Economics of urban distributed PV in China

This report summarizes the results of an analysis of the economics of distributed solar and solar plus storage across many of China’s largest cities, given time-of-use pricing presently available for residential and commercial consumers.

As prices for energy storage and solar photovoltaic continue to become more economical, distributed solar with or without storage is becoming more common in China. In 2020, China announced plans to peak carbon emissions before 2030 and reach carbon neutral emissions by 2060. Wind and solar are expected to become the center of China’s energy system. Already in late 2020, distributed solar—particularly residential solar—has seen remarkable growth, and this is likely to continue in the coming years.

In this analysis, we study the investment returns of self-owned distributed solar PV, either on a stand-alone basis or paired with energy storage, accounting for both present time-of-use (TOU) prices in various Chinese cities, as well as for hourly insolation in each location. We use a threshold of 15% IRR to represent economical returns for such users. Our results show that, for commercial users, at current TOU electricity prices, PV costs, and storage costs, energy storage that can cycle twice per day offers the highest returns in most cities, followed by stand-alone PV. Energy storage that can cycle twice per day can both store peak solar output as well as shift afternoon peak load into off-peak evening hours. On the other hand, storage is presently uneconomical for residential users in most cities. Stand-alone PV is economical (above 15%) for both residential and commercial customers in most regions.