A recent paper in Nature says that “no other country is investing so much money or generating so much renewable energy” as China. “Its build-up of renewable energy systems at serious scale is driving cost reductions that will make them accessible to all.”
The International Energy Agency reckons China accounts for 56% of the US$250 billion in annual global renewables investment, and that solar could become the world's leading primary energy source by 2050. Beijing has recently rejuvenated its nuclear program too. China's Vice Premier, Zhang Gaoli, proclaimed at the UN Climate Summit that his country would strive to peak absolute CO2 emissions 'as soon as possible.' Apparently China is shifting its stance on climate change, and backing its words with manufacturing muscle.
A field-trip across China reveals a more nuanced reality on the ground.
For a start, as the Nature essay notes, today the vast majority of China's non-fossil electricity generation is from hydropower, and the country's gigantic dam projects are controversial. One problem with all renewables is “intermittency”; they need rain, wind and sun, which are capricious, so backup thermal plants must stand by. Another problem is “curtailment”. By 2020, there could be well over 300 GW of wind and solar capacity installed, representing almost 20% of China's total nameplate capacity, but actual generation might be only 8% of the total.
Coal supplies three-quarters of China's electricity and 67% of its total primary energy (although 16% of this is exported in manufactures). A Xinjiang official boasted his province might have one trillion tonnes of coal reserves: “our black treasure will supply China's needs for a century.” I have noted before that coal underpins China's growth model; Inner Mongolia achieved a 159% energy efficiency gain between 2002 and 2009 but exploited this to make fourteen times more cement and steel.
The much-touted UHV lines, transporting power from west to east, all originate at coal-fired complexes, not wind and solar farms. Although coal's trajectory has moderated and will eventually peak, a coal glut is the immediate concern. Recent regulations (a sales tax, supply consolidation, import bans) appear intended to support the mining sector's profitability.
A power utility explained that a large (1000 MW) modern ultra-supercritical thermal plant earns 25-30% return on equity, compared to 8-12% for renewables, even with subsidies from one to the other. Coal is a third cheaper than wind power. The reason is simple: coal is superabundant. Global prices have halved since 2011. A manager at a power equipment maker says that coal power is seeing a resurgence in orders, spurred by the fuel's competitiveness. He disclosed that President Xi Jinping, heading China's leading small group for energy security, has “re-emphasized the importance of coal.”
China's real objective is not so much low carbon as “clean carbon.” China's emissions already exceed the US and EU combined, it emits more per capita than Europe and could overtake America by 2017. A Rolling Stone essay portends that “what China decides to do in the next decade will likely determine whether or not mankind can halt — or at least ameliorate — global warming.” James Fallows, quoted in Mother Jones, describes Beijing's attempt to (using climate change argot) “bend down its curve.” He continues: “The Chinese government is pushing harder on more fronts than any other...to develop energy sources other than coal. The question is, will they catch up? Who will win that race between how bad things are and how they're trying to deal with them?”
But pollution is the real issue driving Chinese policy today, not climate change. This winter is off to a dreadful start. Sulphur and nitrogen emissions standards in wealthy cities have been greatly tightened, and “scrubbing” is (in theory) compulsory. The coal import restrictions target dirty high-ash and sulphur coals. However, the National Energy Administration's Action Plan actually permits a 4.8% annual coal-fired power generation growth until 2020, according to analysts at Bernstein Research. China does require that its generators become more efficient (310g/kWh by 2020) but the CO2 emissions benchmark that regulators target is American shale gas, a fuel the Nature paper disparages.
China's cheap coal has become both a blessing and a curse. As long as it is cheap, it will be used plentifully. About as quickly as China installs solar panels and wind turbines, it will build the giant ultra-supercriticals alongside, currently at a rate of one every two weeks. And we may reach “peak coal” demand only to find that supply has barely responded and coal is more affordable than ever. Fundamentally changing coal's economics is necessary. Burying CO2 is fancifully expensive, so burning coal in the first place must be made more costly.
The most promising solution is a carbon price determined through an emissions trading scheme. To date, progress has been sketchy, but last Friday Europe pledged to revive its flagging carbon market, and to cut its 1990-level CO2 emissions 40% by 2030. China's energy intensity/GDP today is twice OECD levels, suggesting room for improvement. But GDP might expand four times by 2030. China's renewable energy manufacturing machine is racing against cheap “clean” coal.
This piece was first posted on The Interpreter, which is published by the Lowy Institute for International Policy.
Image: Creative Commons 3.0 License.