Richard Heap explores China’s desire to become a leader in renewable energy.
China wants to become a leader in renewable energy.
Now at first look that statement may appear ludicrous. On many measures it already is. More installed onshore wind (231GW) than the rest of the world’s top five. More onshore wind connected to the grid in 2019 (23.8GW) than the rest of last year’s top ten. And more offshore wind (2.4GW) connected to the grid in 2019 than any other country as well.
It’s a similar story in solar, where it has 213GW installed and dominates the solar manufacturing industry. But these numbers only tell part of the story.
The Asian superpower still generates 85% of its energy from fossil fuels. It’s still the world’s largest importer of oil and natural gas. It’s still the world’s largest greenhouse gas emitter. So yes, China leads the world on some key renewable energy metrics – but it leads on some of the least desirable too.
This is the yin and yang of China’s energy policy. But we’re poised to see more yang after a major announcement this week.
On Tuesday, president Xi Jinping told the United Nations General Assembly that China is going to go carbon neutral by 2060.
He said the country would hit peak carbon emissions by 2030; would raise its targets under the Paris climate deal; and is planning a “green revolution” that would spark huge investment in wind and solar.
“The Paris Agreement on climate change charts the course for the world to transition to green and low-carbon development… All countries must take decisive steps to honour this agreement,” he said, in a recording shown at the UN meeting in New York.
The speech included few details. These are likely to feature in China’s next five-year development plan, which is due to be published next year and cover the period from 2021 to 2025. But IHS Markit has estimated that meeting this goal will require China to achieve 1,700GW of wind and 2,200GW of solar capacity by 2060, which the cost of moving China to carbon neutrality within 40 years could cost around $5.5trn.
These figures will inspire awe in the wind industry, and maybe a little fear.
First, the awe. If China shows it is serious about these targets then turbine makers will benefit from huge order numbers in the years ahead. Growing to 1,700GW by 2060 would require 36.7GW of wind installations each year.
It also represents something of a turnaround for China. Yes, the country has kept its position as the top installer of new wind farms in 2019 by a long way, but it has also spent most of the last four years in a trade war with the US. This has caused global uncertainty that China and the US would put trade war victory over green standards.
Then there are the competitive auctions. China has followed other nations in moving to auction-based systems to award support for wind farms, but we’ve seen few signs that it would step in to prevent the types of problems seen in Germany and India.
Jinping’s commitment this week changes the dynamics. He has raised pressure on President Trump and the US to grow federal support for renewables, and his statement is a big coup for the European Union with its Green New Deal.
The plan lacks clarity on carbon offsetting, and the peak emissions target in 2030 has been deemed far too late by critics. Both are huge questions. But renewables investors should see more activity if China truly is on board
Yet there may be some fear too.
For turbine makers, if China is committed to a “green revolution” then it will do all that it can to support its indigenous turbine manufacturers. These could prove formidable foes to established European and US companies, if they make turbines that compete on both reliability and cost. Wind companies will look anxiously at the solar industry.
It may also mean fierce battles in areas from raw materials to energy storage, which is an emerging technology that China wants to dominate. We could shrug and say: ‘Hey, that’s capitalism.’ But that doesn’t mean it’ll be pleasant.
China’s commitment appears to be good for the environment. And if it sets the superpower’s direction for 40 years, it could be the defining battle of our working lives. Buckle up!
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