China using market forces to switch to renewable electricity

China is using market forces to switch from coal to renewable electricity, but its push to replace gasoline with cleaner bioethanol is threatened by Trump’s trade war.

For nine consecutive days, the 5.6 million inhabitants of China’s Qinghai Province, and their factories and municipal lighting did not rely on coal-fired electricity but on clean energy.

From midnight on 20 June to midnight on 28 Jun, the state grid supplied electricity from water, wind and sun power achieving zero emissions – a record.

China is throwing off its dirty coal image faster than any thought possible. In 2017, clean energy generation and installed capacity exceeded 50 per cent of all power generation in the five southern provinces Guangdong, Guangxi, Yunnan, Guizhou and Hainan, which contain 215 million people.

The company has since passed 24 key measures to increase consumption and generation of clean energy. Yuan Quan, a planner at China Southern Power Grid Company, said that in the first quarter of this year, it managed to consume all the hydropower, wind power and photovoltaic power that was generated, cutting coal consumption by 17.66 million tons and carbon dioxide emissions by 42.62 million tonnes.

This process is aided by a marketisation of power purchasing processes driven by central government reforms as China aims to combine the strategic benefits of state management with the cost-cutting benefits of capitalism.

In 2017 China added 53 GW of new solar PV capacity but it has just slashed subsidies for solar, like most countries, to encourage its competitiveness.

Cross-regional power purchasing

This is accelerating power trading between provinces and regions to match areas blessed with high renewable energy resources with areas of high consumption.

For instance in May, a power generation purchase contract worth 129 gigawatt-hours (GWh) was signedbetween Jiangsu (near the coast, north of Shanghai) and Gansu (1700km to the west, by the Gobi Desert).

Gansu windfarm china
Part of the huge Gansu windfarm.

The transaction allows the biggest onshore wind farm in the world to obtain a renewable energy subsidy of 0.25 yuan per kilowatt-hour of profit, and at the same time reduce the amount of unused wind energy and provide more impetus for new turbines to be constructed, yielding a profit of about 0.11 yuan per kilowatt hour.

The windfarm has been criticised because about 60 per cent of the capacity of its 8GW capacity frequently was going unused, partly due to its remote location but also to the economic slowdown. This will now end. It is planned to grow in capacity to 20,000 MW by 2020.

“This power plant is located in the north western part of the country. From the sea to the Yangtze River and then to the canal, the cost of coal transportation is relatively high. At the same time, high coal prices and high coal consumption are also factors.” said Zhong Jindong, deputy general manager of Huaneng Group Jiangsu Branch.

Huaneng Group is one of several power generation groups involved in power generation trading. In May, the coal-based thermal power unit of Huaneng Huaiyin Power Plant of the Group and the wind power of Gansu traded 30 GWh of electricity, which is equivalent to reducing coal consumption by about 9,000 tons.

This is being done in order to meet peak power grid demand as part of a new Chinese policy with the typically poetic Chinese elemental epithet “wind and fire bundling”. But this is not “wind and fire”; it is pure wind.

In May, China’s National Energy Administration issued a “Notice on Further Promoting the Work Related to Power Generation Transactions”, with the aim of substantially increasing the proportion of electricity market transactions and increase the supply of clean electricity in a market-oriented manner, according to Zhang Cheng, Huaneng Group Jiangsu Company’s marketing manager.

Centralised bidding for both baseload electricity and priority power occurs through a trading platform to encourage hydro-electricity, wind and photovoltaic power generation to replace coal-fired thermal power generation.

The move is increasing an already existing trend. By the end of last year, the total amount of power generation transactions in Jiangsu reached 283.4 thousand GWh, reducing coal consumption by over 14 million tons, carbon dioxide emissions by 36.4 million tons and sulphur dioxide air pollution by 280,000 tons.

Yu Wei, deputy director of the planning and marketing department of Datang Jiangsu Power Generation Co, says trading must continue to be marketised, and the rules further improved to attract the participation of more enterprises from different power generation groups.

Transport sector discovers traceability for electric vehicle

The clean energy revolution is also sweeping through the Chinese transport sector.

China accounted for more than half of the 1.2 million electric vehicles sold worldwide in 2017. The government is consequently turning its attention to the reclamation and reuse of all those lithium-ion batteries.

On 3 July, the Ministry of Industry and Information Technology issued the Interim Provisions on the Management of Traceability of Recycling and Utilisation of Renewable Energy Vehicles’ Power Battery Management Regulations.

From August 1, 2018, companies must introduce traceability management for new electric vehicle batteries and used power batteries must be returned for recycling. China imports most of its lithium and reusing already imported lithium will reduce import demands.

More petrol is also to be replaced by biofuels. The province of Tianjin has just published a “Plan for Promoting the Use of Ethylene Gasoline for Vehicles” to be implemented from 1 August.

Promoting the use of ethanol petrol for vehicles is a national strategic initiative to tackle air pollution from particulate matter and carbon monoxide, with a pan for all petrol based cars to use it from 2020 but it has been thrown into doubt by the current trade dispute with the White House since it could affect supplies of raw material such as corn.

The use of ethanol blends can reduce toxic tailpipe emissions by up to 50 per cent, according to two new studies from the North Carolina State University and the University of California Riverside. It also cuts greenhouse gas emissions by about two thirds depending on the source of the ethanol.

In China, bioethanol production is coordinated by the state, which commissions production enterprises through market-based methods. Since September last year, when the plans were announced, state-controlled producers, like China’s State Development & Investment Corporation, agribusiness COFCO, and Jilin Fuel, have been planning billions of yuan-worth of investments to double output.

It is up to a city to manage distribution of bioethanol, mainly by adapting the existing oil depots of Sinopec, China Petroleum and other enterprises.

Each gas station is to be equipped with bioethanol pumps at their own cost. It’s also up to vehicle owners to get their vehicles adapted to burn the new fuels should they require adaptation. The massive operation will be backed up by a heavy promotional campaign.

But the push for cleaner air and reduced emissions may yet become a casualty of Trump’s America First policy. “The plan was too ambitious and will have a huge impact on the whole industry chain. It was too big a step forward. There might be change to the policy,” said Michael Mao, analyst with Zhuochuang, a consultancy based in Shandong province.

According to China Daily, large-scale production of biofuels, while desirable, may be still a few years away. Unless crude oil prices surge so high as to become unaffordable, it might be very difficult to promote alternative fuels on a national scale. But if any country can wean itself off oil for transport, my bet is on China first. 

David Thorpe is the author of The One Planet Life,Energy Management in Industry and Solar Energy Pocket Reference.

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