Transforming China’s Grid: Sustaining the Renewable Energy Push

China’s deployment of renewable electricity generation – starting with hydropower, then wind, and now biomass and solar – is massive. China leads the world in installed renewable energy capacity (both including and excluding hydro) and has sustained annual wind additions in excess of 10 gigawatts (10 GW) for four straight years. Half of the hydropower installed last year was in China. And solar and biomass-fired electricity are expected to grow ten-fold over the period 2010-2020. Most striking amidst all these impressive accomplishments has been the Chinese government’s seemingly unwavering financial support for renewable energy generators even as other countries scale back or restructure similar support programs.

The balance sheets of the central renewable energy fund are changing, however. Supplied primarily through a fixed surcharge on all electricity purchases, it has faced increasing shortfalls in recent years as renewable growth picked up, which may have contributed to late or non-payment to generators. Especially as more costly solar comes online, both the revenue streams and subsidy outlays to generators will require difficult modifications to keep the fund solvent. More broadly, investment decisions are largely influenced by the historically high penetration of state-owned energy companies in the renewables sector, which have responsibilities to the state besides turning a profit.

Recognizing these challenges of solvency and efficiency, the central government is facing a crossroads in its policy support for renewable sector, of which one possible approach would be migrating to a hybrid system of generation subsidies coupled with mandatory renewable portfolio standards (RPS). This fourth and final post in the Transforming China’s Grid series looks out to 2020 at how China’s renewable energy policies may evolve and how they must evolve to ensure strong growth in the share of renewable energy in the power mix.

Policy support to date

Investment in renewable energy has risen steadily in China over the last decade, with the wind and solar sectors hitting a record $68 billion in 2012, according to Bloomberg New Energy Finance (BNEF). These sums – together with massive state-led investments in hydropower – have translated into a surge of renewable energy capacity, which since 2006 included annual wind capacity additions of 10-15 GW and a near doubling of hydropower (see graph). Renewables now provide more than a quarter of China’s electricity generating capacity.


Read more of this post

Transforming China’s Grid: Integrating Wind Energy Before It Blows Away

Wind is China’s fastest growing renewable energy resource. In 2012, 13 gigawatts (GW) were added to the system, and incremental wind electricity production exceeded coal growth for the first time ever. In the same year, unused wind electricity hit record highs while wind not connected to the grid was roughly half the size of Germany’s fleet. China’s is perhaps the largest yet most inefficient wind power system in the world.

As a variable, diffuse and spatially segregated energy resource, wind has a number of disadvantages compared to centralized fossil stations. These unavoidable limitations are not unique to China, though they are magnified by its geography. In addition, as I outlined in a previous post, coal has uniquely shaped China’s power sector development and operation; these also play a role in limiting wind’s utilization. Eyeing ambitious 2020 renewable energy targets and beyond, policy-makers and grid operators are confronting a vexing decision: continue the status quo of rapidly expanding wind deployment while swallowing diminished capacity factors, or focus more on greater integration through targeted reforms.

Getting the power to market

Unlike other countries with varying political support for renewable energy, wind in China enjoys a privileged status. Read more of this post

Transforming China’s Grid: Will Coal Remain King in China’s Energy Mix?

Coal has been the primary fuel behind China’s economic growth over the last decade, growing 10 percent per year and providing three quarters of the nation’s primary energy supply. Like China’s economy, coal’s use, sale and broader impacts are also dynamic, changing with technology and spurring policy interventions. Currently, China’s coal sector from mine to boiler is undergoing a massive consolidation designed to increase efficiency. Coal’s supreme position in the energy mix appears to be unassailable.

However, scratch deeper and challenges begin to surface. Increasingly visible health and environmental damages are pushing localities to cap coal use. Large power plants with greater minimum outputs are shackling an evolving power grid trying to accommodate new energy sources. Further centralization of ownership is rekindling decade-old political discussions about power sector deregulation and reform.

This unique set of concerns begs the question: will Coal always remain King in China’s energy mix?

Read more of this post

Transforming China’s Grid: Obstacles on the Path to a National Carbon Trading Platform

This is the first post of a multi-part series on Transforming China’s Grid, where I will be critically examining China’s efforts to reinvent and decarbonize its power sector and related energy goals. I begin with China’s efforts to create provincial and city-level carbon trading pilots as well as major obstacles to establishing a national system that can link with other ETS markets. Future installments will look at the technical and regulatory barriers to high wind integration, the future of renewable energy incentive policies, and the challenges in moving away from coal.


China’s first mandatory carbon emissions trading system (ETS) pilot debuted last month before a packed auditorium in the southern city of Shenzhen. China’s first official carbon trade was greeted with fanfare and a well-choreographed script of climate officials. Shenzhen is the first of seven cities and provinces expected to unveil cap-and-trade programs in China this year, which drew skeptical reactions from foreign onlookers based on the first day’s low volume – 21,120 tons at 28-30 yuan / ton ($4.55-$5.05).

The ETS pilots are a small market-based component of a broader climate policy that has historically relied on administrative measures carried in five-year plans. The overriding priorities for provincial officials are energy and carbon intensity reduction targets, most recently allocated in 2011. Nationally, these amount to 16% and 17% reductions in energy use and carbon emissions per unit GDP, respectively, by 2015; a 40-45% carbon intensity reduction below 2005 levels by 2020. However, ensuring an early emissions peak (i.e., before 2030) will require more flexible approaches, in particular, market mechanisms, for which the ETS pilots are a useful bellwether. While the merits of the pilots should not be judged by the first trading day, significant obstacles stand in the way of creating a national ETS by 2016, as currently envisioned by the Chinese leadership. Even before the remaining six trading pilots ring the opening bell, we have a good sense of what these obstacles will be.

