Interview: China’s renewables ‘pave the way to rapidly reducing coal dependence’ | News

A report published by Australian think tank Climate Energy Finance says that if the pace of renewable energy growth continues, China could achieve its “double carbon” climate goals earlier than planned.

Here, Carbon Brief interviews the report’s author, Xuyang Dong. Dong’s full Q&A is below.

(A condensed version of this interview was published in the May 16 issue of China Briefing, Carbon Brief’s biweekly email newsletter focusing on climate and energy developments in China. Sign up for free.)

Carbon Brief: Your report states that coal-fired power generation in China will soon peak and then decline – despite growing coal production capacity – thanks to the rapid development of clean energy sources. How widely do you think this potential tipping point is understood, both in China and internationally?

Xuyang Dong: This potential is not sufficiently understood and appreciated both in China and internationally. China is prioritizing energy security over the need to reduce coal consumption. It has positioned thermal power as a backup energy source to ensure energy security as electricity demand continues to grow and stimulate the economy.

This strategy is being emphasized after last year’s decline in hydropower production due to drought, as well as power outages in various parts of the country due to unmet growing demand for electricity. I think there is internal pressure not to want to admit it because they really want to ensure energy security first and foremost. At the same time, China is expanding its renewable energy potential at a breakneck pace that far exceeds that of any other country in the world.

International news headlines continue to highlight China building new coal-fired power plants, leading to distrust in China’s commitment to decarbonizing the country’s electricity grid, even as China’s renewable energy expansion continues at unprecedented speed and scale.

However, the picture is more positive when we look at the installed capacity. At the end of March this year, 53 percent installed capacity in China are zero-emission units. This opens the way for China to reduce its dependence on coal and quickly – as we present in our report. China now needs to set more ambitious climate goals, and it is well-prepared to do so.

CB: If China is to announce more ambitious climate goals and develop renewable energy, as you suggested in the report, what do you think the barriers are?

XD: We recognize that there are concerns about land use in China as a major constraint to building more wind and solar farms. We conducted a case study of a 1.5 gigawatt (GW) solar project being built in the Tengger Desert in Ningxia Province.

The project installed 3.5 million solar modules, which covered only 0.1 percent of the total desert area. In our model, we estimate that China needs to install a total of 5,405 GW of new solar capacity to meet its carbon emissions targets, which may require only 11 percent of the total area of the Gobi Desert, a desert adjacent to Tengger.

The real challenge is the need for more transmission lines. China recently began construction of an ultra-high-voltage power line project that will span three provinces – Shaanxi, Hubei and Anhui – with the aim of transmitting 36 terawatt-hours (TWh) of electricity to Anhui per year and contributing to increasing renewable energy consumption by more than 18 TWh per year.

To maximize the potential for renewable energy generation in China’s desert areas and solve China’s land use problems on the east coast, more such transmission lines are needed.

CB: What do you think about political support?

XD: I think a good start would be to adopt more ambitious overall climate goals because China has the capacity, money and technology to deploy renewable energy at the speed and scale required.

Given that the political system is top-down, a more ambitious goal could help the central government allocate more seats, build better transmission lines, and distribute the energy generated to needed areas.

Internationally, China needs to align with other developed countries to assume its responsibilities as a leading renewable energy superpower, and a price on carbon emissions would be an important policy lever. External incentives and penalties, such as the EU’s (Chinese version of) the EU’s Carbon Border Adjustment Mechanism (CBAM), would also help.

CBAM encourages the EU’s trading partners, especially China, to reduce emissions from their exports. Another driver would be for other countries to catch up with China’s stunning expansion in renewable energy and start imitating its speed and scale, so that China no longer has an excuse to do less.

CB: Speaking of CBAM, your report recommended that China have its own. Can you explain how implementing such a solution would, from a political point of view, help to arouse greater ambition among China’s leaders?

XD: Having our own could encourage China to raise its carbon price, which is currently much lower than in the EU and the rest of the developed world, although China is deflationary and most goods are much lower than the rest of the world.

However, a higher carbon price can be a good incentive, especially to reduce emissions in the manufacturing industry. It could also bring China’s carbon price in line with the EU’s and lead to reduced trade barriers. For other trading partners, such as Australia. Australia exports raw materials. This could also encourage Australia to decarbonize its exports as well.

CB: Would you be concerned that CBAM will make it more difficult to trade with some countries, such as developing countries, China?

XD: Chinese CBAM could present different categories and for different countries. It can hold a higher standard for developed countries and encourage developed countries to help emerging markets and developing economies decarbonize. In the Asia-Pacific region, China, Japan, South Korea and Australia could cooperate on decarbonization.

CB: How do you describe what role you think solar and wind will play in the future?

XD: According to our report, wind and solar energy will be the leading energy sources in the future. China’s manufacturing capacity lowers the cost of solar panels, modules and wind turbines.

The cost of their implementation is also lower. In the meantime, they have world-leading technology that can increase utilization rates. However, this needs to be accompanied by a better kind of interconnection of the energy storage system and better energy storage so that the renewable energy it produces does not go to waste and can also help solve all of China’s curtailment problems.

CB: What do you think about the current energy storage situation in China?

XD: It has become a priority compared to a year ago. Most policy to date has gradually supported increasing the number of solar and wind projects, and now we may see more documents focusing on storage systems. In fact, the production capacity for batteries is also increasing, so we can see falling price in batteries, which will be beneficial for wider implementation of energy storage systems.

CB: Speaking of solar and batteries, what do you think about China’s “new three” – solar, batteries and electric vehicles – and how they are helping China’s energy transition and economy?

XD: The “New Three” played a huge role in China’s economic growth. In 2023, this was due to 40%. China’s total GDP growth last year, amounting to 5.2%. (Read more about Carbon Brief’s analysis of clean energy and China’s economic growth in 2023). This is very important, especially since China is facing many headwinds in various areas, including the housing sector, population decline and deflation.

According to the International Energy Agency (IEA), almost 1.9 million electric cars were sold in China in the first quarter of 2024, more than the rest of the world combined. I think it is inevitable that China’s solar overcapacity will continue to lead the global renewable energy market.

Solar overcapacity in China has been a big topic and poses a threat to the industry as it drives down the price of solar panels and makes many companies unprofitable. However, several major players remain financially sound.

I know there are many concerns about overcapacity in the industry, for example in the EU and the US, and I believe that in order to address concerns about industrial overcapacity, China must first stimulate domestic demand and the use of solar energy and wind farms , construction of energy storage systems and sale of electric vehicles.

Second, China could leverage its low-cost renewable energy exports to help emerging markets and developing economies build more renewable energy capacity, spurring and accelerating the global energy transition. Finally, it should cooperate in joint ventures with European and American investors to build local factories.

CB: You mentioned that there are some “financially sound” Chinese companies that are often accused of using state subsidies to win “unfair” competition. What is your attitude towards the allegations?

XD: This is a very classic way for the Chinese government to operate. When they see an opportunity, they first build capacity and even reach a loss-making state in order to simply dominate the market. Once they take over the market, they will be able to profit from it. China has demonstrated this type of business model in the past.

However, in the meantime, China has demonstrated that it has the manpower, resources and capital to implement or expand production capacity at this pace. This brings down the prices of solar panels and modules, wind turbines, as well as the prices of batteries and electric vehicles, so I think this is good news for the overall global energy transition, especially for countries in emerging markets and developing economies when they really need more of them. capital and more profitable materials. So I think it really depends on how you look at it and how you work with China rather than working against it.

This story is published with permission from Carbon Brief.