The energy landscape in China is evolving rapidly. Dire environmental conditions throughout the country are complemented by the growing presence of renewable and efficient energy systems. This trend offers the vivid juxtaposition of a nation desperate to overcome its troubling present development stage through forward-thinking sustainable planning. The world’s second largest economy has also earned the status of the world’s worst polluter. Facing surmounting challenges, China seeks to revise its environmental trajectory, determined to smoothly and successfully transition from an overdependence on fossil fuels—particularly coal—to an embrace of clean energy.
Ambitious energy production and carbon reduction targetsoutlined in the recently released 13th Five-Year Plan indicate China’s serious desire to achieve a practical path to sustainability. With these goals in mind, the PRC government seeks to incorporate energy efficient technologies and investments into forthcoming urban development—an effort to withstand a slowing economy through innovative and sustainable systems that provide power for the masses at a reduced cost.
Beijing’s evolving reform of the Chinese economy intends for energy demands to sharply decline over the coming 20 years. This includes a concerted effort to significantly reduce dependence on coal—curtailing coal consumption to 0.2 percent annually during that period, following two decades of 12 percent annual demand growth. These plans vary by locality, as Eastern Chinese economic zones such as Beijing-Tianjin-Hebei (JingJinJi), Yangtze River Delta, and Pearl River Delta target major cuts, while lesser-developed regions in Central and Western China seek to control demand and accommodate gradual urban growth.
The government has demonstrated its commitment to these goals, as the National Development and Reform Commission (NDRC) and National Energy Administration (NEA) announced recently that China has halted plans for new coal-fired plants and postponed the construction of about 200 planned generatorsthroughout the country—forgoing roughly 105 gigawatts of environmentally unfriendly power production. This type of trend, though increasingly common in the US as a result of the Obama Administration Clean Power Program, is very new for China. The measures would suggest that Beijing has begun to take more thoughtful action around addressing the country’s egregious environmental situation—degradation that has had far-reaching global climate implications.
Meanwhile, China’s surging emphasis on clean energy offers accelerated natural gas production and imports, and will increase hydropower capacity by 60 million kilowatts. Nuclear power plants are under construction up and down China’s coasts, which will provide 30 million kilowatts in total capacity. China’s total wind power generation is expected to triple to 495 gigawatts of installed power capacity by 2030, compared to only 149 gigawatts in 2015. Already the world leader in solar capacity production, China added 15 gigawatts of new photovoltaic capacity in 2015.
China has also risen as a world leader in new energy vehicles, accounting for 40 percent of global sales in 2015
Renewables, however, are only part of China’s growing efforts to incorporate efficient technologies into the broader national energy landscape. China has recently established itself as a world leader in new energy vehicles, as 2015 electric car sales reached 330,000—40 percent of the global total. Sales figures for the first quarter of 2016 are already double that of the year before, suggesting a continued surge in this trend. Seeking to reach five million electric vehicles by 2020, China’s local brands have invested nearly $6 billion over the past five years. During this period, manufacturers will strive to improve car battery durability and affordability, while increasing the number of charging stations, in a push to make new energy vehicles more accessible and desirable to the masses.
In addition to new electric vehicles, China is making strides in a variety of other clean energy technologies. A recent United Nations Environment Program (UNEP) report noted that China had built 10.5 billion square meters of energy saving buildings in urban areas through 2014. Last year, China began to require that at least 50 percent of new real estate projects comply with energy efficiency standards. Beijing, Shanghai, Tianjin, and Chongqing and other east coast provinces are promoting newly introduced green building standards, which focus on lighting, air conditioning, water heating, and other appliances—part of China’s broader eco-cities initiative.
Preparing for a 70 percent rate of urbanization by 2030, which will add 350 million people to the nationwide urban population, China outlined a wide range of infrastructure upgrades to public utilities, smart grids, smart transport, smart water supplies, smart land administration, and smart logistics in the 13th Five-Year Plan. This includes smart city-focused investments that exceed the $260 billion offered for these initiatives by the 12th Five-Year Plan. The Chinese smart grid market is expected to grow at a rate of 20 percent between now and 2020, the result of significant government investment. This includes plans announced in 2015 for $31 billion-worth of smart grid infrastructure in Xinjiang.
