Yunnan, in southern China, in 2014 contributed $206bn, or 2%, to China’s nominal GDP, up 6.6% from 2013. Yunnan is less industrialized than other Chinese provinces covered in Climatescope, although it has the country’s second-largest hydro power fleet. Hydro has been one of Yunnan’s economic pillars for decades, allowing it to sell electricity to neighboring provinces. The surplus of hydro power also has been a major impediment to wind and solar penetration.
At the end of 2014, Yunnan had a total installed power capacity of 68GW, of which 74.6% (50.7 GW) was hydro, 20.9% (14.2GW) was coal and 4.1% (2.8 GW) was wind. In terms of generation, hydro power dominates with 82% of the total 212TWh in 2014. Wind and solar power combined accounted for less than 3%. The development of wind and solar in Yunnan have been slow despite higher-than-average incentives for those technologies.
In 2014, 35% of Yunnan’s hydro power (62TWh) was sold to Guangdong, an industrialized demand center. That means more than 11% of Guangdong’s 2014 total power consumption was met with Yunnan generation. We expect this energy transfer will remain and expand between the two provinces despite Guangdong’s efforts at local generation development. The main reasons are: 1) additional interprovincial transmission networks started operations in 2014 and 2) a lower retail price established in early 2015 by the National Development and Reform Commission.
The 2014 transmission additions consist of two parallel ±800 kV ultra-high-voltage transmission lines extending from the west of Yunnan to central Guangdong. Those lines doubled the existing capacity and lifted power exports from Yunnan to Guangdong by 15% from 2013.
As a result of the NRDC-ordered price cuts, Guangdong’s industrial and commercial users are paying CNY 0.45/kWh for hydroelectricity from Yunnan. That is CNY 0.01/kWh lower than the price of power imported from Sichuan and CNY 0.22/kWh lower than Guangdong’s benchmark retail price.
Yunnan is experiencing declining utilization of coal-fired and wind assets. Yunnan coal-fired plants are approaching their minimum output limit, which threatens overall grid stability. The policy of directing hydro power to export markets can help avoid further cuts in coal-fired power plants, which would address the threat to grid stability and improve Yunnan’s coal-generation economics.
Wind power’s decline is directly price-driven. The tariff for in-province wind power, CNY 0.34/kWh, is more expensive than the on-grid price for in-province hydro.
To promote electric vehicles, the Yunnan government in 2012 released a “New Energy Vehicles Promotion and Industrial Development Action Plan” for Kunming, the provincial capital. The plan sets a target of increasing Kunming’s new energy vehicles to 3,400 units by 2015 from just 123 at the end of 2014, with 3,700 charging stations built. It is too soon to report target attainment because 2015 data is not yet available.