The Future Is Renewable: Targets and Policies by Country - Phillip Riley Research Series - China | April 2017
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Phillip Riley Research Series The Future Is Renewable: Targets and Policies by Country China | April 2017
Introduction This Phillip Riley research series is an investigation into the renewable energy policies of Australia, the United States and various Asia Pacific nations. The reports look into the countries’ renewable energy potential, climate change targets and the success of their policy to date. Each report focuses on the current and future use of renewable energy and takes into account the political, geographical and economic challenges unique to each nation. Phillip Riley is a specialist recruitment and consulting practice focusing on the Renewable Energy & Energy Efficiency sectors. We attract and retain talent across a broad range of job disciplines including Pre-Construction (Sales, Project Development, Corporate Finance), Construction (Construction, Commissioning, Consulting), Operations (O&M, Energy Information Systems) and Retail (Commercial and Industrial Solar, Energy Efficiency). Our clients span the breadth of the Renewable Energy generation (Wind, Hydro, Solar PV, Solar Thermal, Bioenergy, Wave, Tidal) types, and includes supporting companies such as Original Equipment Manufacturers (OEMs), Engineer Procure Construction (EPCs), Transportation & Logistics, Project Development, & Consulting Firms. In addition, we are a recruitment partner to Transmission, Distribution & Energy Retail companies, and have demonstrable track record across the Private, Public & Not-For- Profit Sectors. To view and download all reports of this Research Series, please visit the Research section of our website at http://phillipriley.com.au/featured/research/. 2
The Future is Renewable: Targets and Policies by Country China | April 2017 Author: Daila Ziedars
Targets and Policies by Country: China As one of the largest countries in the world with the biggest population, China faces unique challenges in its energy sector. With more than 1.3 billion residents, the effects of global warming have the potential to affect millions and millions of its people, so climate change is undeniably of great concern to China. Changing to a cleaner energy supply is a key part of China’s plans to tackle climate change and the Chinese government is actively promoting renewables as an important part of transitioning to a low carbon economy. China is the world’s largest energy consumer - accounting for 20% of the world’s total energy consumption1 - and as its economy continues to grow, demand for energy is also increasing. China has immense reserves of coal, so it follows that coal has long been the most-used source of energy, but it has recently become a world leader in renewable energy as well. In 2013, China installed more renewable energy capacity than all of Europe and the Asia Pacific region1 and it is still increasing. The government of China has put in place several policies and targets in an effort to reduce emissions and air pollution as well as increase renewable energy use. Greenhouse gas emissions in China In 2014, China was responsible for 28% of the world’s CO2 emissions2. Because of the vast quantities of coal consumed by the country, China is also the world’s largest emitter of energy related CO2 emissions. The use of coal for electricity generation is not only responsible for large amounts of greenhouse gas emissions, it is also responsible for a significant amount of pollution in China’s air. Air pollution is a major problem in China and in 2010 It caused more than 1.2 million premature deaths1. There is concern about the impact that coal-fired power stations are having on health, the environment and on water availability (due to the quantities of water coal-fired power plants use). Therefore it makes sense that targeting the use of coal is key to 1 International Renewable Energy Agency (IRENA), Renewable Energy Prospects: China, 2014, http://www.irena.org/remap/IRENA_REmap_China_report_2014.pdf 2 International Energy Agency (IEA), CO2 emissions from fuel combustion, 2016, 4 https://www.iea.org/publications/freepublications/publication/CO2EmissionsfromFuelCombustion_Highlights_2016.pdf
