China is a powerful force in renewable energy generation and technology production. Energy Innovation share their analysis and look to the future.

Chinese society has developed at an unprecedented scale and speed. As of 2010, more than half of China’s population resides in cities. This mass migration to China’s urban regions has also resulted in a surge of energy demand, with the attendant economic, infrastructural, and environmental impacts.

As China consumes more energy, it emits more carbon. The country is now responsible for a quarter of the entire world’s CO2 emissions. The furious building of factories and infrastructure emit other pollutants, which pose a severe threat to China’s air and water quality. On certain days, the air pollution in many of China’s largest cities is 20 times higher than that considered safe by the World Health Organization. The economic and social costs of rising greenhouse gas emissions are impossible to ignore, so China is turning more and more to clean energy to build a sustainable economy.

By 2013, China had installed nearly 400GW of renewable energy (including hydro, wind, and solar power). That’s more than all the electric capacity installed in Canada, the United Kingdom, and France combined. China has invested more in clean energy than any other nation, providing more than $50 billion in renewables financing last year. And yet, renewable energy accounts for just 20% of total electricity generation, nearly all of which is hydropower. Because of the country’s massive size and huge energy demands, the construction of hundreds or even thousands of gigawatts of more renewable energy is necessary.

However, little by little, improvements in China’s energy markets and policies are beginning to make a difference in steering the nation’s supermassive energy sector toward cleaner options. The growth of renewable energy in China has been aided by the decreasing costs of renewable energy equipment, especially for solar. While cheaper equipment certainly elevates the business case for renewables, government policies and energy markets must be properly structured to maintain momentum toward a deeper clean energy transformation.

China now accounts for nearly two-thirds of the entire world’s production of solar photovoltaics (PV), producing more than 25GW of PV in 2013. China’s 400-plus solar panel manufacturing companies have drastically driven down the costs of solar equipment. Lower equipment costs, paired with targets established by Chinese government, have propelled China far beyond its original target of 1.8GW of installed solar by 2020 – a goal the country has already surpassed ten times over.

And with literally thousands of solar water heating system manufacturers, China has also benefited from reduced costs for these solar products as well. Over 30 million Chinese homes have installed solar water heating systems, which are sold at a fraction of the cost of those sold in the United States and parts of Europe.

It goes on. China also has the world’s largest domestic wind market, with more than 90GW installed overall, 18% of which was installed just last year. Despite China’s heroic construction of wind turbines, its emphasis on construction has outpaced its ability to connect new projects to the power grid. In 2012, approximately one-fifth of China’s installed wind capacity was not connected to the grid.

Further, China’s relatively rigid rules governing grid management make it difficult to incorporate variable energy sources such as wind and solar. Thus, about eight percent of generated wind power is curtailed to maintain predictable electricity output.

These economic inefficiencies haven’t gone unnoticed by the government, which has taken action to enhance wind forecasting requirements, increase control of automated wind turbines, and improve incentive schemes that prioritize renewables generation. These government actions have made way for more wind energy in China; average wind farm use has recently increased by more than 100 hours per year, representing 5-10% more wind into the system every year.

In addition to directly adding renewable energy to the grid, China’s government has also been incentivizing clean energy by establishing carbon markets in some of the most polluting regions.

With a little help from California Governor Jerry Brown and the state’s Air Resource Board, China has established cap-and-trade pilot projects in seven major cities and provinces, representing seven percent of China’s total CO2 emissions. While each city’s program is structured slightly differently, all have set targets to reduce emissions from high-emitting industrial companies by approximately 15-20% below 2010 levels. Achieving these targets will require China’s major industrial players to improve their energy efficiency and increase their use of clean energy resources.

With the right pricing, policy, and prioritization, renewables can become a major contributor to China’s energy sector. China’s central government has demonstrated robust effort in these realms in its 12th Five-Year Plan (2011-2015), which outlines social and economic development initiatives for the country. The central government has set targets for both energy and carbon intensity reductions by 2015 (16% and 17%, respectively). These targets are supported by a host of policy measures. In addition to incorporating a higher portion of renewables into the energy mix, the government is working to improve industrial efficiency, expand public transit, and increase forest coverage. Achieving a cleaner, domestic, efficient energy sector will have monumental impacts in China and – given its status as one of largest and fastest-growing economies – the rest of the world as well.  

- This is a guest blog by Hallie Kennan and CC Huang of Energy Innovation. As it is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details.

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