China may be the world’s biggest user and producer of coal – and also the largest emitter of carbon dioxide and other greenhouse gases but all is not doom and gloom. China is currently establishing the world’s largest renewable energy system. By 2013 this had reached over 1 trillion kW, larger than the accumulated total of electrical energy produced by the power systems of France and Germany. What is driving this shift toward renewable energy, and what does it mean for China and the rest of the world?
Beijing wants to move the country in the direction of lower-carbon energy use and so far has had some impressive – if partial – results. Last year, for example, China’s new renewable power capacity surpassed new fossil fuel and nuclear capacity for the first time – although overall investment in renewable energy fell by 6% between 2012 and 2013.
The report cited above also notes that China is the world’s top investor in renewable power and fuel, has the biggest total capacity of renewable power including hydro (and also not including hydro), the world’s biggest hydropower capacity and windpower capacity (over 60 GW), as well as the largest solar water heating capacity and geothermal heating capacity.
China overtook the US in 2010 to claim the number one spot as the world’s largest wind power producer, with 44.7 GW of productive capacity. The Gansu Jiuquan project, for example, situated in Inner Mongolia on the edge of the Gobi desert, will be the world’s largest wind farm and its capacity of 10 GW will be larger than the entire installed capacity of windpower in the US.
Yet because of the country’s size and the legacy of the ‘dash for growth’ over the last 20 years, China’s energy industry overall is still cheap and nasty. It still depends on coal for two-thirds of its energy requirements and ranks as the world’s biggest carbon polluter. Nor does it show many signs of improvement. In 2014 it is likely that China will become the world’s largest oil importer and coal and oil still account for nearly 90% of energy consumption. In 2011, China’s GDP accounted for only 10% of the world‘s carbon dioxide output, yet it consumed 60% of the world’s cement, 49% of the iron and steel and 20% of the energy.
Faced with such daunting figures, China has adopted ambitious targets for renewable energy investment for its 12th five-year plan, which aims to spend $473.1bn on clean energy investments from 2011 to 2015, in seven strategically important spheres: energy-saving and environmental protection, next generation information technology, bio-technology, advanced equipment manufacturing, new energy (solar, wind and biomass power), new materials and new-energy vehicles. China’s goal, according to Forbes magazine, is to have 20% of its total energy demand sourced from renewable energy by 2020.
In fact, it is making a reasonably good start, spending a total of $56.3bn on wind solar and other renewables in 2013 and accounting for 61% of the total investment in renewables in developing countries. It invested more in renewable energy last year than all the countries in Europe combined. China now has about 24% of the world’s renewable power capacity, including around 260 GW of hydropower.
Manufacturers in China now churn out more solar photovoltaic panels (PVs) and wind turbines than any other country. By 2020, China aims to have quadrupled its capacity for wind, solar and biomass power, from less than 50 GW in 2010 to more than 200 GW in 2020, spurred on by health concerns and the Fukushima nuclear disaster in nearby Japan.
The main motive for China’s turn towards renewables is not hard to fathom. The ever-growing number of horror stories about unbreatheable air in many major cities continues to be a major issue with the public. It is estimated that outdoor air pollution contributes to 1.2m premature deaths each year, providing a solid motivation for the need to create a greener energy system.
According to a recent report by the world’s largest thin-film solar company, Hanergy Energy Holding Group and China New Energy Chamber of Commerce, China installed 12 GW of new PV generation capacity in 2013, a massive 232% increase over the previous year. Compare that to Germany, whose new PV capacity dropped 56%, and Italy, where new solar power additions fell by 55%.
The report also notes that China in 2013 accounted for the largest proportion of total global solar industry financing, which at $23.5bn, is equivalent to the entire amount raised in Europe. Li Hejun, chairman and CEO of Hanergy and president of the China New Energy Chamber of Commerce, told China Outlook: “There’s little doubt that the government is serious about promoting green energy as the base of this growth – China’s renewable energy capacity increased from 27.9 GW in 2001 to 183 GW in 2013 and it was by far the world’s largest investor in renewable energy last year.”
He added: “Solar power has been the rising star in this field, with thin-film solar technology leading the way. This is because thin-film panels, unlike traditional silicon-based solar modules, are lightweight and portable and can be flexible, translucent, and integrated into buildings and other consumer products, like vehicles, mobiles, and clothing. As China and other global energy markets transition away from fossil fuels, thin-film solar technology will play an important role.”
Li was keen to make a distinction between the firms that focus on traditional, crystalline-silicon based modules (more than 90% of the global PV market) and those (like his own company) that make next-generation, thin-film panels. China has always been a cost leader in manufacturing, so it is not surprising that panel production is concentrated in China.
However, China’s growing success in producing PV panels has not been widely appreciated in either Europe or America. In December last year the European Union introduced tariffs after China was accused of flooding the market with cheap panels. An EU investigation found that Chinese companies were selling panels in Europe at far below their normal market prices and were also receiving illegal government subsidies. The tariff only applies to manufacturers who would not agree to a minimum price.
Similar actions have taken place in the US, where Chinese solar panels had made significant inroads into the marketplace.
At the same time – and despite the growth of the market – according to a 2013 report by the United Nations Environment Programme (UNEP), while Chinese firms have been able to successfully compete internationally, they have fallen behind their western competitors in technological development – for example, in their development of thin film solar panels. On average, as a percentage of revenues, Chinese firms tend to invest less in research and development than their western counterparts.
The report also states that across every sector studied, a technology gap exists between Chinese firms and their industrialised-world competitors. The government needs to encourage longer-term investment in research and development, and further support for domestic innovation. It also needs to spend more on investment in the grid itself. At present, it is not easy in China to switch excess output from one region to another, particularly important as sunlight is stronger in the west of the country, whilst demand for power is strongest in the east. Some windpower farms are not even connected to the national grid.
However, recent reports suggest that China is catching up. Ambitious targets have already been set for the 13th Five-Year Plan from 2016-2020 – although much of the predicted growth is based on a continuing property boom in China, so if that slows down, it may affect plans to increase production of panels, wind farms and other renewables.
For China’s leadership the battle to reduce pollution is always a political issue, something that has to be balanced against the need for further industrialisation and development. Will pollution control still allow for economic growth? As things stand, there are grounds for optimism in the way China is facing up to its severe environmental problems. Will that optimism still be there in five years?