China China’s emissions reduction goals. China is working towards switching to a low-carbon economy and aims to disconnect economic activity from carbon emissions, which has historically been the trend in China. The country is focusing on reducing the energy intensity of its economy i.e. emissions per unit of GDP, as opposed to overall emissions. In 2016, the government released its 13th Five Year Plan (FYP) for 2016- 2020. Amongst many other goals, it extends previous emissions intensity reduction targets and the goal now is to reduce CO2 per unit of GDP by 18% (compared to 2015 levels) by 20203. China has also committed to longer term emissions reduction goals as a signatory of the Paris Agreement. In its submission to the UNFCCC, China has outlined several commitments to reduce emissions and has presented its already notable achievements. By 2014, China has reduced CO2 emissions per unit of GDP over 33% compared to 2005 levels, increased non-fossil energy consumption to 11.2% and increased forest stock. The goals for the future, set out in its Nationally Determined Contributions, are that it will have reached peak CO2 emissions, reduced the carbon intensity of its economy by 60-65% (compared to 2005 levels) and increased non-fossil energy use to 20%, all by 2030. There is also a target to increase gas use to 10% by 2020 (to displace coal use) and to increase forest in the nation by 4.5 million cubic metres (compared to 2005 levels). China has also initiated carbon trading pilots in 7 provinces and cities (including Beijing) and is trialling low-carbon development in 42 provinces and cities4. Although China’s efforts are admirable, The Climate Action Tracker has concluded that their energy intensity reduction goals are not enough to limit global warming to 2 degrees, let alone the 1.5 degree stretch goal. However, it does state that China’s 2020 3 The People’s Republic of China, First Biennial Update - Report on Climate Change, 2016, http://en.ccchina.gov.cn/archiver/ccchinacn/UpFile/Files/Default/20170124155928346053.pdf 4 Department of Climate Change, National Development & Reform Commission of China, Enhanced Actions on Climate Change: China’s Intended Nationally Determined Contributions, 2015, 5 http://www4.unfccc.int/ndcregistry/PublishedDocuments/China%20First/China%27s%20First%20NDC%20Submission.pdf
China and 2030 target will most likely be met, which puts China on the right path5. Renewable energy in China Renewable energy has a big role to play in China’s plan to transform their economy to a low-carbon one. China’s 13th Five Year Plan (FYP) for energy was released recently and it outlines specific targets for energy consumption and energy resource use. Two of its major targets are increasing the percentage of non-fossil energy consumption to at least 15% of total consumption and reducing the share of coal to 58%6. This is effectively an extension to the goals of the 12th FYP (ending in 2015), which aimed for 11.4% non-fossil resources and 64% coal7. It is important to note that China’s use of the term “non-fossil” resources includes nuclear power, as well as renewables. China includes nuclear power in their plans because it can replace coal as reliable baseload power generation whilst being much less emissions-intensive. However, China is working towards increased penetration of renewables and has set targets for each technology type (wind, solar, etc.). The end goal is to have over 680 GW of installed renewable energy capacity by 20206. China has already made rapid progress with renewables. By 2014, hydropower capacity had increased 2.57 times, wind capacity had increased 90 times and solar capacity had increased 400 times (all compared to 2005)4. China has 4 of the 10 largest power plants in the world - all of them hydroelectric 5 http://climateactiontracker.org/countries/china.html 6 International Energy Agency, China 13th Renewable Energy Development Five Year Plan (2016-2020), 2017, https://www.iea.org/policiesandmeasures/pams/china/name-161254- en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZWFzdXJlczwvYT4gJn JhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPj wvbmF2Pg 7 International Energy Agency, The Twelfth Five-Year Plan for National Economic and Social Development of The Peoples Republic of China, 2016, https://www.iea.org/policiesandmeasures/pams/china/name-25112- en.php?s=dHlwZT1jYyZzdGF0dXM9T2s,&return=PG5hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZWFzdXJlczwvYT4gJn 6 JhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy9jbGltYXRlY2hhbmdlLyI-Q2xpbWF0ZSBDaGFuZ2U8L2E- PC9uYXY-
