As the largest developing country in the world, with a population of nearly 1.4 billion, China consumes more energy than any other country. It is now determined to develop a green economy, pushing for sustainable economic growth within the red-line environmental limits.
Yet economic growth is not possible without a fundamental transformation of the energy sector. The “four revolutions and one cooperation” called for by President Xi Jinping aim to transform both energy consumption and energy supply, develop new clean technologies and strengthen close international cooperation on energy security.
The direction for the revolution is also clear. China will build a clean, low-carbon, safe and efficient energy system with a strong emphasis on energy security. President Xi Jinping stresses that “low-carbon energy system directs human future” and emission reductions are key to reach the global goals set by the Paris agreement.
Renewable energy is one of the key technologies in the energy system of the future. China introduced a Renewable Energy Law in 2005, and since then the promotion of wind and solar energy has been a cornerstone of China’s energy strategy. China and Europe have been frontrunners in the massive deployment of these technologies, and in the huge cost reductions the world has experienced in the past decade. Many wind and solar power projects are already competitive with fossil fuel projects; in the coming years renewable energy is set to be the cheapest global energy solution.
There remain, however, a number of challenges which could hamper the future deployment and integration of renewable energy. Two of the three reports from ECECP, “Supporting
the construction of renewable generation in the EU and China” and “Integration of variable renewables in the energy system of the EU and China”, highlight the challenges ahead and offer possible solutions as country leaders weigh up the next step forward in the transition to low-carbon energy systems. Many of the lessons already learnt are similar and relevant both to China and the EU, although future measures must be tailormade to the specific Chinese and
European contexts. Investors require a stable policy framework, clear and ambitious targets for deployment and risk-mitigation. At the same time, power system flexibility and efficient power market design, with a level playing field for all technologies, are important prerequisites for the integration of renewable energy into the power systems.
These reports are important milestones in EU-China energy cooperation. Policy decision makers should study and learn from the experiences from the two frontrunners. The lessons learnt may also inspire other countries and regions to accelerate the development and integration of renewable energy in the drive towards a global low-carbon economy.
Energy Research Institute of NDRC
In China, the installation and utilisation of hydropower and more recently PV and wind power have been increasing year on year. Although renewable energy sources (mainly PV and wind) have achieved double digit growth, their share in overall consumption, apart from hydropower, is still negligible. China’s energy system is still dominated by coal (accounting for 57% of energy use in 2019). China is now the world’s largest market for wind and solar power, yet non-electric renewables, mainly from biomass fuels, are still at the very early stage, with no clear pattern of development.
China and Europe are together struggling to manage the transition to green energy. The European Green Deal, recently issued by the EU Commission, sets Europe on an unprecedented and irreversible path within a very diversified political and technological environment represented by 27 different member states. Nevertheless, EU energy policies, a well-integrated grid and regulation of production, together with a transparent and open market, allow Europe to exploit renewable sources to their utmost and foster their growth.
The development of renewable sources is a key priority for both China and Europe; they each firmly support the move towards decarbonisation of their economies and at present they are the most credible and leading political and economic systems pressing for full decarbonisation of industry, society, transport and the overall economy.
Although Europe and China have very different political, economic, geographical and historical systems, a mutual exchange of their experiences over the past decades could result in an enhanced range of political and technical choices for the benefit of global energy transition trends. Europe has an historical timing advantage over China in terms of technology and policy models, with different results across member states and a political and geographical complexity at least on a par with that of China, if not greater. Hence, China may be able to take this opportunity to learn from Europe’s choices, mistakes and successes and as well as from the consequences of its political and technological strategies.
Recent history demonstrates that Europe has been successful not only in integrating renewables, but also in planning an energy system that will support sustained economic growth. Evidence of that success is that the average EU-27 primary energy intensity – i.e. the ratio of energy consumption to GDP – is the lowest in the world and half that of China.
In spite of the significant differences between Europe and China, as very effectively outlined
in this report and in its conclusions and recommendations, a comparison of the two energy systems offers clear conclusions. Europe’s experience shines a light on the areas that China will need to consider when planning its energy transition over the coming years.
The first area relates to the need to tackle renewable energy development within a comprehensive, holistic and visionary energy system, taking into account technologies, security, sustainability, and energy intensity reduction across the whole energy value chain and energy sectors (electricity, heating, fuel).
The second lesson from Europe – which has been able to harmonise the complexity of 27 different countries with a variety of policies, a multitude of energy systems and a range of dominant fuels (France with nuclear, Poland with coal, Italy with gas, Scandinavia with
renewable, etc.) – is the value of flexibility and distributed energy production, with approaches aimed at optimising the whole system rather than single technological segments. In this aspect the role of grid regulation and flexibility, cogeneration and prioritising renewables over fossil
fuels are key success factors that China may wish to take into account, carefully adopting UHV solutions that are fully integrated into a distributed power production system.
The third key aspect is market transparency. The focus should be on the end-user who should be able to make a direct contribution to the decarbonisation trend with ‘green’ choices, while bearing higher energy costs for electricity, heating and fuels. Private, commercial and industrial end-users should be given an active role and be offered a choice of energy sources, with appropriate education and awareness of their options. Empowering the consumer will lead to more rapid decarbonisation.
The fourth area of European experience relates to bioenergy and hydrogen. These new technologies, already piloted and adopted in Europe, would mitigate the intermittency of renewable sources, strengthen China’s energy security, contribute to a circular economy, and enhance efforts to reduce emissions through the exploitation of biomasses for producing biogas, biomethane, second generation biofuels, etc. Biogas and hydrogen are the ultimate solutions for decarbonisation of transport, increasing flexibility in the energy system and accelerating the move away from coal while contributing to, and even anticipating, fulfilment of the commitments taken in Paris in 2015.
The fifth, final, and perhaps most pressing point for discussion is the advisability of a genuine opening of China’s market to European companies allowing them to operate in China on a level playing field, as well as through innovative pilot schemes and joint collaborations. This approach could prove the best way to harmonise European and Chinese experience on the ground and on joint projects where European companies can transfer knowledge while developing their business operations in China. This would boost China’s energy transition effort by involving European technologies, processes and regulations and drawing on European companies’ readiness to adapt proven solutions to the Chinese market.
This study provides an excellent basis for understanding the key differences between the power markets in China and Europe and offers a clear depiction of the lessons learned from European and Chinese experiences. It achieves this through a very careful comparative approach that advocates solutions only after considering whether local differences might render them unworkable.
I am absolutely convinced that this report will consolidate and further strengthen cooperation between China and Europe in the context of the EU-China Energy Cooperation Platform. The European Union Chamber of Commerce in China and its energy related members are fully and proactively supportive of the ECECP, in the hope and expectation that it will strengthen mutual cooperation between China and the EU and open up mutually beneficial business opportunities.
Guido D. Giacconi
National Chair of EUCCC Energy Working Group
Chairman of In3act Business Strategy Consulting (Beijing)
This report was prepared by
Monique Voogt, SQ Consult BV, and
SHI Jingli and ZHONG Caifu, Energy Research Institute of National Development and Reform Commission