government support.
By year-end 2014, Shandong had an installed capacity of 79.8GW, of which 90.2% (72GW) was coal. Wind and large hydro represented just under 8% with solar accounting for the rest at 400MW. In terms of actual generation, nearly all (97%) of Shandong’s 373.8TWh came from burning coal. Zero-carbon power penetration has to date been very limited in the local energy mix.
Shandong’s wind resources are not the best in China. To compensate, the provincial government has since 2010 offered a CNY0.06/kWh ($0.01/kWh) subsidy to wind-generated power on top of the national benchmark power price of CNY 0.61/kWh ($0.10/kWh). This premium has had its intended impact and wind capacity has grown at an annual rate of 137% per year over the past five years.
Unlike in provinces such as Heilongjiang, Jilin and Inner Mongolia, Shandong’s wind projects have rarely experienced curtailment due to grid constraints. This is due to high electricity demand from local industry.
Local industrial demand is also driving solar growth more directly. More than 60% of Shandong’s PV capacity is distributed and often small projects serve industrial consumer directly through bilateral power purchase agreements.
In 2011, the Shandong government released its Guidelines to Encourage Solar Industry Development which set explicit goals of 600MW of utility-scale solar and 1.2GW of small-scale projects by 2015. Given that those targets that have yet to be achieved, Shandong is likely to see further growth in 2015.
To rein in local power sector CO2 emissions, the Shandong government in 2011 released its 12th Five-Year Plan for Energy Conservation. It set targets to cut CO2 intensity in the power sector to 0.85 tons of coal equivalent per kWh by 2015. That would mark 17% and 35% drops compared to 2010 and 2005 levels, respectively.