China power stations - including the biggest one in the world called Three Gorges Dam on the Yangtze River, which has a capacity of over 22,000 MW8. Unlike other countries with renewable energy targets, China includes expansions in large-scale hydro in its plan to increase renewables. The 13th FYP target for hydro capacity is for at least 380 GW by 20209. This is an increase of about 61 GW from 2015 levels10. The potential for additional hydro in China is good and by 2030 there could be 400 GW installed, plus 100 GW of pumped hydro storage1. China also has a great wind resource, particularly in the west and northeast of the country. The 13th FYP target for wind power capacity is for at least 210 GW by 202011, 5 GW of which will be offshore wind. This would account for 6% of China’s total installed capacity by 2020 and is a large increase from 130 GW in 201510. In recent years, wind power has been especially vulnerable to curtailment (the wasting of available power) and the 13th FYP aims to have these issues resolved in Northern China by 2020. There is also a need to improve transmission from here to higher demand areas in other parts of the nation but by 2030 wind capacity could amount to 500 GW, plus 60 GW of offshore wind farms1. China has an excellent solar resource. By 2020, China aims to have at least 110 GW of solar capacity installed, 5 GW of which would be from CSP (concentrated solar power) technology, plus 800 million square metres of solar thermal installations12. This is also a big increase from 2015 capacity of around 42 GW. There is already a good solar 8 http://www.eia.gov/todayinenergy/detail.php?id=28392 9 http://thediplomat.com/2017/01/chinas-ambitious-new-clean-energy-targets/ 10 http://www.stats.gov.cn/tjsj/ndsj/2016/html/0915EN.jpg 11 International Energy Agency (IEA), China 13th Wind Energy Development Five Year Plan (2016-2020), 2017, https://www.iea.org/policiesandmeasures/pams/china/name-161251- en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZWFzdXJlczwvYT4gJn JhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPj wvbmF2Pg 12 International Energy Agency (IEA), China 13th Solar Energy Development Five Year Plan (2016-2020), 2017, https://www.iea.org/policiesandmeasures/pams/china/name-161248- en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZWFzdXJlczwvYT4gJn7 JhcXVvOyA8YSBocmVmPSIvcG9saWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPj wvbmF2Pg
China industry in China - it is home to 5 out of the 6 largest solar manufacturing companies in the world. Because of this, solar panel prices are decreasing (30% in the last year alone), making it more affordable for consumers to generate their own electricity13. By 2030 solar capacity could expand to 308 GW, 40% of which could be from distributed generation1. Feed-in-tariffs are available for solar PV and CSP projects, increasing the popularity of this technology. The 13th FYP also includes a target for increasing the use of ocean energy and bioenergy. By 2020 it aims to have at least 50 MW of ocean energy capacity installed. This part of the plan focuses on giving islands access to ocean energy technology, improving R&D and developing an ocean energy supply chain. The targets for bioenergy are also much smaller than those for wind, solar and hydro but China plans to expand the use of biomass, biogas, waste-to-energy and biofuel technologies. As part of its goal to build a low-carbon economy the Chinese government will also increase the efficiency of coal powered electricity generation, develop geothermal energy, construct smart grids, improve energy efficiency, increase the use of distributed generation and strictly control coal consumption. The most recent data suggests that peak coal may have already been reached, as the use of coal has dropped in the past few years, which is excellent news. Despite great improvement in the clean energy sector, coal still plays a big role in China, delivering vast amounts of baseload electricity yearly. In many cases, fossil-fuel powered electricity (mainly coal) has priority on the grid and this has led to the wasting of power from renewables. In 2016, 21% of all wind power was curtailed and in northern China 12% of solar generation was also wasted13. The curtailment of renewable power is a major issue for renewables in China and reduces the possible 13Renewable Energy World, China is Leaving the US Behind on Clean Energy Investment, 2017, http://www.renewableenergyworld.com/articles/2017/01/china-is-leaving-the-us-behind-on-clean-energy- 8 investment.html?utm_source=dlvr.it&utm_medium=twitter
China income of renewable generators. As a result of this, the government has set out new policies to prevent future curtailment. Firstly, it has placed an emergency ban on new coal construction (stopping construction on some plants and halting the approval process for others) to avoid an oversupply of coal generation capacity. Secondly, it has set out rules to guarantee the sale of renewable energy on the grid. A minimum purchase guarantee will be set, assuring the income of renewable energy generators, and fossil-fuel powered plants who push out renewables will be forced to pay compensation to the renewable generator. Lastly, the government has set individual renewable energy consumption targets for 31 provinces, municipalities and regions, with