Several policy documents laying out plans for an energy sector reform have been issued since 2014. Among them are China’s National Climate Plan, China’s Nationally Determined Contributions and the 13th 5-Year Plan on Energy Reform (13th Energy FYP). They will all have to stand scrutiny as to their target achievement by the end of 2020.
Among the most concrete plans are the National Climate Plan and the 13th Energy FYP which stipulate guidelines and specific capacities for improved energy generation from coal, oil and gas, wind, solar, biomass and thermal recycling energy, for energy consumption saving targets, for better distribution and for the financing of new technologies.
The energy mix until 2020 foresees a shift from “dirty” coal energy to “clean” alternatives, which in China includes natural gas, hydro, nuclear, solar and wind. Renewables’ increasing role is illustrated by the fact that by 2020 many of the originally set annual capacities of 200 Gigawatt (GW) for wind, 100 GW for solar, 350 GW for hydro, 58 GW for nuclear and 15 GW for biomass energy will have been exceeded. However, these are not sufficient to ensure energy security, therefore China focuses on natural gas to replace coal, eliminating outdated coal-fired power generation units and implementation of a.o. ultra-low emissions plants.
Energy efficiency measures to reduce overall consumption complement structural reforms, e.g. shifting from traditional energy-guzzling industries to less energy-consuming sectors. The target is a reduction in commercial energy consumption to 2.5% by 2020 for sectors like steel or building materials. Overall energy consumption by 2020 should remain within 5 billion tons of standard coal equivalent (SCE), thereof up to 15% from non-fossil fuels, 10% from natural gas, and less than 58% from coal.
Policies also call for improvement of energy distribution through the development of smart grids and distributed energy resources. Smaller-scale local energy generation is to increasingly satisfy local energy needs and alleviate problems of efficiency losses in distribution. Fiscal incentives, new energy resource pricing mechanisms, and financing support complete the reform plans.
Results so far are mixed. Total energy consumption has been rising steadily to 4,86 billion tons SCE in 2019, up 4.5% from last year. Clean energy accounted for 23.4% up by 1.3 percentage points. Consumption of natural gas rose by 8.6%, followed by crude oil (+6.8%). The share of coal in overall energy consumption has dropped to 57.7% in 2019, reaching China’s target ahead of time. However, increased energy demand has triggered the addition rather than reduction of coal power capacity: from 2018 to 2019, the country added 43 GW of net new coal power capacity. Therefore, overall coal consumption rose again, with increases for 2019 being estimated between 1% (National Bureau of Statistics) and 3% (Greenpeace). Coal remains the energy source of choice based on availability and price, while access to cleaner natural gas remains hampered by higher prices and access (transport, import) problems.
China’s efforts to adjust its energy structure and improve energy efficiency has led to a constant decline in carbon intensity, partly due to the reduced share of coal in the energy mix. China’s CO2 intensity declined by 4.1% in 2019, but the increased energy demand will likely be leading to yet another increase in overall CO2 emissions. In 2018, China’s CO2 emissions increased y-o-y by 2.2% to 9.64 Gt CO2.
Activity Rating: ***Moving Forward (needs more work)
China has made enormous strides in raising the share of renewable energy forms in the overall energy mix. However, the task of energy reform is complex as it not just tackles CO2 emissions and climate change but increasingly integrates a more immediate problem: alleviating heavy air pollution and addressing PM 2.5 particulate, VOCs and gasses like SOX and NOX. Therefore, the official policy defines natural gas as “clean” energy in the same category as renewables and nuclear energy. While natural gas is certainly not ideal, other forms of so-called “clean” energy come with their own problems: hydropower’s environmental impact on biodiversity and economic impact on the livelihood of downstream farmers is well documented and discussed. So is nuclear energy, especially after the meltdown of the nuclear power plant in Fukushima, Japan. More energy from wind and solar is certainly desirable, but it is unrealistic to hope that those energy forms are able to sustain in the mid-term the energy needs of a country with a population of 1.4 billion, and one that continues to be a manufacturing hub for of many of our daily used products of convenience.
Far more worrying is that China continues to export and finance coal energy technology – albeit cleaner coal technology – to the developing countries along the Belt and Road Initiative (BRI) when it has the technological know-how, expertise, and financial capacity to help these countries build up capacities in renewable energy. This export policy runs counter to the global fight against CO2 emissions from fossil fuels as it creates emissions in countries that may not have the ability to invest in clean energy sources.
Also, much remains to be done regarding energy efficiency where China lags behind developed countries. More efforts to improve the efficiency of energy-intensive industries, for example, construction, cement, steel, and chemicals, are called for. For example, better heat and steam recycling from production to reduce primary energy needs based on coal. Policies like an absolute coal consumption cap not based on the share-of-energy mix and incentives for developing clean coal production and utilization technologies, such as coal cleaning technologies and carbon capture and storage technologies are called for. Accelerated development of non-fossil fuel energy technologies, especially renewables, can be achieved by increasing investment, setting more active and binding goals, giving priority to non-fossil fuels in gaining grid access, and establishing a carbon emission trade market. As to natural gas, China has been struggling with production, storage, and transportation infrastructure insufficiencies leading to seasonal shortages. Natural gas has to be a large part to be imported as local production ability is yet insufficient.
China has assumed a leadership role in energy sector reform especially in developing and installing capacity for renewable energy technologies since the Paris Agreement in 2015. We recognize that the energy sector reform is highly complex especially in light of a slower economy. At the same time, we urge the Chinese government to continue on their path and accelerate the phasing out of coal-fired plants, stop the financing and export of coal-based energy technology in favor of renewable energy, and focus on easing access and pricing for cleaner fossil fuels like natural gas while increasing efforts to steadily expand capacities for renewable energies. We also acknowledge the complex task of phasing out older, energy-consuming industries in a socially responsible manner, but urge the Chinese government, as the time to lower CO2 emissions is running out, that fast action and investment in innovative energy-efficient technologies are imperative.
National Energy Administration (NEA)
Director Jianhua Zhang
38Yuetan South Street,
National Development and Reform Commission
Minister Lifeng He / 何立峰
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Premier Li Keqiang
This post was submitted by Climate Scorecard China Country Manager Annette Wiedenbach; Translation by Jolin.
Climate Scorecard 专题报道 #26， 2020年3月