February 20, 2019 Read More →

The stakes are higher in China’s energy transition

Asian Power:

With a newly opened retail market, the country might be halfway in its energy transition, but issues on its overseas investments in coal are potential hurdles.

Renewables have displaced coal and fossil fuels in powering China’s gigantic economic machine, taking 38% of the energy mix and leaving a third of it to thermal power sources in 2018, data from the National Energy Administration (NEA) showed. However, it will need more renewables not only to address the environmental, social, and health impacts of its traditional energy sources that have built up over the decades but also to hold up the growth of its massive economy which has begun to slow down.

The latest China Renewable Energy Outlook noted that renewable energy sources will become the core of China’s energy system by 2050, with about 80GW to 160GW of annual solar photovoltaic (PV) installations expected. The report, which was released on the sidelines of the 24th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24) in Katowice, Poland in December 2018, noted the need to move China’s power sector towards a more sustainable path, with renewables now bannering the transition compared to being a mere add-on to coal and fossil fuel in previous national energy strategies.

However, China’s leadership in renewables investment seems to be challenged by its own actions. A report by the Institute for Energy Economy and Financial Analysis (IEEFA) revealed that it has committed or proposed about $36b in financing for about 102GW of coal-fired capacity in 23 countries. Of the 399GW of coal plants currently under development outside China, Chinese financial institutions and corporations have committed or offered to fund for over one-quarter of them, or 102GW.

Whilst the Chinese government has signaled it will restrict coal lending, the country has yet to formally limit its investment in coal plants. “Instead, Chinese finance is increasingly stepping in as the lender of last resort for coal plants, as other banks take active measures to restrict their funding,” said IEEFA researcher Christine Shearer.

The country with the most coal-fired capacity supported by Chinese finance is Bangladesh, followed by Vietnam, South Africa, Pakistan, and Indonesia. About 76GW of the 102GW of capacity is in pre-construction status.

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