Emissions from the Chinese Power Sector

China recently announced (1) a plan to achieve net zero-emissions by 2060. Significantly, this pledge was made by President Xi himself at the annual United Nations General Debate session. This announcement surprised many analysts who struggled for the right response. Should they be celebrating a key moment on the pathway to decarbonisation, expressing scepticism about a possible Chinese public relations stunt or studying the practicalities of meeting this goal?

One thing is clear, this is a key moment in the climate debate that has been grinding its way over 50 years from a theoretical, activist driven exercise to a mainstream public policy reality. Building on the Paris agreement, a Chinese admission that they need to start talking about zero carbon further confirms a low carbon inevitability. With the debate incrementally shifting away from moral imperatives to investment, technology selection and balancing trade offs, this article focuses on emissions from the Chinese electricity sector. This is not the full story on Chinese carbon emissions but electricity generation is their largest source of emissions as well as holding the key to further decarbonisation steps, for example in transport, home heating and a range of industrial processes. It also represents ~25% of total global CO2 emissions – it is not an exaggeration to say that decarbonisation of Chinese electricity is the single most important element in stabilizing atmospheric CO2 levels.

To assist in an overview of how China produces electricity, how this has changed in recent years and what the future might bring, Table 1 provides a comparison with the US and Australian power sectors. All three nations share a historical reliance on coal fired generation that has resulted in relatively high sector emissions as well as having the landmass and geographical diversity suited to future, large scale renewable generation.

Table 1 Electricity Sector comparison – China, Australia and the USA (2008 to 2018)

Table 1 shows the electricity production in TWhrs/year from different generation technologies. Electricity generated by Nuclear, Hydro and Renewables (wind and solar) is carbon free while generation from gas and particularly coal generates CO2. For the three countries listed above, generation trends, both overall and for the different generations technologies, can be tracked by comparing the 2008 output against the 2018 output.

So what are the key points from Table 1?

Firstly Chinese generation, as one might expect for a nation still undergoing industrialisation, is still expanding rapidly, with demand essentially doubling in the 10 years from 2008 to 2018. In contrast, generation growth in Australia and the US, like many mature industrialised nations, has been basically flat and expected to remain relatively flat for at least the next decade. Given this growth in output from the Chinese power sector an increase in CO2 emissions is to be expected. What will encourage climate advocates is that emissions were only up 25% while overall generation was up over 100%. In contrast, both Australia and the US saw declining emissions, down 19% and 26% respectively. Clearly Australian and US generation are both further down the decarbonisation path than China but the recent announcement should mean China will start to close this gap.

As mentioned above emissions from the Chinese electricity sector are the largest single contributor to the global total. Put simply, what China does and doesn’t do really matters. Scott Morrison likes to point out Australia’s relatively insignificant contribution to global emissions. This doesn’t win him any friends among environmentally sensitive voters but in crude quantitative terms it is a valid statement. As China starts to decarbonise Australia will come under more pressure, both internally and from international groups, to increase the rate at which it reduces its emissions. One suspects both major parties in Australia understand this but are struggling with the language and planning needed to drive decarbonisation without alienating key voting blocs and losing office.

The second key point is that grid emission intensities (tonnes of CO2 emitted/TWhr generated) have decreased in all three nations as new carbon free generation has been installed. In Australia and the US, new carbon free generation has predominantly been renewables while in China there has also been significant amounts of new nuclear and hydro. Western environmental groups favor renewables over alternative low or zero carbon strategies but China is clearly using an “all of the above” approach. It will be interesting to see if China stays on this more pragmatic, multi-track approach and if so will it prove advantageous relative to relying more heavily on wind and solar.

It is worth noting that a switch from coal to natural gas has also been a common factor in carbon intensity reductions. This is particularly the case in the US where cheap gas from fracking is an important driver. The Australian government (and more guardedly the Labor opposition) is supportive of using gas to lower grid emissions but there is opposition from advocates wanting a straight coal to renewables transition. Unlike the US and Australia, China is a net importer of natural gas (in fact it currently uses gasified coal to make up for this shortfall) so the trajectory for Chinese gas generation is difficult to forecast. One suspects China will need to develop and promote carbon capture and storage if gas generation is to grow appreciably. With a 2060 timeline this is feasible and might be politically expedient if expanded nuclear generation loses favour.

A final point in the comparison between the three nations is the clear evidence of a decline in coal. This decline seems terminal in the US and is potentially so in Australia and China. This has major political and economic implications for Australia – the Finkel plan (2) looks to hydrogen fill the gap created by a decline in coal mining and exports but there is opposition to using fossil fuel based route as a bridge to large scale renewable based hydrogen production. Opposition to reduced coal use in China won’t be as overt but there will still be social and political ramifications as a new future is contemplated for literally millions of miners and their communities.

Getting back to the Chinese plan – is decarbonisation by 2060 feasible and does a comparison with Australia and the US tell us anything how this might be done? The Chinese should provide more clarity on how they intend to start this journey when they publish the 14th edition of their Five- Year plan sometime before the end of the year. One suspects this will show that decarbonisation can’t start in a meaningful way until growth in power demand stabilises. Rising demand makes it hard to close coal plants, as has happened in Australia and the US, when all new zero carbon generation is being consumed by new demand. Projections are that Chinese power consumption will peak in about 2030 at around 15,000 TWhrs – over double the current output and at a level roughly equivalent to the US on a per capita basis.

China has the advantage and disadvantage of having to install massive amounts of new capacity over the next few decades – not just to replace existing coal plants but to meet new demand. The obvious disadvantage is that this will be expensive and potentially disruptive to local communities. There are, however, advantages in knowing that the end goal is a zero carbon grid. For example, geographical distribution of new renewables can be mandated to reduce the impact of inevitable seasonal supply shortfalls. China’s most important advantage, however, may be their willingness to embrace new hydro and particular nuclear power. A recent study quoted by the Grattan Institute (3,4) suggests that by 2060 China will get 70% of its power from wind and solar with the remaining generation comprised of baseload and fully dispatchable nuclear (expanded a factor of 5 over existing capacity) plus hydro with some biomass and gas, potentially fitted with carbon capture.

If the US elects Joe Biden with enough congressional support to greenlight his plan for a zero carbon power sector by 2035, we will see the two global superpowers going head to head on decarbonisation. If the Grattan referenced study is anywhere near accurate, it could be a test of 70% renewables supported by nuclear, hydro and possibly gas with CCS versus as close to 100% renewables as possible backed up by storage. This obviously a simplification and both China and the US will have opportunities to adjust their programs as they learn to manage increasing levels of wind and solar. It is, however, the way things are currently set up. At a political level China is likely to be able to push through a centrally mandated energy mix while western economies need to be much more mindful of public opinion that currently rejects new nuclear, major hydro schemes, anything that can be construed as giving a lifeline to the fossil fuel industry and often anything in someone’s backyard.

Australia will be able to watch this contest play out. President Xi’s 2060 target will put more pressure on Scott Morrison to publicly announce a timeline for Australia to get to net zero, something he is obviously loath to do. While Australia arguably has better renewable resources than either China or the US, it will still need storage and backup. Nuclear is out, more hydro is limited and without gas all bets will be on storage.