the amount varying depending on the area’s resources and demand. The targets range from 5% to 13% renewable energy consumption by 202014. These three new policies are a start towards giving grid priority to cleaner energy sources and should reduce curtailment problems faced by renewable power plants. China’s government financially supports the drive for renewables by providing subsidies to approved renewable energy projects. They also offer low cost financing to renewable energy projects via state-owned banks like the China Development Bank, while also providing guarantees for renewable energy companies. For now, the cost of renewable energy subsidies is partly being paid for by consumers, who pay and electricity surcharge, and the state picks up the remainder. However, some relief for the government may come when a green certificate trading scheme is introduced later this year. The future of renewables in China China has the potential to be the most important player in the clean energy sector worldwide. In 2015 it invested US$100 billion in clean energy and in 2016, the nation also invested in overseas clean energy projects totalling US$32 billion. There are 14World Resources Institute, China’s 1-2-3 Punch to Tackle Wasted Renewable Energy, 2016, 9 http://www.wri.org/blog/2016/04/chinas-1-2-3-punch-tackle-wasted-renewable-energy
China are currently 3.5 million renewable energy jobs in China (compared to less than 1 million in the U.S.) and this is set to increase as more clean energy projects are approved. China’s National Energy Administration estimates that between 2016 and 2020, a further 13 million jobs will be created as China works towards meeting it renewable energy targets13. Given the scale of the changes that need to be made, China's commitment to transition to a low carbon economy and reduce its emissions intensity is admirable. Since a large part of the country’s climate change targets are aimed at the energy sector, it is a good time to be involved in renewables in China. There are going to be a huge number of clean energy projects coming online in the next four years and unprecedented growth in related jobs. As the already impressive renewable energy sector continues to expand, China has the potential to develop economies of scale, which will drive down the cost of future renewable energy projects. This, along with China’s excellent renewable energy resources, will make the Chinese energy market even more attractive to investors. The government will be able to cut spending on renewable energy subsidies and focus on other areas, like further reducing carbon emissions. There is already fairly strong government support for renewables in China and if the targets in the 13th Five Year Plan are achieved (and extended after 2020) then China will be well on its way to becoming a clean energy superpower. 10
China A short note about Hong Kong In contrast to China’s efforts to clean up its energy supply, Hong Kong seems not to have embraced renewable energy at all. Hong Kong also suffers from air pollution, which is the cause of many deaths annually and costs the government billions. Greenhouse gas emissions in Hong Kong are increasing steadily and they are currently sitting at 23% above 2002 levels15. The residents of Hong Kong have high energy energy consumption habits. Energy accounts for 97% of all emissions16 and renewables account for less than 1% of all energy use. Unfortunately, Hong Kong has limited potential to increase this. There are opportunities to utilise waste-to-power, solar and wind but there are issues with land availability (due to its high population density) and lack of interest in some technology types like ocean energy and offshore wind. It currently has 3 power stations, only using coal and natural gas but has a plan to increase the use of low-emissions gas-fired power generation and wants to introduce nuclear power generation. 15 South China Morning Post, How China has embraced renewable energy and Hong Kong hasn’t, and what’s behind city’s green power inertia, 2017, http://www.scmp.com/lifestyle/article/2062467/how-china-has-embraced-renewable-energy- and-hong-kong-hasnt-and-whats 16 http://www.emsd.gov.hk/filemanager/en/content_299/stage1_report.pdf 11
Installed capacity of “non-fossil” power generation, China (x 10,000 kW) 80000 Hydro Nuclear Wind Solar Others 70000 60000 50000 40000 30000 20000 10000 0 *2020 Target outlined in China’s 13th Five Year Plan Resource: http://www.stats.gov.cn/tjsj/ndsj/2016/html/0915EN.jpg CO2 Emissions of neighbouring nations Share of renewable resource types in (t CO2 / population)** (2014) installed generation capacity, China 1. Australia 15.81 2005 2. Taiwan 10.68 3. Singapore 8.29 2010 4. Malaysia 7.37 5. China 6.66 2015 6. Thailand 3.60 7. Indonesia 1.72 2020* 8. Vietnam 1.58 0% 50% 100% 9. Philippines 0.97 Hydro Wind Solar Others 10. Cambodia 0.40 *2020 Target outlined in China’s 13th Five Year Plan Resource: **From fuel combustion only 12 http://www.stats.gov.cn/tjsj/ndsj/2016/html/0915EN.jpg Resource: http://www.iea.org/statistics/statisticssearch
