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    Robust Pumped Storage Growth To Reinforce Mainland China's Renewables Growth


    May 26, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Robust Pumped Storage Growth To Reinforce Mainland China's Renewables Growth

      • 25 May 2022
      • China
      • Power
      • State Grid Corporation of China (SGCC)

      Key View

      • We have recently revised up our hydro-electric pumped storage generation and capacity forecasts for Mainland China, following positive developments in the sector.
      • Our forecast for hydro-electric pumped storage capacity still remains below the government’s targets, as these developments in the sector will remain insufficient to meet it.
      • Increasing storage capacity will work well in integrating China’s robust expansion of the renewables sector, as it will be able to address intermittency issues.
      • Hydro-electric pumped storage will remain the largest storage type in the market as developments of gravity and battery storage cannot match the magnitude of hydro-electric pumped storage.

      We have recently revised up our hydro-electric pumped storage generation and capacity forecasts for Mainland China, following positive developments in the sector. Mainland China is the top-performing market in Asia for pumped storage, with a total of 36.4GW of capacity as of end-2021. Over the coming years, we expect Mainland China’s hydro-electric pumped storage capacity to expand rapidly. Notably, in December 2021, the State Grid Corporation of China (SGCC) commissioned the 3.6GW Fengning Pumped Storage Power Station in the Hebei province. The facility is made up of 12 reversible pump generating sets, each with a capacity of 300MW, with a total generation ability of about 6.6TWh. Additionally, there are other major projects in Mainland China’s pipeline for the sector, including the Yuanqu, Tiantai, and Zhejiang Jinyun Pumped Storage Power Stations, with capacities of 1.2GW, 1.7GW, and 1.8GW respectively. As the Fengning Pumped Storage Power Station came online before its expected 2023 completion date, we expect upside risks to the other facilities as well, with the possibility of it coming online earlier than its initial expected operational date.

      In September 2021, the National Energy Administration (NEA) announced that it aims for hydro-electric pumped storage capacity to reach 62.0GW in 2025 and 120.0GW in 2030. We currently forecast the market to reach capacities of 59.2GW and 86.5GW in 2025 and 2030 respectively, falling short of the NEA’s goals. This view is underpinned by the limited facilities in construction to reach the market's goals. Furthermore, Mainland China was only able to reach 30.3GW in pumped storage capacity in end-2020, falling short of its target of 40.0GW, which was set out in its 13th Five Year Plan.

      Hydro-Electric Pumped Storage Growing
      Mainland China - Hydro-Electric Pumped Storage Capacity, GW

      e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, NEA, National sources, Fitch Solutions

      Increasing storage capacity will work well in integrating Mainland China’s robust expansion of the renewables sector, as it will be able to address intermittency issues. We expect the expansion of the hydro-electric pumped storage sector to complement the market’s rapidly expanding solar and wind power sectors, with the government’s support. In 2019, the SGCC announced that it will invest CNY38.7bn (USD5.66bn) into the construction of five hydro-electric pumped storage facilities that are scheduled to come online in 2026. The motive behind this investment is to boost the uptake of electricity generated from renewable sources by storing it in pumped storage facilities and consuming it during peak demands. This ensures that the electricity generation intermittency issues of solar and wind power plants are addressed, notably when the plants are generating during periods of low electricity demand. We forecast solar and wind power capacity to increase at an annual average of 11.9% and 9.6% respectively, from 2022 to 2031. This robust growth in renewables will be met by a steep annual average growth of hydro-electric pumped storage capacity at 9.7% over the same period.

      Solar And Wind's Robust Growth Spurs Pumped Storage Growth
      Mainland China - Wind, Solar & Hydro-Electric Pumped Storage Capacity Growths, % y-o-y

      e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National sources, Fitch Solutions

      Hydro-electric pumped storage will remain the largest storage type in the market as developments of gravity and battery storage cannot match the magnitude of hydro-electric pumped storage. Over the coming years, we expect pumped storage to remain dominant in Mainland China given the expertise the market has in developing hydropower projects. Additionally, the magnitude of gravity and battery storage developments in Mainland China have been limited compared to pumped storage facilities.

      • Gravity storage: In May 2022, Mainland China has started construction of its first gravity storage facility in the Jiangsu province. The facility is currently under construction under the Swiss energy storage company, Energy Vault, and will supply and store electricity to SGCC. The facility is planned to be able to store 100MWh of electricity, which pales in comparison to the Fengning Pumped Storage Power Facility’s 6.6TWh (6,600,000MWh).
      • Battery storage: Targets for battery storage in Mainland China are ambitious, with the government aiming for 30GW of battery storage by 2025 (about half of their target for pumped storage). SGCC also has ambitious plans for battery storage, targeting 100GW by 2030, up from its currently installed amount of 3GW. Apart from targets, the lithium-ion battery manufacturing sector of Mainland China has increased significantly. The Ministry of Industry and Information Technology announced that it grew to 32GWh in 2021 (a 146% y-o-y increase). While this bodes well for the battery storage sector, it still falls below the potential of pumped storage, informing us that pumped storage will dominate Mainland China’s electricity storage solutions over the coming years.
      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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