China’s energy a key focus for their next five year plan

by: Hans van Cleef

China’s National People’s Congress (NPC) met at the beginning of March. The Congress approved the draft version of the 14th Five-Year Plan (2021-2025). The five-year plan provides a strategic direction for economic development and related topics. One of these topics is China’s energy and climate policy. The plan is mainly a continuation of the existing policy, however, a number of new aspects stood out. The Chinese expect a peak in CO2 emissions before 2030 – some even say before 2025 – and aim for a CO2-neutral economy in 2060. Admittedly, this is 10 years later than most developed countries are planning. However, those countries do have a lower economic growth rate and thus less desire for growth in net energy demand.

China aims for an 18% reduction in ‘carbon intensity’ and a 13.5% reduction in ‘energy intensity’ by 2025. The report, as in previous editions, shows that there are concerns about rising energy consumption and related air pollution. It indicates the need for higher energy efficiency and a transition to clean energy sources. The country is clearly struggling with the rising energy consumption that comes with higher living standards.

China’s rapid energy consumption rise means renewables cannot satisfy demand

For decades, the supply of global energy has barely been able to keep up with China’s growth in demand for energy. This has impacted the development of China’s energy mix. China reigns supreme when it comes to investing in energy. A graph from Ember’s Global Electricity Review shows that from 2015 to 2020, some 2,600 TWh more electricity has been generated globally, of which 1,900 TWh of this is produced additionally in China. China has the largest growth rate in renewable energy generation (solar, wind, hydro and bioenergy), nuclear energy and coal.

There was also strong growth in the consumption of natural gas. Only the US used more natural gas for electricity production, with the EU using as much as China. In the EU and the US, natural gas was mainly a substitute for coal power, the net electricity production in the US remained almost the same and in the EU it decreased only slightly. Chinese demand for electricity is growing faster than the construction of renewable energy sources and the reliance on fossil fuels such as coal and natural gas is necessarily increasing as well. The conclusion is that, despite the substantial investments in renewable energy, the globe will still use more fossil fuels to generate electricity in 2020 than it did in 2015.

Completely different focus than in Europe

Zooming in on two energy sources, namely coal and nuclear power, we can conclude that both show a completely different pattern in China than in Europe, let alone the Netherlands. The first is coal power. Last year, the construction of 38.4 GW of coal-fired power plants was approved in China. As a result, almost 90 GW of coal power is now under construction, versus just 8.6 GW of coal capacity to be decommissioned by 2020. Coal is on the rise in China as Dutch usage falls. In the Netherlands, there are just four coal-fired power plants with a combined capacity of almost 4 GW, following the recent closure of the coal-fired Hemweg power plant in Amsterdam (630 MW). Dutch coal facilities are no longer allowed to burn coal after 2030.

The other is nuclear energy. In 2020, China had 51 GW of capacity for electricity production by nuclear power plants. Although this is less than the target of 58 GW of capacity in previous five-year plans, the country remains committed to further expanding the number of nuclear power plants. In fact, with the planned construction of an average of six nuclear power plants per year, capacity should reach 70 GW by 2025. By building nuclear power plants in series, it appears that it is cost-effective and the technical knowledge is/maintains a high level. By way of comparison, Germany and France increasingly want to push nuclear energy out of the energy mix because of the risks involved. The fact that it cannot be replaced 1-on-1 by sustainable energy leads to higher CO2 emissions. In Belgium, the debate surrounding nuclear energy has flared up again and there seems to be a stalemate between parties that want a quicker closure of existing nuclear power plants because of the risks involved and parties that want an extension of the life span for the sake of climate policy. In the Netherlands, there is renewed interest in actually using the energy source. No new nuclear power plants have been built in Europe for a long time (one is now being built in the UK, but nothing else). Our knowledge and skills have therefore declined, and the costs are therefore higher than in China.

Security of supply high priority could also be a factor in increased nuclear reliance

Why China is also fully committed to nuclear power may have something to do with supply security. In a recent column, John Kemp (Reuters News) rightly pointed to the security of supply that China seeks in an economy that needs more and more energy. Indeed, the Chinese see the benefit of centrally large scale produced power. The construction of renewable energy sources is going fast. Nevertheless, the country is also becoming increasingly dependent on imports of natural gas and oil, with geopolitical consequences. China has large reserves of coal that it can extract cheaply. This explains the large percentage of coal in the energy/electricity mix. But the air pollution associated with it is also an important aspect. This combination means that it may pay to invest more in nuclear power, even if it is slightly more expensive than, say, coal power.

Complain a little less, appreciate a little more?

From a Western perspective, there are therefore quite a few comments on the Chinese five-year plan. It is said not to be ambitious enough in terms of CO2 reduction and it still relies too much on fossil fuels. From the Chinese perspective, however, it is very ambitious. China aims for a high security of supply with an affordable and as clean as possible energy mix. And this in an economy where the hunger for energy seems almost impossible to satisfy due to strong economic growth and higher standards of living.

In my opinion, we should have a little more understanding for the Chinese way of dealing with the energy transition. Moreover, their massive investments in renewable energy help technological development enormously. Many international companies are also building up knowledge in this way or are being forced by competition to do better to remain competitive. Higher efficiency and lower costs are the result. And well, the fact that they also look at their security of supply and make up for shortages with the energy source they have in abundance and at low prices cannot be blamed on them. An argument that from our country, with our 99.99% security of supply of energy, is hard to imagine at the moment.

China has to balance the dramatic rise in energy consumption that comes with higher living standards that are a by-product of a nation that is expanding. The country now sees the largest growth rate across a broad energy spectrum; renewable energy generation (solar, wind, hydro and bioenergy), nuclear energy, natural gas and coal. The country needs to rely on all these energy sources to satisfy the rapid expansion of the economy. China is aiming for net-neutrality later than peers in 2060, however, for a developing nation its environmental targets are still ambitious. Overall, China shows is trying its best to match its huge demand for electricity by using numerous energy sources. The investments in fossil fuels, such as coal, are rather a necessity rather than a choice. Energy will be high on the Chinese agenda throughout this entire decade.

 

This column has been published in Dutch on Energiepodium.nl