China Takes the Lead on Renewable Energy: Motivation and Challenges

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At the start of 2017, while Trump administration pulled US out of the Paris Agreement, China pledged to invest 2.5 trillion yuan ($367 billion) into renewable power generation – wind, solar, hydro and nuclear – by the end of 2020. At the same time, the Chinese government scrapped plans to build 85 coal-fired power plants, continuing the shift from fossil fuels to renewables.

China currently is at the center of global energy transformation, surpassing US and Europe. The energy revolution in China serves as a great model to other developing countries that need build more energy resources and infrastructures to sync with their growth.

Motivation

So why China became the global leader of renewable energy within one decade? There are several reasons behind spurring China to invest huge amount of money and resources into renewables. Air pollution issue has been the focus of discussion both inside and outside China. As the economy took off rapidly, China has paid and will be paying the price for its breakneck industrialization that helped it catch up with the industrially advanced world. China’s tradeoff from its rapid development is severe.

One new academic research in Nanjing University suggested that air pollution could be the cause of one in three deaths in China in 2016. In the 13th Five-Year Plan (FYP), the Chinese government’s most important strategy to address its economic, social, and environmental challenges from 2016 to 2020, it first time included the specific PM2.5 target, aiming to reduce the emissions of PM2.5 by 25%. To fulfill the target, promoting renewables and cutting coal burning is one of keys addressing the phenomenon known as ‘Airpocalypse’. Not only did the authority made orders to transfer from thermal to renewables, but also the Chinese citizens want more greener power in their daily life, willing to pay a little more for utility, according to some survey.

The response to rising social unrest over unbreathable air is not the only motivation to China’s push of developing renewable energy. China sought to position itself as the global leader in the battle against climate change, while Trump was working hard to undo the hard-won achievements about clean power policy of his predecessor and EU was on a track of reduced clean energy investment starting from 2011. As China’s international influences rose continuously, taking the lead of renewable energy revolution is an opportunity to consolidate its position in the world and will be beneficial to many other areas.

China also foresees the opportunity to develop and deploy renewable energy technologies that, presumably, many other nations will want in the future for carbon mitigation. China has already been a major manufacturer and exporter of renewable energy technologies, supplying two-thirds of world solar panels and building half of the world’s wind turbines with a rate of about two every hour. The dominance of China in building renewable energy infrastructure is partly attributed to its manufacturing strategy in favour of renewables, which is not just for the reason of mitigating climate change, but also in the strategic plan for its national energy security.

As the whole world is shifting from fossil fuels to renewables, the capability of generating green energy on their own can put China on a very favorable position in terms of national energy security. Moreover, China is actively investing in innovative renewable energy technologies to further cement its leadership in the world. While U.S. cleantech venture capital investment has sharply declined since 2011, China seized this opportunity to lead the clean energy technology innovation by investing and acquiring companies with new technologies that could be game-changers in the future. The Chinese clean energy company Hanergy’s buying many oversea small companies with cutting-edge CIGS solar technology and leveraging the technology for localization in China is one good example here.

Besides the strong grip on innovative clean energy technologies, tremendous job creation is another benefit coming with China’s effort being global leader of renewables. While Trump made promise to put American coal miners back to work, China is moving towards the opposite direction. Currently, more than 2.5 million people work in the solar sector alone in China, compared with 260,000 people in the US. The investment to achieve the 2030 goal will create about 10 million jobs in renewable energy sector, estimated by National Energy Administration. Interestingly, one of the hottest projects in the east province of Anhui is to build giant floating solar energy farm on top of a flooded area once home to a coal mining factory.

Challenges

While China takes the lead in renewable energy, it also faces many challenges in its transition from fossil fuels to renewables. The first obstacle is its continuing coal dependence. It has to be acknowledged that China’s economy still heavily depends on coal-based power system, and it will continue to do so for many years to come. However, Chinese government is so efficient on policy making that it is already on a path to permanently reduce its coal consumption and production, seeking progressively greater reliance on clean energy resources. At the same time, China is making significant progress to reduce its resource intensity. The 13th Five-Year Plan announced the two-year “freeze period” for the approval of any new coal-fired power plant, and, meanwhile, is aiming to reduce energy intensity by a total of 15% between 2016 and 2020.

Another hurdle that China is experiencing is the slowing power demand growth and growing clean energy curtailment. The construction of solar panels and wind farms in China has outpaced the upgrades of its electrical grid, resulting a great amount of energy waste. In 2016, 17% of China’s wind power was wasted, and the number reached 10% on solar side. Achieving capacity targets of renewable energy will not be automatism to replacing coal-fired power generation if the transmission infrastructure bottlenecks cannot be resolved. The government already realized the problem and now is focusing on investing in grid and reforming the energy market so that the green resources in place can generate to their full potential.

Moreover, not only the Chinese citizens are suffering from the polluted air in major urban areas, the output of solar energy is also significantly impacted by the dirty clouds. The air pollution can block 20% of sunlight from reaching the solar panels in northern and eastern parts of China. Given the difficulties of eliminating air pollution issue in short-term, policymakers are weighing the costs of transmitting electricity from remote, cleaner areas to dirtier ones against the benefits of producing more power by building solar farms where more sunlight can directly reach the arrays. Nevertheless, expanding renewable energy production can create a virtuous cycle. More clean energy production can reduce reliance on fossil fuels, thus cutting down the polluted air emissions that hamper solar power production. This will send more electricity into the grid, which, in turn, will further reduce the need of fossil fuels.

Despite the hurdles, technological innovation and political stimulus should help China to realize its goal towards the commitment of renewable energy transition in the future. China’s position as global leader in renewable energy will continue, and the whole world’s energy transformation will depend on China.

By Jian Cao