IN the last two years, China’s President Xi Jinping signed two major climate agreements with the United States committing China to increase the non-fossil-fuel share of all energy to a target of 20 percent. In addition, China submitted to the UN’s Intended Nationally Determined Contributions (INDCs) outlining its carbon reduction targets. Chinese officials at all levels of government are focused on developing low-carbon initiatives, with each one competing to have the most visible initiatives, ideally without having to expend much in the way of new resources. This commitment seems stronger and more pervasive in China than in the US, and it has only emerged in the past three years.
The first aspect of China’s electricity sector that strikes the casual observer is its sheer size — 1,505 GW, which is larger than any system in the world by a significant margin. In 2015, it installed approximately 51 GW of solar and wind capacity, compared to 12 GW installed in the US over the same period. These are impressive number, but given the intermittent nature of solar and wind generation, these sources remain a small volume of total consumed power. Second, China measures its success not in terms of renewables, but in terms of non-fossil-fuel power sources, which includes nuclear and large hydroelectric facilities. These low-carbon sources are not being aggressively pursued in the US or Europe due to both political and economic challenges.
Beneath the surface of this momentum lie three large challenges that China must address if it is to turn public rhetoric into an effective green energy program.
First, China has a very inefficient electric dispatch system — the methodology by which the grid decides how to utilize its generating assets. In the US, the grid operator dispatches the lowest-cost plant to operate first, the next-lowest next and so forth. Power costs vary with demand, which increases throughout the day, but the overall cost to meet each day’s demand is the lowest possible, while still guaranteeing grid stability and security. In China, the grid operator signs contracts with each generator for a set number of operating hours according to energy sources and technologies, and plant use is prorated so that each generating unit of the same kind is used for approximately the same number of hours. The idea was initially designed to attract more investors by assuring them a fixed number of hours in which their power would be purchased, but the unintended result is that the dirty coal-fired plant that is old and inefficient is often dispatched the same number of hours as a more efficient new unit, and that renewable energy resources are often curtailed when supply exceeds demand. The outcome is poor economic performance and poor environmental impacts. This is not news to the Chinese central government, which is trying to convince the grid companies to change this dispatch system, but so far without success.
Second, there are enormous differences among the 26 provinces. Some have much higher per-capita income levels than others. A low-carbon strategy that is politically acceptable in one province may not be economically viable for another. Hence having national low-carbon targets that are the same for every industry in every province may not be feasible. Further, implementing aggressive caps on carbon emissions in some provinces and not in others may lead to the relocation of carbon-intensive facilities from the former to the latter. The result would be relocating emissions, not reducing them.
Third, the criteria for promotions within the Chinese government have been weighted toward meeting economic goals. Provincial officials who meet their economic growth numbers have a good chance to advance. Large infrastructure projects, such as coal power plants involving large capital investments that can raise local employment rates and boost the local economy, have been traditionally favored. Implementing a low-carbon strategy that involves significantly greater investments in solar and wind power and the implementation of an aggressive energy efficiency program, characterized by stronger building codes and alternative means of transportation, will in the near term increase the costs of goods and services. The result is likely to be lower growth numbers, which is not a good outcome for politically ambitious officials. The key question is will local and provincial officials believe that assertion? If they believe that jobs and high levels of economic growth will determine their future, it may be quite hard to persuade them to adopt aggressive green energy goals. Therefore, getting the incentives right for the sub-national officials on whose shoulders will fall the implementation and enforcement burden of reducing pollution, both carbon and conventional, becomes essential.
It is one thing to manufacture millions of photovoltaic collectors for the world’s export markets, but it will be a much more difficult challenge for China to transition to a low-carbon economy and a green energy portfolio. Such a transition will require major changes and challenges, ranging from reforming China’s electricity grid to enhancing the incentives and responsibilities of local officials to establishing carbon targets and standards that are perceived at the local and provincial levels as fair, politically viable, enforceable and economically sustainable.
n In partnership with The Mark News.
The first aspect of China’s electricity sector that strikes the casual observer is its sheer size — 1,505 GW, which is larger than any system in the world by a significant margin. In 2015, it installed approximately 51 GW of solar and wind capacity, compared to 12 GW installed in the US over the same period. These are impressive number, but given the intermittent nature of solar and wind generation, these sources remain a small volume of total consumed power. Second, China measures its success not in terms of renewables, but in terms of non-fossil-fuel power sources, which includes nuclear and large hydroelectric facilities. These low-carbon sources are not being aggressively pursued in the US or Europe due to both political and economic challenges.
Beneath the surface of this momentum lie three large challenges that China must address if it is to turn public rhetoric into an effective green energy program.
First, China has a very inefficient electric dispatch system — the methodology by which the grid decides how to utilize its generating assets. In the US, the grid operator dispatches the lowest-cost plant to operate first, the next-lowest next and so forth. Power costs vary with demand, which increases throughout the day, but the overall cost to meet each day’s demand is the lowest possible, while still guaranteeing grid stability and security. In China, the grid operator signs contracts with each generator for a set number of operating hours according to energy sources and technologies, and plant use is prorated so that each generating unit of the same kind is used for approximately the same number of hours. The idea was initially designed to attract more investors by assuring them a fixed number of hours in which their power would be purchased, but the unintended result is that the dirty coal-fired plant that is old and inefficient is often dispatched the same number of hours as a more efficient new unit, and that renewable energy resources are often curtailed when supply exceeds demand. The outcome is poor economic performance and poor environmental impacts. This is not news to the Chinese central government, which is trying to convince the grid companies to change this dispatch system, but so far without success.
Second, there are enormous differences among the 26 provinces. Some have much higher per-capita income levels than others. A low-carbon strategy that is politically acceptable in one province may not be economically viable for another. Hence having national low-carbon targets that are the same for every industry in every province may not be feasible. Further, implementing aggressive caps on carbon emissions in some provinces and not in others may lead to the relocation of carbon-intensive facilities from the former to the latter. The result would be relocating emissions, not reducing them.
Third, the criteria for promotions within the Chinese government have been weighted toward meeting economic goals. Provincial officials who meet their economic growth numbers have a good chance to advance. Large infrastructure projects, such as coal power plants involving large capital investments that can raise local employment rates and boost the local economy, have been traditionally favored. Implementing a low-carbon strategy that involves significantly greater investments in solar and wind power and the implementation of an aggressive energy efficiency program, characterized by stronger building codes and alternative means of transportation, will in the near term increase the costs of goods and services. The result is likely to be lower growth numbers, which is not a good outcome for politically ambitious officials. The key question is will local and provincial officials believe that assertion? If they believe that jobs and high levels of economic growth will determine their future, it may be quite hard to persuade them to adopt aggressive green energy goals. Therefore, getting the incentives right for the sub-national officials on whose shoulders will fall the implementation and enforcement burden of reducing pollution, both carbon and conventional, becomes essential.
It is one thing to manufacture millions of photovoltaic collectors for the world’s export markets, but it will be a much more difficult challenge for China to transition to a low-carbon economy and a green energy portfolio. Such a transition will require major changes and challenges, ranging from reforming China’s electricity grid to enhancing the incentives and responsibilities of local officials to establishing carbon targets and standards that are perceived at the local and provincial levels as fair, politically viable, enforceable and economically sustainable.
n In partnership with The Mark News.