  1. Read more of this post

Envisioning a national energy policy: China’s energy strategy to 2015

While Washington debates about whether to get serious on our climate and energy policies, Beijing this week released China’s five-year energy development plan, laying out an ambitious “all of the above” strategy that where lacking in specifics more than makes up for in vision (the plan, in Chinese; and Google translated). The wide-ranging proposal builds on a number of previous plans and targets designed to ramp up renewable energy and transition fuels, aggressively consolidate the coal industry, scale up large hydropower, and build a coastal nuclear development zone. I was struck by this map of projected energy bases and import lines:

China comprehensive energy bases

Read more of this post

Boom-bust cycles in U.S. and Chinese wind installations, in two charts

The Washington Post’s recent article on the “The rise and fall of the U.S. wind industry, in one chart” showed the correlation between the federal wind production tax credit (PTC) and annual installations of wind. When the credit is allowed to expire, installations plummet. When it is renewed, a boom period ensues. This has resulted in an uneven, “saw-tooth” pattern of wind growth that among other things generates anxiety about the future of the market. How, might you ask, does this compare to China – where wind capacity doubled for four of the last six years? Here’s one chart:

Read more of this post

Debunking the Myths and Miracles of Chinese Energy Policy

This week, MIT will host a presidential energy debate with senior advisors for the two candidates — Joseph Aldy (Obama) and Oren Cass (Romney). This post is part of a Science Wonks series to raise awareness of the debate and critical issues facing our nation’s energy future.

Rhetoric about “getting tough” with China on trade is heating up during this election season as both parties try to articulate credible strategies for kick-starting the struggling U.S. economy. Not surprisingly, some of the most prominent recent examples of U.S. administration trade actions against China have been in the increasingly profitable clean energy sector, which totaled $263 billion globally in 2011. The U.S. is right to watch what China is doing on energy policy – and should continue to advocate for a level playing field – but perhaps in China’s impressive support for this industry there are also some lessons for a comprehensive U.S. national energy strategy. In this post, I will debunk some of the myths and miracles of China’s energy policy, making a case for U.S.-China cooperation (and healthy competition).

What’s in a five-year plan, anyways?

China-watchers get really giddy one or two times every five years. The first is the opening of the Chinese Communist Party Congress in years that end in 2 (coming up soon), at which the next leader serving a 10-year term is announced. The second is the National People’s Congress in March of years that end in 1 or 6, at which the country’s main planning document – the “five-year plan” – is released. This document guides a host of economic and political activities during the five-year period and is the product of several years of negotiation. In the last two (11th and 12th), we have witnessed a concerted increase in high-level focus on addressing energy and environmental issues, most notably with the inclusion of nationwide energy intensity and carbon intensity reduction targets.

Read more of this post

“Cloud” Records over 200 Commitments to Sustainability at Rio+20 Earth Summit

Government leaders, representatives from the private sector and the NGO community have returned home after the two-week long set of activities marking the Rio+20 Earth Summit. This once-in-a-generation meeting of world leaders marked a critical time for our planet as we struggle with persistent problems related to our climate, oceans and forests. While the agreed-on document does not live up to this challenge – and, arguably, could never havecountries, communities and companies worldwide used this historic opportunity to announce hundreds of individual commitments to instigate real change. These are the real legacy of Rio.


Based on over two years of advocacy related to this gathering, we launched the first-ever aggregation and tracking tool for these and many more commitments on sustainable development. We called it the Cloud of Commitments (

Read more of this post

New Platform to Track the “Cloud of Commitments” from Rio+20 Earth Summit

Ninety-eight heads of state and government are addressing the world from Rio de Janeiro over the next three days about how we are going to protect our planetary home for the next three generations and more. Will our leaders commit to take action now…while they are still in office…and while there is still time to avoid dangerous tipping points? Or will they embrace the general instead of the specific, lofty promises instead of concrete actions? This week, NRDC has launched the first-ever aggregation and tracking tool for these and many more commitments on sustainable development. We are calling it the Cloud of Commitments.

cloud-screenshot.jpg(screenshot on June 20 at 12:45pm)

Read more of this post

What Can Premier Wen Do For the Climate at Rio+20

This post is co-authored with Dr. Yang Fuqiang, Senior Advisor on Climate and Energy at NRDC, Beijing. It originally appeared on Switchboard.

In less than two weeks, Chinese Premier Wen Jiabao will join as many as 135 heads of state and 50,000 participants at the Rio+20 Earth Summit. The first historic Earth Summit in 1992 was a turning point in China’s environmental awareness, catapulting sustainable development to a national priority. Now, as the twentieth year reunion nears, we need to capture this unique opportunity to make progress on a variety of issues, in particular climate change. Premier Wen should look past the contentious fight over the ballooning outcome document and focus on what matters most: action.

Rio+20 is set to be one of the “largest and most important conferences in the history of the United Nations”, according to UN Secretary-General Ban Ki-moon. NRDC has been calling for over a year now that concrete actions and commitments should be the main outcome of this conference. A lengthy document without action does little to help move forward on important priorities for China and the rest of the world. We need to speed up deployment of renewable energy; make good on promises to phase down fossil fuel subsidies; mobilize investments in off-grid renewable energy; and much more.

Read more of this post


Get every new post delivered to your Inbox.

Join 308 other followers