November 25, 2016
The real story behind China’s latest ramp-up of coal power
November 25, 2016
China remains a mystery wrapped in an enigma, certainly when it comes to climate and energy policy. You have all heard that China is the number one solar and wind power producer in the world and also very active on the electric mobility front. You probably have also heard that despite its climate commitments China has been ramping up coal fired power capacity again the last two years or so. How are we to understand this?
Collin Smith, a graduate student at the Hopkins-Nanjing Center in China, who has also worked for the Beijing office of the Natural Resources Defence Council (NRDC) has written an excellent article explaining what is going on in China.
“China’s current headache with coal-fired capacity”, Smith writes, “was precipitated by a policy change the country enacted two years ago. Starting in October 2014, authority for approval of new coal capacity additions shifted from the national to the provincial government, causing the approval of new coal plants to surge in 2015 as the central government ceded control of the country’s thermal generation sector. Altogether, 165 GW of new capacity received permits over the course of this year alone.”
The problem with all these new power plants is that they are not needed. There has been a national slowdown in the consumption of coal-fired power, with total coal consumption in China dropping by 2.9% in 2014 and another 3.7% in 2015.
Smith notes that “In traditional market systems, coal-fired capacity wouldn’t be built if there wasn’t a reason to use it – hence, more coal plants equals more emissions. However, in China’s state-dominated economy, this isn’t necessarily the case. In a country whose past economic growth was driven largely by investment in fixed assets, building new coal plants was a proven way for provincial leaders to head off an economic slump.”
The result: in October 2016, China’s coal-fired power plants had an average load factor of just 46%, “meaning these plants were sitting idle more often than they were run. If China’s current build-out of capacity continues, these load factors will drop even more in the future.”
Given that this wasted capacity represents around $200 billion in unneeded expenditures, the central government has made several attempts to rein in the expansion. In October the central government called for a halt to construction work on an additional 17 GW of projects. The latest Five Year Plan, released earlier this month, sets a target of 1,100 GW of coal-fired capacity by 2020. As the country’s current coal-fired capacity is around 920 GW, this leaves room for roughly 180 GW of new coal plants to come online.
Although this presumably means some of China’s current expansion plans will be shelved, it’s still far more capacity than the country needs, notes Smith.
Smith concludes that “China’s ongoing attempts to curb production of both physical coal and coal-fired power illustrate that the supply side shouldn’t be viewed as an indicator of China’s future emissions; rather, it’s action on the demand side that will determine how well the country will meet its emission targets.”
He observes that China has plans to develop a national spot market for electricity by 2018, which would further favour wind and solar over coal. “The country’s power sector will continue to become cleaner, greener, and more efficient, no matter how many idle smokestacks ultimately dot its skyline”, notes Smith.
He does add that there is one grave risk: China may export its surplus coal fired power to its neighbouring countries.
How Putin is running rings around Europe
November 25, 2016
There are different ways of looking at Russia’s energy relations with Europe. Cyril Widdershoven, a long-time Dutch energy analyst who has worked for many international think tanks, takes a very straightforward view: he believes that Russia’s “new Tsar” Vladimir Putin regards Europe as a rival in a great geopolitical game.
There is something to be said for that. For a long time it was possible to argue that Putin’s policies were intended to put Russia back on her feet after the country’s economy and geopolitical status had gone into a precipitous decline in the 1990s. The last few years, however, this argument does not ring true anymore. Putin’s regime has become increasingly aggressive both at home and abroad. The Russian president appears to look at the world strictly from a perspective of power, which seems to motivate all his decisions, including those on gas pipelines.
And that means, Widdershoven argues, Europe should adopt the same attitude. Clearly, many European leaders are aware of this and are trying to come to a common position vis-à-vis Russia. But according to Widdershoven, they are being consistently outsmarted by Putin, who appears to be much cleverer and better at playing geopolitical games.
The European Commission’s recent decision to allow Gazprom greater use of the OPAL gas pipeline in Germany – which connects the Nord Stream pipeline through the Baltic Sea with the Czech Republic – is one more sign that EU policymakers are failing to respond adequately to Russian pressure, writes Widdershoven. He argues that EU leaders are letting down Eastern European countries that are feeling the heat from Russia.
