JINAN, China — Shi Mei and her husband earn a decent living by growing corn and millet on their small farm in China's eastern Shandong province. In 2021, they diversified by investing in solar energy and signed a contract to install approximately 40 panels on their roof to supply energy to the grid.
Now the couple gets paid for every watt of electricity they generate, reaping the equivalent of $10,000 a year, which Shi can track through an app on her phone.
“When the sun shines, you make money,” Shi said.
The Shi family is on the cusp of a solar boom in China, which has long dominated global solar production but hasn't always installed much of it in homes. That is changing as the government focuses on the urgency of reducing the world's worst greenhouse gas emissions while growing its green economy. China wants a fifth of its energy to come from renewables by 2025, and has offered a wide range of subsidies to local governments and companies.
The push – both in industrial solar and in rooftop installations like Shi's – is working so well that the grid now has more power than it can handle. Shi was lucky to get in early; Some cities in Shandong province, including her village, are halting new rooftop solar installations.
Analysts and solar companies say the future remains bright if China can quickly adapt to the oversupply. Companies and utilities are doing their utmost to build battery capacity to store all the energy generated. They would like to see more flexible energy prices, so that demand can be better matched to supply. And they'd like technology that makes it easier to start and stop coal power, so that it's not always the clean energy of solar that gets “constrained” — in industry jargon — when the grid can no longer supply it.
“China has the great potential and opportunity for its energy sector to reach its CO2 peak by 2025,” said Grace Gao, senior Climate and Energy Campaigner at Greenpeace China. “I look forward to seeing Shandong truly become a leader in renewable energy and demonstrate its best practices to the rest of China.”
As with many infrastructure projects in China, solar energy is being installed at a rapid pace and on a large scale. China has added 216 gigawatts of solar power in 2023, just over half from large solar farms, according to the country's National Energy Administration. The Chinese total is more than half of what the entire world added last year, according to research by consultancy Wood Mackenzie.
One gigawatt of solar power is enough to meet the energy needs of about 320,000 Chinese households for a year, Gao said.
Shandong province has added about 14 gigawatts of solar energy by 2023, and the province now has the capacity to produce more power than can be used at certain times of the day. It is the leading province in renewable energy capacity, but that also means it is the first to face the difficulties of rapid growth.
“Other provinces will also face these problems as solar energy becomes more and more abundant,” said Peng Peng, secretary general of the China New Energy Investment and Financing Alliance, an industry group.
After China announced subsidies for both rooftop and industrial solar energy in 2014, Shandong, with an advanced manufacturing industry, was a good candidate to take an early lead in solar energy development compared to less populated provinces such as Qinghai or Inner Mongolia.
Wang Xingyong installs and maintains rooftop solar panels for customers ranging from villagers to factories, and said his sales have doubled every year since 2016.
“In the beginning, we might only do a project for one customer, a farmer, and it would be worth ten thousand to fifty thousand yuan,” he said. “Later, we would spend a few hundred thousand million on just one project.”
The business model varies, but many companies like Wang ask villagers and factories for the chance to use their roofs. Villagers buy the systems and receive payouts by selling the electricity to the grid. Wang is paid to build and maintain the solar installations for factories that use the electricity they generate.
Wang said the concept was initially a hard sell because few people believed the government would pay them to generate electricity. Wang said he slowly won over people, starting with his family and friends, providing the money for the equipment himself and then taking the results to other villages.
As they pitch, few talk about big concepts like the country's goal of peaking carbon emissions by 2030. It comes down to money in people's pockets. Shi, the farmer, said her neighbors installed solar panels on their roofs after seeing her investment do well.
“Compared to just putting your money in a savings account, the return is higher,” she says. Thanks to her 2021 contract, she is still making money even though the village will no longer allow new installations.
A second model would essentially allow families to get paid rent to enable the installation of solar energy on their roofs – as much as 3,000 yuan ($414) per month, said Liu Wenping, an investor in solar energy companies. They can also get a free air conditioner or refrigerator as an added incentive, and get a small percentage of the electricity sold, but not as much as people who buy solar.
Chinese battery companies, EV manufacturers and utilities are all racing to develop more advanced batteries to store electricity from solar panels. Batteries are becoming cheaper, but still impact the profitability of the overall model. The Shandong provincial government is conducting a pilot program in Dezhou of lithium iron phosphate batteries that can store energy during peak production and later supply it to the provincial grid if necessary.
Other solutions include moving to so-called spot market prices, where the price fluctuates on an open market. China currently uses prices set by regulators for its electricity and updated after intensive research. Without price flexibility, China cannot encourage customers to shift some usage to non-peak times by lowering prices during those times.
But last year, regulators in Shandong introduced price floors, cutting prices sharply to encourage people to use electricity when it was plentifully generated but usage was very low – in this case the lunch period when factories were typically all at the same time. break momentarily. time. Factories responded by shifting some of their use to cheaper energy.
Solar energy analysts say they expect China will eventually move toward fully market-driven pricing with the electricity grid.
Meanwhile, China wants to improve its network. The National Development and Reform Council, which oversees economic policies and their implementation, called on provinces in February to focus on increasing the flexibility of the electricity grid. It included a call to equip old coal-fired power stations with new technology so they can turn on and off much faster. The municipality also wants a 'smart' network that can quickly decide the best time to distribute the generated electricity.
“Every country in the world that is installing a lot of renewable energy sources and then facing the challenges that come from all this variable intermittent generation is looking for smart ways, intelligent, AI-enabled or at least model-enabled approaches to harness this energy distribute and use. this in the most efficient and effective way,” said David Fishman, senior manager at consultancy Lantau Group, which monitors China's energy industry. “That is certainly where China is going.”
There are no signs of a pause in China's solar energy expansion. Companies are flocking to other provinces in the south, which are not as far away as Shandong.
And in Shandong, solar installer Wang is optimistic about his prospects despite the halt of new projects because he still has industrial customers. He is already planning to invest in upgrading transformers. And he's intrigued by a trend driven by the explosion of electric cars in China, with the installation of all-in-one stations that combine solar generation, battery storage and electric vehicle charging.
“I trust that the future will continue to get better,” he said.
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Wu reported from Beijing. AP video producer Olivia Zhang contributed to this report.
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