Further Resources U.S. Energy Information Administration, China, 2015, https://www.eia.gov/beta/international/analysis_inc International Energy Agency (IEA), Feed-in tariff ludes/countries_long/China/china.pdf support for solar PV, 2017, https://www.iea.org/policiesandmeasures/pams/chi na/name-46873- en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5 hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- International Energy Agency (IEA), China’s Policies SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saW and Actions in Climate Change, 2014, NpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZ https://www.iea.org/policiesandmeasures/pams/chi WFzdXJlczwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9s na/name-146230- aWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3 en.php?s=dHlwZT1jYyZzdGF0dXM9T2s,&return=PG5 kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPjwvbmF2Pg hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saW NpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZ International Energy Agency (IEA), Feed-in tariff for WFzdXJlczwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9s CSP, 2017, aWNpZXNhbmRtZWFzdXJlcy9jbGltYXRlY2hhbmdlLyI- https://www.iea.org/policiesandmeasures/pams/chi Q2xpbWF0ZSBDaGFuZ2U8L2E-PC9uYXY- na/name-161255- en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5 hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saW International Energy Agency (IEA), China 13th Ocean NpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZ Energy Development Five Year Plan (2016-2020), WFzdXJlczwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9s 2017, aWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3 https://www.iea.org/policiesandmeasures/pams/chi kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPjwvbmF2Pg na/name-160750- en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5 hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saW NpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZ International Energy Agency (IEA), China 13th WFzdXJlczwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9s Bioenergy Development Five Year Plan (2016-2020), aWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3 2017, kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPjwvbmF2Pg https://www.iea.org/policiesandmeasures/pams/chi na/name-160331- en.php?s=dHlwZT1yZSZzdGF0dXM9T2s,&return=PG5 hdiBpZD0iYnJlYWRjcnVtYiI-PGEgaHJlZj0iLyI- National Development and Reform Commission, SG9tZTwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9saW China’s Policies and Actions on Climate Change, NpZXNhbmRtZWFzdXJlcy8iPlBvbGljaWVzIGFuZCBNZ 2014, WFzdXJlczwvYT4gJnJhcXVvOyA8YSBocmVmPSIvcG9s http://en.ccchina.gov.cn/archiver/ccchinaen/UpFile/ aWNpZXNhbmRtZWFzdXJlcy9yZW5ld2FibGVlbmVyZ3 Files/Default/20141126133727751798.pdf kvIj5SZW5ld2FibGUgRW5lcmd5PC9hPjwvbmF2Pg 13
Further Resources International Institute for Sustainable Development , Public Finance for Renewable Energy in China: Building on international experience, 2014, ABC news - China to spend $493 billion on green http://www.iisd.org/sites/default/files/publications/ power by 2020, 2017, public_finance_renewable_energy_china.pdf http://www.abc.net.au/news/2017-01-05/china-to- spend-$493-billion-on-renewable-fuel-by- 2020/8164434 South China Morning Post - Beijing slaps quotas on regions’ non-hydro renewable energy consumption, South China Morning Post, China to launch trading of 2016, green certificates for solar and wind power to cut http://www.scmp.com/business/article/1920410/bei subsidies on renewables, 2017, jing-slaps-quotas-regions-non-hydro-renewable- http://www.scmp.com/news/china/policies- energy-consumption politics/article/2067849/china-launch-trading-green- certificates-solar-and-wind Renewable Energy World, China Announces New Renewable Energy Tariff Surcharge Subsidy Catalogue, 2016, South China Morning Post, Hong Kong needs to http://www.renewableenergyworld.com/articles/2016/ switch on to renewable energy, 2015, 10/china-announces-new-renewable-energy-tariff- http://www.scmp.com/comment/insight- surcharge-subsidy-catalogue.html opinion/article/1795166/hong-kong-needs-switch- renewable-energy http://www.carbontracker.org/china-five-year-plan- http://www.gov.hk/en/residents/environment/energy/ coal-co2-emissions-renewables/ renewableenergy.htm 14
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