China’s Fossil Fuel Addiction and the Green Transition

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China’s Fossil Fuel Addiction and the Green Transition

Vyacheslav Svetlichnyy / Shutterstock.com

China's renewables development leads the world by a more than a two-to-one ratio, but its fossil fuel usage still accounts for more than 50% of its power production needs, creating the world’s highest GHG emissions.

19 March 2023 – by Tim Daiss   Comments (0)

China’s fossil fuel addiction is real. China has been setting records for the development of its renewables, leaving the rest of the world behind. Both its solar and wind power build-out for electricity generation have made such strides over the past decade that China is being called a veritable green power.

The world’s most populous country, consisting of around 1.4 billion people, and the second-largest economy deployed more renewable energy generation capacity in 2021 than the rest of the world combined.

China’s renewable electricity consumption totalled 2,444.6 terawatt-hours in 2021, making up around 29.4% of China’s total energy consumption.

As such, China is on track towards meeting its 33% electricity consumption target from renewables by 2025. The country could comfortably exceed that target if it continues to upgrade its power grids to accommodate more renewables.

The Top Spot for Wind and Solar Capacity

China holds the top spot for global wind power, boasting a world-leading 329 gigawatts (GW) of installed wind power capacity. The US is second with 132.7 GW of capacity, followed by Germany at 63.7 GW.

China’s solar power success follows closely behind. Its solar power capacity in 2021 equalled 306.9 GW. The number is far ahead of its nearest solar power rival, the US, at 95.2 GW. Japan held the third slot at 74.1 GW, followed by Germany at 58.4 GW. Notably, China’s solar capacity was only 4.2 GW in 2012.

Solar power had the greatest capacity growth rate of any energy source in China in 2021. It expanded by 20.9% from the previous year, compared to an overall power capacity growth rate of 7.9%.

China Is The World’s Worst Carbon Emitter

China is also the world’s primary energy consumer. The primary energy consumption of China was 157.65 exajoules (EJ) in 2021. This far exceeds the US runner-up at 92.97 EJ, followed by India at 35.43 EJ.

However, much of China’s energy supply and production comes from fossil fuel usage, including sources such as coal, crude oil, natural gas and liquefied natural gas (LNG). As such, China is the world’s largest greenhouse gas (GHG) emitter. It tops the world’s second-worst emitter, the US, by over double the amount.

Even worse, China’s carbon emissions have yet to peak. Meanwhile, the US and much of Europe have drastically lowered their respective emissions over the last decade.

China seeks to peak carbon emissions by 2030, but recent fossil fuel investments have cast doubt on that possibility.

Liquefied Natural Gas Consumption 

China has increased its LNG usage over the past several years to help drive economic growth. However, its LNG usage slowed last year.

LNG demand in 2022 dropped by 20% due to economic contraction from its “zero-COVID” policy and subsequent lockdowns, according to a new Global LNG Outlook 2023-27 by the IEEFA.

According to the Chinese General Administration of Customs, LNG usage declined by 19% to 64.13 metric tonnes (Mt) in 2022 from 79.3 Mt in 2021. Since Beijing has lifted COVID-19 lockdowns, China’s LNG demand is projected to rebound by between 9 to 14% this year.

However, China’s overall gas usage slipped by only 1% in 2022 compared to the previous year. Much of the reason for the disparity in LNG and total gas usage declines comes from the cost-prohibitively high LNG prices from last year. The prices made China rely more on pipeline gas imports and domestic gas production.

China is also expected to be the world’s largest-growing LNG market over the next two decades. Shell’s 2022 LNG Outlook forecasts that China will import more than 60 Mt of additional volumes through 2040.

That additional LNG usage also comes at an environmental cost given that, when used for power generation, gas emits at least half of the CO2 compared to coal – the dirtiest burning fossil fuel.

China’s Coal Production and Usage

As effective as China’s renewables development has been, its coal consumption is the most problematic variable of its energy equation.

In 2021, coal accounted for 55% of the country’s energy mix, followed by petroleum (19%), natural gas (9%), hydropower (8%), non-hydro renewables (7%) and nuclear (2%).

China’s coal-fired power plant trajectory has worsened over the past year, hitting its highest level since 2015.

Many expect this trajectory to continue. In 2022, China sanctioned an average of two new thermal coal-fired power plants per week. The total capacity equalled some 106 GW per year, quadrupling the number of new permits from 2021. The amount of coal-fired capacity under construction is at least six times larger than the rest of the world.

Why Coal?

As such, the question has to be asked: Why is China continuing to not only rely on coal for more than half of its power production but also allowing provincial governments to permit new plants at a record pace?

The Chinese Communist Party (CCP) views near-term energy security, albeit building out more coal power infrastructure, as vital for economic stability in weaker provinces. The government also justifies new projects as “supporting” power capacity to ensure grid stability and the integration of renewable energy.

In other words, China views more coal power development as a transition power source while it builds out more renewables.

Unfortunately, coal-fired power plants are anything but near-term in nature. They have an average lifespan of around 50 years. These coal-fired power plants, even if shut down after a decade of use, would be ready to be re-commissioned any time energy planners foresaw an increase in energy demand and needed more power production.

China Must Do More to Reduce Reliance on Fossil Fuels

Despite a positive outlook for China’s renewables, the country must reduce its over-reliance on fossil fuels for the power sector.

“Current project developments, manufacturing capacity and policies are guiding China in the right direction of lower emissions,” Rystad Energy said in a recent report. “In order for it to help limit global warming to 1.5°C, however, an even faster decline in fossil-fueled power generation will be needed in China,” it adds.

To keep on track towards meeting its climate goals, the country requires more than twice as much solar PV and onshore wind capacity by 2050, Rystad finds. This would enable China to displace coal-fired power generation much faster. Therefore, it will be able to reduce emissions from the power sector to close to zero by 2050.

by Tim Daiss

Tim has been working in energy markets in the Asia-Pacific region for more than ten years. He was trained as an LNG and oil markets analyst and writer then switched to working in sustainable energy, including solar and wind power project financing and due diligence. He’s performed regulatory, geopolitical and market due diligence for energy projects in Vietnam, Thailand and Indonesia. He’s also worked as a consultant/advisor for US, UK and Singapore-based energy consultancies including Wood Mackenzie, Enerdata, S&P Global, KBR, Critical Resource, and others. He is the Chief Marketing Officer (CMO) for US-based lithium-sulfur EV battery start-up Bemp Research Corp.

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