China is the world‚Äôs largest greenhouse gas emitter, and is building the most power plants of any country in the world, making its decarbonization paramount to preventing dangerous climate change. But the costs of wind, solar, and energy storage have fallen so fast that building clean power is now cheaper than building fossil fuels ‚Äď a lot cheaper.
New research shows plummeting clean energy prices mean China could reliably run its grids on at least 62% non-fossil electricity generation by 2030, while cutting costs 11% compared to a business-as-usual approach. Once again, it‚Äôs cheaper to save the climate than destroy it.
While fast-falling clean energy prices make China‚Äôs clean energy transition possible, only smart policy can achieve a low-carbon electricity future. Fortunately, this clean energy transition would also spur long-term sustainable economic growth while cleaning the country‚Äôs air.
Short-term decisions, long-term impact
COVID-19 sparked a global emissions drop‚ÄĒChina‚Äôs tumbled by an estimated 25% in the first quarter of 2020. But without decisive action to transform the country‚Äôs energy system, the pandemic could be a blip in China‚Äôs long-term rising emissions trend. May data showed a rapid rebound driven by coal power and cement production, with emissions up 4% to 5% year over year.
The economic recovery choices China makes today could either improve or worsen its air and water quality. While the Ministry of Ecology and Environment recently affirmed the country‚Äôs climate commitment, which promises to peak emissions and reach 20% non-fossil electricity generation by 2030, its coronavirus recovery effort could lean heavily on polluting sources as China approved more coal permits in March 2020 than all of last year.
China‚Äôs scale makes these decisions globally important, and potentially perilous ‚Äď emissions from the country‚Äôs power sector are comparable to combined power sector emissions from the United States and Europe.
Its coal capacity additions in 2019, for example, accounted for nearly two-thirds of all capacity added worldwide. Yet the country has also demonstrated unparalleled ability to scale zero-carbon generation, leading the world in installed wind and solar capacity, as well as nuclear power.
China plans its economy in ‚ÄúFive Year Plans‚ÄĚ guiding development and serving as the principal measure of performance for government officials. The plans lay out binding, quantitative targets for everything from the economy and infrastructure, to health and social development, to the environment.
China‚Äôs leaders are currently developing the 14th Five Year Plan for 2021-2025, and greater climate and clean energy ambition could accelerate decarbonization. For example, the country‚Äôs current climate goals allow emissions to increase through 2030 before declining, and to date the country‚Äôs carbon dioxide (CO2) targets have been expressed as carbon intensity per unit of GDP allowing for emissions increases with economic growth.
A more realistic picture of energy costs
Despite the precarious future emissions outlook, China‚Äôs current climate targets are within reach, with multiple studies mapping out scenarios to achieve high penetrations of renewables in the coming decades.
But as the new paper from Stony Brook University and Lawrence Berkeley National Laboratory researchers points out, even these optimistic analyses fail to capture just how dramatically renewable energy and storage prices have dropped in recent years. The global weighted-average levelized costs of electricity (LCOE) of utility-scale solar panels, onshore wind, and battery storage have fallen by 77%, 35%, and 85%, respectively, between 2010 and 2018.
And widely cited references such as the International Energy Agency‚Äôs World Energy Outlook and the U.S. government‚Äôs International Energy Outlook have underestimated clean energy development due to fast-falling costs quickly rendering previous analysis outdated.
Given the mismatch between projections and real-world project economics, the researchers updated SWITCH-China, an optimization model originally developed at University of California-Berkeley, to determine how different renewable energy cost scenarios affect future deployment (SWITCH is a loose acronym for¬†investment in solar, wind, transmission, conventional, and hydro sources).
The study explores four scenarios: business-as-usual, which assumes current policies continue with moderate cost drops for renewables; low-cost renewables, with continuing rapid decreases in costs for renewables and storage; a carbon constraints scenario, in which carbon is capped at 50% lower than the 2015 level in 2030 on top of the low-cost renewables scenario; and a deep carbon constraints scenario capping 2030 emissions 80% below 2015 levels.
China‚Äôs clean energy economic opportunity
If the rapid downward price trend for renewable energy continues and capital investment choices shift away from fossil fuels ‚ÄĒas outlined in the second scenario above‚ÄĒChina can provide 62% of its electricity from non-fossil sources by the end of the decade.
Power costs decrease in this scenario by 11%, from $73.52 per megawatt-hour (MWh) under the status-quo to $65.08/MWh. Power sector emissions would be 22% lower compared to 2015 levels instead of 5% higher. This trend mirrors widely reported modeling showing the U.S. can reach 90% clean energy by 2035 while cutting wholesale power costs 10%
With a lower carbon cap of 50%, though, China could cut 2015 electricity sector emissions in half and still come in with costs 6% lower than the base case.
Higher wind and solar energy concentrations on the grid spur a major uptick in storage capacity. To support 62% non-fossil energy, the analysis estimates storage capacity should increase more than eightfold from the current trajectory, from 34 gigawatts (GW) to 290 GW. The model also allows existing natural gas generation to fill in the gaps to meet peak load, though the need for natural gas capacity would be cut nearly in half in this low-cost renewables scenario.
Regional variations in demand and renewable generation capacity also will require changes to China‚Äôs transmission infrastructure. Much of the nation‚Äôs solar capacity is concentrated in the northwest, which becomes a net exporter of electricity to the central, northern, and eastern regions under the low-cost renewables scenario. As much as 35 GW of transmission capacity could be needed to move solar and wind generation to centers of demand such as Jing-Jin-Ji, the Yangtze Delta, and the Pearl River Delta‚ÄĒdouble today‚Äôs cross-provincial transmission capacity.
China can have clean air and economic growth thanks to cheap clean energy
While plummeting prices for wind, solar, and energy storage technologies make this clean energy transition possible for China, policy action is required for its‚Äô low-carbon electricity future.
Because the 14th Five Year Plan and other policies expected in coming years will determine China‚Äôs energy investment priorities and decarbonization trajectory, policymakers should leverage current and projected low prices for renewable energy to set ambitious targets for deploying clean power. These targets should be accompanied by decisions to reduce fossil fuel investments, and provide job training to help workers transition to the clean energy economy.
China could also accelerate its ‚Äúpeaking‚ÄĚ date by five years, ensuring that official plans include reducing overall emissions starting in 2025. The country could also support an absolute carbon cap with stronger underlying targets for key economic sectors‚ÄĒpower, industry, transportation, buildings, and non-CO2 emissions.
These targets would generate demand for new infrastructure that fuels near-term economic recovery through clean energy additions, and wise long-term investments that provide cleaner air at lower costs.
Dirty air is incompatible with economic growth and a prosperous modern society ‚Äď thanks to cheap clean energy, China can have both.