The report, published by Australia-based think tank Climate Energy Finance, says that, if this rate of renewables growth is maintained, then China could reach its “dual carbon” climate goals earlier than planned.
Here, Carbon Brief interviews the author of the report, Xuyang Dong. The questions and Dong’s answers are reproduced in full, below.
(An abridged version of this interview was published in the 16 May edition of China Briefing, Carbon Brief’s fortnightly email newsletter focusing on climate and energy developments relating to China. Sign up for free.)
Carbon Brief: Your report concluded that China’s coal power output will soon peak and decline – despite rising coal capacity – thanks to the rapid rise of clean energy sources. How widely do you think that potential tipping point is understood, both within China and internationally?
Xuyang Dong: This potential is not being understood or acknowledged enough both within China and internationally. China is prioritising energy security over the need to reduce coal-use. It has positioned thermal power as the backup energy source to ensure energy security, as electricity demand continues to grow and boost the economy.
This strategy is being emphasised after the downturn in hydropower generation last year caused by droughts, as well as blackouts in different parts of the country due to the unmet rising electricity demand. I think there is a pressure domestically of not wanting to admit it, as they really want to ensure energy security first. Concurrently, China is increasing renewable energy capacity at a staggering pace that far outstrips every other nation on the planet.
Internationally, news headlines continue to emphasise that China is building new coal-fired power plants, leading to a lack of confidence about China’s commitment to decarbonising its national electricity grid, although the expansion in renewable energy additions in China is at an unprecedented speed and scale.
However, the picture is more positive when we look at installed capacity. At the end of March this year, 53 per cent of China’s installed capacity is zero-emissions. This paves the way for China to reduce its reliance on coal and to do so rapidly – as we map in our report. China now needs to be more ambitious in its climate targets and it is well positioned to do so.
CB: If China is to announce more ambitious climate goals and expand renewable energy like you suggested in the report, in your opinion, what are the barriers?
XD: We are aware there are concerns over China’s land-use as a major constraint for building more wind and solar farms. We have run a case study on a 1.5 gigawatt (GW) solar project being built in the Tengger Desert in Ningxia province.
The project has 3.5m solar modules installed and only took up 0.1 per cent of the total desert. In our model, we estimate that China needs to install a total of 5,405GW of new solar capacity to reach its dual-carbon targets and that may require only 11 per cent of a total land area of the Gobi Desert, a neighbouring desert to Tengger.
The real challenge is that more transmission lines are needed. China recently started construction of an ultra-high-voltage power line project, which will cover three provinces – Shaanxi, Hubei and Anhui – to send 36 terawatt hours (TWh) of electricity to Anhui per annum and help boost renewable energy consumption by more than 18TWh per annum.
More transmission lines like this are needed to maximise the renewable energy generation potential of China’s desert areas and to resolve China’s land use constraints in the east coast.
CB: What do you think about policy support?
XD: I think being more ambitious in the overall climate target would be a good start because China has the capacity, the money and the technology to deploy the renewable energy at the speed and scale it requires.
Considering its political system is “top-down”, a more ambitious target could help the central government to give out more mandates, build better transmission lines and distribute the generated power into the areas that are needed.
Internationally, China needs to align with other developed countries to take its responsibilities as the leading renewable superpower and the carbon price would be an important policy lever. The external incentives and penalties, such as [having a Chinese version of] the EU’s carbon border adjustment mechanism (CBAM), would also help.
CBAM encourages the EU’s trading partners, especially China, to reduce the emissions of their exports. A further driver would be for other nations to also catch up with China’s staggering renewable expansion and start to emulate its speed and scale, so there will be no excuse left for China to do less.
CB: Speaking of CBAM, your report recommended China to have one of its own. Can you explain how introducing one would help, politically, to enable greater ambition from China’s leaders?
XD: Having one itself could incentivise China to increase the price of carbon, which currently is significantly lower than the EU and the rest of the developed world, although there is a deflation in China and most of the commodities are a lot lower than the rest of the world.
But a higher price on carbon could be a good incentive, especially limiting the emission in the manufacturing industry. It could also match China’s carbon price with the EU and lead to less trade barriers. For other trading partners, for example, Australia. Australia has been exporting raw materials. It could also incentivise Australia to do an embedded decarbonisation on its exports as well.
CB: Wouldn’t you worry the CBAM would make trading with some countries, such as developing countries, harder with China?
XD: The Chinese CBAM could list different categories and for different countries. It can have a higher standard for the developed countries and encourage the developed world to help the emerging market and developing economy to decarbonise. In the Asia-Pacific region, China, Japan, South Korea and Australia could work together to decarbonise.
CB: In the future you described, what role do you think solar and wind energy will play?
XD: As our report mapped out, wind and solar will be the leading energy sources in the future. China’s manufacturing capacity is driving down the cost for solar panels, modules and wind turbines.
The cost of deploying them is lower, too. In the meantime, they have the world’s leading technology, which can increase the utilisation rates. However, it needs to be accompanied by a better sort of combination in the energy storage system, and better energy storage, so the renewable energy it generates doesn’t go to waste and it can also help with China’s entire curtailment issues.
CB: What do you think about the current energy storage situation in China?
XD: It has become a priority compared to a year ago. Most of the policy before is supporting more build out for solar and wind power projects, progressively, and now we can see more documents focusing on storage systems. In fact, there is more and more manufacturing capacity for batteries as well, so we can see a dropping price in the batteries, which will be beneficial for a larger deployment of energy storage systems.
CB: Speaking of solar and battery, what do you think about China’s “new three” – solar, batteries and EV – and how they help China in energy transition and economy?
XD: The “new three” has played a very huge part in China’s economic growth. In 2023, 40 per cent of China’s total 5.2 per cent GDP growth last year was driven by it. [Read more on Carbon Brief’s analysis on clean energy and China’s economic growth in 2023]. This is very significant, especially because China is facing multiple headwinds in different areas, including the housing sector, population decline and deflation.
According to the International Energy Agency (IEA), the first quarter of 2024 saw China sell nearly 1.9m electric cars, more than the rest of the world combined. I think it’s inevitable that China’s solar manufacturing overcapacity continues to lead the global renewable market.
China’s solar manufacturing overcapacity has been a big topic and it is posing a threat to the industry as it is resulting in price slump for the solar panels and making a lot of business non-profitable. However, there are still some major players remaining financially healthy.
I know there are a lot of concerns about this overcapacity in the industry, such as in the EU and the US, and I think for China to address the concerns over industrial overcapacity, it needs to, first, stimulate domestic demand and deployment of solar and windfarms, energy storage systems buildout and EV sales.
Secondly, China could use its cheap renewable exports to help emerging markets and developing economies to build more renewable energy capacity, boosting and accelerating the global energy transition. Finally, it should be collaborating on joint ventures with European and US investors to build local factories.
CB: You mentioned there are some “financially healthy” Chinese companies and they have often been accused of using state subsidies to win “unfair” competition. What’s your view on the accusations?
XD: It’s a very classic way of the Chinese government doing things. When they see an opportunity, they build the capacity first and they will even run at a loss-making state to just dominate the market. Once they have taken over the market, they can profit from that. China has shown this sort of a pattern of doing business in the past.
However, in the meantime, China has shown it has the labour capacity, resources and the capital to deploy or develop the manufacturing capacity at this rate. It drives down the prices of a solar panel and module, wind turbine, as well as battery and EV prices, so I think it is good news to the global energy transition overall, especially for countries from the emerging market and developing economies when they really need more capital and more cost-efficient materials for them. So I guess it really depends on how you look at it and how you work with China instead of working against it.
This story was published with permission from Carbon Brief.
