Envisioning a national energy policy: China’s energy strategy to 2015
January 25, 2013 1 Comment
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:
Although this figure and the plan as a whole is patently simplified, it captures the spirit of an energy strategy based on one of China’s most pressing energy problems: the geographical mismatch between abundant resources (whether they be coal, wind, natural gas…) and areas of high consumption. The laundry list of technologies, policies, programs and demonstrations mostly attempt to deal with this singular problem.
Starting with reducing demand, China’s optimistic energy consumption target for 2015 is 4.0 billion tce (tons of coal-equivalent), 0.1 billion tce lower than the target made back in 2011. For comparison, IEA’s New Policies scenario puts China at 4.3 billion tce in 2015. This is familiar territory for China, where the world’s largest suite of energy efficiency policies is already up and running (read here for more details). It is also familiar territory to overshoot these absolute targets while still meeting energy intensity targets (energy use per unit GDP), which do not indirectly restrict local economic growth.
Expanding supply occupies the majority of press attention, and in the plan China does not disappoint: major expansions in coal extraction, unconventional natural gas (shale and coal-bed methane), large hydro, nuclear and renewables are already underway in an “all of the above” energy strategy. Shale gas exploration is booming (with significant foreign interest) with ambitious production targets of 6.5 billion cubic meters in 2015, then increasing ten-fold by 2020. After 8 years of delay due to environmental protests, China also just announced its intention to continue hydro projects on China’s last free-flowing river, the Nu, in biodiverse Yunnan province. Renewables growth is set to continue unabated as Beijing has indicated its commitment to save floundering solar companies while maintaining feed-in-tariff support (here are the 2015 and 2020 renewable energy targets); though, ensuring adequate grid connection will be a perennial challenge as wind penetration increases.
Transmission/distribution networks and distributed energy build-out is picking up the pace in the 12th Five-Year Plan, with concerted efforts on: ultra-high voltage electricity transmission lines from west to east, an ambitious oil and gas infrastructure (as the graphic above shows), and distributed solar and natural gas projects. Distributed solar now has a separate target (10GW) and distributed natural gas projects (which according to the plan are suitable for industrial parks, tourist areas and the like) should reach 1000 by 2015. Since most of the shale gas in the foreseeable decade is coming from Sichuan, expect that a majority of these demo projects happen (or don’t happen) there.
Finally, the usual calls for market and pricing reform adorn the plan, which are absolutely necessary to scale up clean energy and rationalize energy consumption. It calls for expanding peak and seasonal electricity pricing, as well as tiered pricing schemes and load penalties on industry. Given the $40 billion State Grid is spending on smart grid technologies and the planned 36 million new smart meter-equipped homes, some sort of pricing reform must be in the cards to capture the returns.
While China’s experience is far from perfect, it does demonstrate a basic fact: national energy strategies can guide markets to see the long-term potentials in new technologies, especially if those strategies move us out of a boom-bust cycle of uneven federal support for clean energy. For China to succeed in its 2015 and 2020 goals, it must move beyond vision and focus on concrete implementation challenges. For the U.S., we must first start with a vision — of the preferable, acceptable and unacceptable sources of energy given our long-term economic and climate challenges. Then, let us take seriously our polished policy papers.