Is China a Climate Villain or Saviour?

It’s well known that China has the largest greenhouse gas emissions by country, and is the largest consumer of coal. The country is a large importer, producer and consumer of all fossil fuels. Chinese emissions per capita are significantly above the world average, but are very far below the United States, Canada, Australia, Saudi Arabia and Qatar.

Bloomberg New Energy Finance estimate 63% of Chinese electricity is generated by burning coal, with 29 GW of coal-fired power plants being added this year. China’s installed capacity of coal power stations will likely grow by 10%, and peak in 2025… They are also adding about 43 GW of solar PV, 28 GW of wind power, and 9 GW of hydro power per annum. Hydro comprises 18% of electricity generation, wind 6%, and solar 3% (renewables share of just under 30%). The country has high curtailments of renewable generation, hindering their energy transition towards clean technologies. There is a massive expansion of transmission capacity going on, attempting to reduce these curtailments.

Last month Wood Mackenzie concluded in “China provincial renewables competitiveness report 2019” that the Levelized Cost of Electricity (LOCE) for solar and wind power in China is already cheaper than natural gas-fired power, and will overtake coal by about 2026. Research director Alex Whitworth said “Across most of China’s provinces and regions, renewables cost premium remains over coal power, averaging 26 percent in 2019 for wind and solar, down from over 100 percent in 2010”. Shanghai and Qinghai already have cost-competitive renewables today.

China has been the largest investor into renewable energy during the last decade by far, including both a rapid build-out of renewables domestically and outbound renewables investment into many other countries. One-third of all wind and solar installations are in China, with total capacity of 372 GW in hydro, 241 GW in wind, 267 GW in solar and 22 GW in biomass (according to BloombergNEF).

As well as being the leading renewables owner, developer and investor China is also the best positioned country for the coming energy transition:

• All of the top ten manufacturers of crystalline solar PV modules are Chinese (73% global market share). The country has been a large importer of German equipment for the manufacture of solar cells, which has been utilised to build a massive and low-cost industry. The solar and wind industries around the world are bracing for the impact of devastating coronavirus in China, which has brought some manufacturing to a halt and is likely to result in price rises, supply shortages and project delays. China has such a dominant lead in the solar panel supply chain that solar module stockpiles could soon be exhausted in other countries, due to coronavirus (China-made modules account for 90% of Australia’s rooftop solar market).
• Six of the top ten wind turbine manufacturers are based in China, with the share of wind turbine nacelle capacity rising from 29% to 54% during the last decade. Their top three turbine makers dominate – Goldwind, Envision and Mingyang.
• Last year China had three-quarters of the manufacturing capacity for lithium-ion batteries. They already have capacity for 88,000 tons of battery recycling per annum, which is expected to increase by more than an order of magnitude during the next decade.
• Over half of Electric Vehicles are produced and sold in China, where there are almost 400 models on offer (across both battery EVs and plug-in hybrids). China sells well over 20 million two-wheel electric vehicles per year.
• Chinese hydrogen electrolyzer technology is 83% cheaper than Western equipment (capex for large-scale alkaline electrolyzers).
• They have the world's longest high-speed railway network, accounting for two-thirds of the world's total. High-speed rail developed rapidly in China over the past 15 years with substantial funding from the Chinese government, especially the economic stimulus program during the Global Financial Crisis. China's early high-speed trains were imported or built under technology transfer agreements with foreign train-makers including Alstom, Siemens, Bombardier and Kawasaki Heavy Industries. Since the initial technological support, Chinese engineers have re-designed internal train components and built indigenous trains manufactured by the state-owned CRRC Corporation. Their government has targeted the fast-track export of Chinese high-speed rail abroad.
• The country is a leader in Artificial Intelligence, online payments, mobile technology, as well as industrial digitalisation partnerships.

In conclusion, China is both one of the biggest carbon emission villains as well as potentially a climate change saviour (through the deployment of Chinese-made equipment and technology). Chinese solar panel manufacturing has decimated the German industry, demonstrating the capacity for China to rapidly build low-cost capacity at massive scale. Strategic industry policy has positioned China to benefit from the global transition towards renewable energy, battery storage, Electric Vehicles and cleaner transport. Large volumes of low-cost Chinese manufactured goods will be utilised for the path to Net Zero and for the energy transition, both in developed and developing countries.