China has also shown leadership with carbon capture and storage (CCS) technology, which acquires carbon dioxide emissions from sources such as fossil fuel power plants and other large industrial plants, and stores this carbon underground. In many cases, these carbon dioxide emissions can be converted and then used to enhance production of oil and natural gas. With a wide range of projects underway, China has risen to number two in the world for CCS technologies. Many believe that China will be the location for the major CCS projects of the future.
China’s impressive efforts to assimilate renewables and other cutting edge efficient technologies into its broader energy expansion plans has demonstrated the ability for economically developing countries to play a prominent role in the global movement to combat climate change. Yet, while these trends are important and should be duly recognized, China’s prospects for accomplishing its lofty energy objectives depend on a number of uncertain factors—including potential obstacles.
Though China has risen to become the preeminent world leader in renewable energy investment—having committed $110.5 billion during 2015—limitations to energy infrastructure throughout the country are preventing proper integration of these systems into the larger national grid. Industrial overcapacity challenges continue to favor state-owned factories, as China’s official annual planning process is designed to ensure a minimum number of operating hours throughout the year for coal-fired generators. Seeking to meet this quota, system operators at grid companies most often curtail renewables to offset these coal-fired generation figures. Because generators are paid only when providing energy to the grid—guaranteed through a set price per kWh—there is no capacity payment for these generators. Making up more than 60 percent of total installed capacity and represented by longstanding influencers, the coal industry is resistant to concerted efforts to reform the current operating hour quota system.
These grid inefficiencies are disproportionately impacting the renewable energy sector—exemplified by a 15 percent curtailment in wind energy during 2015. Present challenges toward properly integrating wind, solar, and other renewables into the greater energy grid are illustrating the growing need for more effective energy storage mechanisms and technologies that ensure stronger short- and long-term efficiency.
Proving to be a major barrier to seamless grid integration for renewables following years of aggressive expansion, overcapacity has left the Chinese energy sector in more than $16 billion of outstanding debt—with $4.4 billion of those bonds due from renewable companies. This record debt is plaguing China’s largest renewable energy producers, with four companies defaulting on $1.8 billion worth of bonds—including top solar panel producer, Yingli Green Energy Holding Co., which missed payments on more than $268 million of notes. These financial trends are highly concerning, as solar- and wind-power generating plants throughout the country are noticeably lagging behind production of equipment—a potentially destabilizing trend as the Xi Jinping Administration strives to uphold its commitments toward reducing never-ending nationwide pollution problems.
Yet, while these limitations pose fundamental challenges for China in its long-term efforts to realize its energy efficient goals, they remain a technical obstacle within what is proving to be an encouraging stage in the country’s clean energy revolution. China’s impressive investments in renewables are influencing other developing countries to push strongly for similar clean energy development, while simultaneously pressuring leading developed countries—such as the US—to expedite domestic transitions to energy efficient economies. The International Energy Agency (IEA) announced earlier this month its decision to select a Chinese official as a special advisor to the IEA head. This is the first time a Chinese official has filled the role, underscoring growing cooperation between the leading energy agency and the world’s number one polluter and energy consumer.
China’s growing leadership around energy efficient technology and policy, coupled with its perpetuating environmental troubles and grid infrastructure inefficiencies, demonstrate the complex and dichotomous identity of this 21stcentury global giant. Though record-breaking investments in renewable energy and concurrent efforts to curb carbon output through coal factory closings offer a glimpse of China’s great desire to surmount its environmental struggles, a bureaucratic stranglehold over state-owned energy companies enables industrial overcapacity to offset much of the nation’s progress in clean energy.
China’s prospects for accomplishing its clean energy and climate change prevention goals will greatly depend on its ability to overcome internal political and infrastructural inconsistencies. However, should the country prevail in its energy goals—transforming successful local energy systems into a blueprint for a comprehensive integrated national grid—China will usher in an innovative future for global energy. The successful integration of renewables could offer a new foundation of technologies and standards for a globally integrated grid—enabling humanity to move one step closer toward achieving a healthier future for the planet.
This article was originally posted here on David Solomon’s China Rising blog and is reposted with permission from the author.