Efficiency improvement essential for coal phase-out in China

There is no doubt in my mind that China is very concerned about global heating.  She is by far the largest investor in wind and solar farms in the world, and she has an aggressive EV roll-out plan.  Shet knows that she will suffer as much as any country from global heating, and that she is responsible by herself for 27% of global emissions.  The country's emissions controls are designed to reduce emissions relative to GDP/total electricity demand which means that because GDP/electricity demand is growing so rapidly, total emissions could still rise even if relative emissions fall fast.  '

So it is good news that China uses electricity much less efficiently than other countries.  Improvements in efficiency, combined with the roll-out of renewables and EVs, could stabilise China's emissions or even cut them.

 From EMBER

China – the world’s largest producer and consumer of coal power – has recently promised to ‘strictly limit’ the growth of coal consumption in the next five years (2021-2025) and to phase it down thereafter, as part of its efforts to attain carbon neutrality before 2060. In this context, the future trajectory of coal power in China has become clear: coal generation will peak before 2025 and all unabated coal generation will fall to zero before 2060. Now, the question is how to turn this trajectory into reality. 

Electricity efficiency could be a crucial aspect of the answer to this question. With enormous opportunities for efficiency improvements, it should be put at the forefront for policy making in China, because this would help redress excessive growth of electricity demand, and hence make the phase-out of coal generation easier.

Between 2010 and 2020, China’s electricity demand grew by an average of 8.1% or about 340 TWh per annum – equivalent to the electricity demand across the United Kingdom in 2020. Although renewable generation also experienced exceptional growth over the same time period, it has not been able to, on its own, satisfy the incremental electricity demand. As a consequence, more electricity has also been produced from coal and other fossil fuels in order to maintain the overall sufficiency of electricity supply.

 

It is very likely that the current trend of fast-growing electricity demand will continue in the years to come, mainly driven by rising population and prosperity, as well as the need to decarbonise some of the hard-to-abate sectors (i.e., steel, cement, and transport) through electrification. This demand growth may exceed the speed at which ‘clean’ electricity technologies can be deployed, making the phase-out of coal generation difficult.  

The industry sector is the largest electricity consumer in China, accounting for almost 70% of electricity consumed in 2018. The electricity intensities of various industries in the sector are in general higher than those of the major industrialised countries, though to varying degrees. The difference is likely due to the use of less efficient production technologies, suggesting large potential for electricity savings if more advanced technologies can be adopted. 

The services sector is another major electricity consumer in China, responsible for about 15% of electricity consumption in 2018. It is also one of China’s fastest growing electricity consumers, with annual consumption rising at an average of 16% over the period 2010-2018, from 448 TWh in 2010, to 1,023 TWh in 2018. This compares to 7.4% for the industry sector, 10.5% for the construction sector, and 12.0% for the household sector. The electricity intensity of the services sector in China has exhibited  an upwards trend over the past few years, reaching 0.20 kWh per dollar of sectoral value added in 2018 – more than twice the world average. China’s high electricity intensity of the services sector suggests large potential for improvement.

There also exists significant scope for efficiency improvement in China’s household sector. Consider domestic air conditioners – the main electrical appliance in the household sector – for example. The average annual performance factor of variable speed mini-split air conditioners sold in China over the period 2015-2017 was 7-20% lower than the most efficient units available in the market and 50-60% lower than the best practice units. This means that large amounts of electricity can be saved if more stringent standards could be introduced on the efficiency of air conditioners.

China’s huge potential for electricity efficiency improvements, if realised, could help redress its excessive growth of electricity demand as the economy continues to grow. This, together with an inexorable march of renewable energy, is very likely to expedite the process of squeezing coal out of the generation-mix. Policymakers should therefore put more emphasis on tapping into the country’s potential for electricity efficiency improvement as they draft the 14th energy five-year plan – the first comprehensive policy guidance for steering China’s journey to carbon neutrality.