China’s pledge to peak carbon emissions by 2030 and reach carbon neutrality by 2060 cannot be solved by simply focusing on lifting the renewable share of electricity supply, says Prof Lin Boqiang, director of the China Energy Policy Research Institute.
“Solar and wind are simply too small,” adds Lin. According to him, simulations indicate coalfired power capacity may still represent around 60% of China’s total power capacities by 2030.
Lin is a consultative committee member of the National Energy Committee under the National Energy Commission. Speaking at Credit Suisse’s Asia Pacific ESG Conference 2021 on Oct 20, he thinks the main obstacle to achieving net zero emissions is coal.
“It is roughly 56%–57% of the energy mix. This means China’s energy mix has very high carbon dioxide (CO2) emissions. Coal consumption will have to be reduced.”
Apart from climate change, reducing coal consumption will also help reduce air pollution. CO2 emissions from the power generation and heating sectors account for more than 40% of total CO2 emissions in China.
Some top-down change is on the way. China announced on Nov 3 plans for a 1.8% reduction in average coal use for electricity generation at power plants over the next five years.
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By 2025, coal-fired power plants in China must adjust their consumption rate to an average of 300g of standard coal per kilowatt-hour (kWh), declared China’s economic planner, the National Development and Reform Commission (NDRC). That compares to 305.5g per kWh in 2020.
Average coal use for electricity generation in China fell by about 17.4% in the 15 years till 2020.
However, China’s demand for coal power may increase if demand for electricity accelerates. Over the past 40 years, electricity growth and GDP growth have been highly correlated, says Lin.
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Some local governments have been supportive of energy-intensive industries because it drives economic growth. “Heavy, energy-intensive industry capacity needs to be reduced to a certain extent to make the transition sustainable,” says Lin. This is critical to achieving carbon neutrality.
For China to achieve its emissions targets, consumer behaviour will also need to change. Compared with developed countries, Chinese consumers have “a lower ability to pay for carbon neutrality”, which makes it difficult to speed up energy pricing reforms, says Lin.
China may be used to heavy lifting on the supply side, but Lin highlights the other half of the equation. Thinking about solving climate change from the demand side would be a shift for policymakers and commentators, says Lin. “We always focus on the supply side because it is easier to understand but the demand side is equally important — and possibly more important.”
Lin says Chinese consumers could be encouraged to take a “circular economy” approach to consumption by recycling trash and not always buying the latest devices.
Power gridlock
Global efforts to decarbonise cannot be effective without China’s participation, but China’s success depends on the development of sustainable renewable energies.
In a subsequent panel discussion, Shawn Qu, chairman and CEO of Canadian Solar, says solar power has already reached parity, or better, in terms of price compared to fossil fuels. “Technically, it’s possible to reduce cost even further. But society should start to think differently about the cost of solar. Why should it be pushed down even further when it’s already the cheapest?” he adds.
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Listed on Nasdaq, Canadian Solar manufactures solar photovoltaic modules and runs large-scale solar projects, with subsidiaries in over 24 countries.
Rather than just lowering cost, Qu suggests that research should also focus on deploying solar into national grids and improving storage.
David Simmonds, group general counsel at CLP Holdings, says the business plans to accelerate its exit from coal. “In China, renewables’ contribution to the energy market is still small. China provides big opportunities in both wind and solar,” he adds.
Incorporated in 1901 as China Light & Power Company Syndicate, CLP is an electricity company in Hong Kong listed on the Stock Exchange of Hong Kong.
Lin, who is also a member of the Energy Price Consultation Committee under the NDRC, offers a candid take on China’s power grid and its current gridlock. “When you invest in coal and oil, you can make money. But you can’t when you invest in renewables. Who is going to pay?” he asks.
Three parties pay for green energy, says Lin. They are governments via subsidies, capital markets and consumers. “Capital markets are paying for it and the question is whether that’s sustainable. In China, consumers are starting to pay for it… Someone needs to pay for the transition,” he notes.
Photo: Bloomberg