Putin has also managed to greatly strengthen Russia’s position in the Middle East and North Africa, notes Widdershoven. Most alarmingly, he has forged an alliance with Turkey, by which he may effectively cut off sources of non-Russian gas from the region.
Widdershoven concludes that “Europe’s options to attract interest in these countries to export their gas volumes to European markets will be reduced as a result of Russia’s policies. The prospects for a Turkish energy hub for Europe and the capabilities of European countries to source gas exports from that part of the world look increasingly bleak.”
Full article: EU is losing the energy battle with Russia
For another vision on the OPAL pipeline decision, see Brussels Insider here.
The complex case of the Indian energy transition
November 25, 2016
I have to admit that I didn’t quite realise how ambitious India is when it comes to decarbonisation. What you read mostly in western media is about India’s huge coal power plant programme and its reluctance to sign up to ambitious greenhouse gas reduction targets in international climate negotiations. Well, it turns out that’s not the whole story.
As researcher Dénes Csala of Lancaster University writes in a fascinating article, India is doing quite a lot when it comes to trying to change its energy system. It aims to build 1 TW (1000 GW) of solar power by 2030. That’s four times the total worldwide solar PV capacity today! What is more, the country wants all cars to be sold from 2030 on to be electric. Pretty amazing. Do they know this at Shell and BP?
Ironically, however, according to Csala, massive though these plans are, they are not enough from a climate perspective! Csala calculates that even if India were to be allotted 50% of the world’s remaining “carbon budget”, it would still exceed this based on its current plans. To keep within this (generous) budget, India would need to build 1500 GW of solar power by 2030 rather than 1000.
And what about those EVs? Csala notes that with India’s current pledge to the Paris Climate Agreement, 60% of its electricity will still come from coal power by 2030. That’s down from 80% today, but since the Indian economy will grow, this will not lead to lower greenhouse gas emissions in absolute terms. And clearly those EVs will run to a large extent on dirty coal power.
In short, the Indian energy transition represents a complex picture. It will be fascinating to see how it will play out in the coming decades in what will soon be the most populous nation on earth.
UK shows: emission trading can work
November 25, 2016
The sordid story of the EU Emission Trading System has been told many times and in many forms on Energy Post. Just follow the tag EU ETS and you will find dozens of articles about this topic. See here for our most recent overview of the “reform process” that is going on in Brussels when it comes to the ETS.
The ongoing reform is a very complicated process, with all sorts of complex proposals that are being made, but the most important point is really that currently the ETS does not work.
There are various reasons for this, but what it comes down to is that EU member states have been giving out too many carbon credits to protect their energy-intensive industries.
Does this mean then that we should give up on emission trading altogether? This is certainly what many people argue. However, energy economist Adam Whitmore, who has written many critical articles on the EU ETS, takes a different view. In a new article he argues that the UK example shows that emission trading can have a real impact on the power sector.
The UK has taken a different approach to the EU: it has adopted a minimum price (carbon price floor) to ensure that the system would be genuinely felt by big power producers. Et voila – what happened is a carbon pricing scheme that works, writes Whitmore.
The UK has greatly reduced coal fired power production, and according to Whitmore, “a good deal of the reduction has been due to the carbon price floor, especially in the last two years, when its level has been increased significantly.”
The UK experience shows a number of things, writes Whitmore:
- Firstly carbon pricing can be effective even at fairly moderate levels.
- Second, fuel switching can indeed offer substantial, low cost abatement in the short to medium term even if it is not enough in the long term.
- Third, a lower bound on price is useful in an ETS – these reductions would not have happened as a result of the EU ETS alone.
- Fourth, system security is consistent with emissions reductions if coal is kept on the system for a while, but does not run much.
He calls on the EU to follow the UK example: stop talking about all these complex “reforms” that hardly anybody understands and just go for a minimum price.
Full article: A carbon pricing scheme that works