(Bloomberg) — After launching the biggest boom in renewable power in history, China is now paying-up to make sure all that clean energy can get to homes and businesses.
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Spending on power transmission surged 19% to 529 billion yuan ($72 billion) in the first 11 months of last year, according to the National Energy Administration. Funding for new power capacity was larger at 866.5 billion yuan, but at just 12% growth it’s looking likely that annual grid investments expanded faster than generation projects for the first time since 2018.
And infrastructure investment will keep rising this year. State Grid Corp. of China, the nation’s largest operator, promised to boost spending to more than 650 billion yuan in 2025 after setting its budget at 600 billion yuan last year. China Southern Power Grid Co., the other major operator, has said it plans to lift capital spending for network upgrades by more than half by 2027.
Chinese power markets and companies aren’t the only ones with a lot riding on the buildup. Faster grid expansion is going to accelerate demand for copper, said Wei Lai, deputy trading head at Zijin Mining Investment Shanghai Co.
Other metals suppliers, from steel to aluminum and zinc, are relying on the energy transition to replace demand lost to the collapse of the property sector. Local governments and industries feeling the strain of China’s slowing economy will require the full spectrum of power sources to be available if they’re going to successfully lower electricity prices for their factories.
China’s wind and solar capacity more than doubled from 2020 to 2024 to 1,350 gigawatts, a level that exceeds all of the power plants in the US, according to BloombergNEF.
Although that power is cheap and clean, it has two major problems: it’s reliant on the weather, and its scale means it’s often located in wide, open spaces far from population centers. That requires a lot more power lines and energy storage facilities to deliver electricity when and where it needs to go.
Already, some Chinese regions have so much wind and solar they have to shut down generation for parts of the day because local grids can’t handle all the power. Utilization rates for both technologies have been slowly dropping this year, although conditions are still much better than they were. In the first six months of 2016, for example, nearly half of all wind power in Gansu had to be curtailed.
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So the clock is ticking on grid operators. For all of the investment in wind and solar, fossil fuels and coal in particular continue to stubbornly hold their share of power generation. Failure to adapt in good time could slow the pace of the renewables build out and create yet another hurdle for China’s energy transition.
On the Wire
Aluminum extended gains to the highest level in more than a month as Chinese inventories contracted, signaling improved demand in the largest metals market.
Rio Tinto Group, the world’s top iron ore exporter, said shipments of the steelmaking material slipped in the fourth quarter, as demand from China remained lackluster and production at some mines declined.
China’s domestic coal price growth may slow in the near term on demand constraints from weak producer prices and slower industrial profit growth, according to Bloomberg Intelligence.
China has failed to break a deflationary cycle and is now on track for the longest streak of economy-wide price declines since the 1960s, analysts say, exposing a key vulnerability likely masked by a growth upswing at the end of last year.
As global luxury houses struggle in China, a young jewelry retailer is making waves.
Canada wants its allies to explore a pricing floor for critical minerals to address what it views as market interference from China, the dominant supplier of metals key to the energy transition.
This Week’s Diary
(All times Beijing unless noted.)
Thursday, Jan. 16:
Friday, Jan. 17:
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China home prices for December, 09:30
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China industrial output for December, including steel & aluminum; coal, gas & power generation; and crude oil & refining, 10:00
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Retail sales, fixed assets investment, property investment, residential sales, jobless rate
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China’s weekly iron ore port stockpiles
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Shanghai exchange weekly commodities inventory, ~15:30
Saturday, Jan. 18
–With assistance from Kathy Chen and Winnie Zhu.
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