Emissions by 2030

network operators

Dear All,

Another year has passed and we meet again at this Christmas double issue of EU China Energy

ECECP started 2021 with a workshop exploring opportunities and challenges in introducing

innovative energy solutions in EU and China, but 2021 was really a year of the power sector. We held

two additional workshops in the summer and autumn to share the experiences of the European power

sector in the clean energy transition and to offer China’s perspective. In November, ECECP brought a

small part of COP26 from Glasgow to Beijing when we hosted 50 guests at a live streamed

promotion of renewables and integration of variable renewables in the energy system in EU and

China, market-based financing of energy efficiency investments, and the role of gas. Three Joint

Statement reports were also published in summer 2020.

Our website’s readership has quadrupled since its launch in 2020.

Even as COVID-19 continues to complicate interaction between the EU and China, we hope that our

magazine will go some way towards meeting the needs of the energy community in EU and China

for news and views.

This issue of the EU-China Energy Magazine includes articles on China’s action plan to reach peak

emissions by 2030, the global gas crisis, a discussion on the role of battery storage in the low carbon

energy system, as well as a behavioural perspective on greening pensions. Read the latest EU and

China policy developments in the News in Brief section. We hope you enjoy these and the other

A livestreamed event brought energy players together in Beijing to follow

presentations given at November’s COP26 summit in Scotland. Daisy Chi

and Helena Uhde offer a round up of key points from energy experts from

around the world.

On 5 November 2021, ECECP hosted a COP26 live streamed event in

Beijing to coincide with EU Energy Day, allowing policy makers, CEOs

and local politicians to discuss global initiatives to effect the energy

energy, green hydrogen, the phasing out of coal and methane emission

Much is published about the many new jobs that will be generated en route

to climate neutrality, yet no one can deny that fossil fuel workers’ jobs may

be at risk. A people-centred approach, that balances social and economic

development, is needed to ensure that the benefits and costs involved in the

transformation of the energy system are distributed fairly and in a way that

protects the most vulnerable groups.

Europe is at the forefront of ensuring a just transition. The EU has pledged

to cut emissions by 55% by 2030 and to achieve net zero emissions by

2050. EU Energy Commissioner Kadri Simson stressed that the energy

transition will fundamentally change the way people live and therefore

Up to EUR 75 billion will be set aside via the Just Transition Mechanism to

help regions affected by the phasing out of coal and the industrial transition.

The EU has also proposed a new Social Climate Fund, which will use

additional revenues from carbon pricing on home heating and road transport

to help those who are most vulnerable to higher energy and fuel prices. The

EU is also actively seeking new revenue streams and creating new jobs in

coal regions.

Following up on its commitment to sharing its experience with international

partners, the EU has taken an active role in the Global Commission on

People-Centred Energy Transitions, an initiative coordinated by the IEA

coal in key partner countries such as Indonesia and South Africa. The EU is

that exploration in the North Sea will soon cease, the government is now

actively working with labour unions to help those affected find new jobs.

Emerging and developing countries, such as South Africa, India, Indonesia

and Senegal, face greater pressure and challenges in the energy transition,

as they have to ensure economic development even as they reduce fossil

fuel energy use. Assistance and support from the EU, the US, and China are

particularly important if they are to achieve their goal.

With around 40% of the world's population living in coastal areas, the

development of offshore renewable energy could largely meet the energy

demand of those coastal mega cities. According to the International

emissions by 2030?

Reducing coal consumption

One of the most critical changes China will need to make is to reduce its

consumption of coal. Coal is one of the most polluting forms of energy and

is still China’s biggest source of power. The country has cut its overall share

of energy derived from coal to 56.8 percent in 2020 from 72.4 percent in

to cleaner forms of energy at the top of the agenda.

Among other proposals, the Action Plan calls for:

● Strictly controlling the growth of coal consumption during the 14th FYP

and gradual reduction of coal consumption during the 15th FYP

● Strict control over new coal-fired projects, ensuring that new projects

adhere to international standards while phasing out the use of outdated coal

● Ensuring that the proportion of newly built renewable energy capacity

does not fall below 50 percent

● Demarcating areas where the ‘scattered’ burning of coal is prohibited,

One of the biggest obstacles to reducing coal consumption is balancing the

reduction of coal with ensuring energy security for China’s population and

large, economically significant industries. Recent attempts to curb the use of

coal have led to an energy shortage that left some parts of China without

power and caused some factories to have to temporarily shut down. In

previous years, China has also made attempts to curb the ‘scattered’ burning

of coal, particularly by rural households who still rely on this form of energy

for heating and cooking in some areas, but had to roll back bans due to a

lack of alternative energy supplies.

The use of phrases such as reducing the use of coal ‘in an orderly manner’ is

necessarily require the continued burning of coal until all demand can be met

by alternative sources.

Replacing coal with alternative power sources

The main alternatives to fossil fuels mentioned in the Action Plan are solar,

wind, hydroelectric, and nuclear power, as well as other forms of renewable

energy sources.

China has already made significant headway in transitioning to renewable

energy. According to the China energy report from Ember, China’s relative

share of renewable energy resources has grown significantly in the past five

years, with the share of solar and wind energy growing to 10 percent in 2020

important component. The Action Plan calls for the development of

hydroelectric power projects in Western China in particular, in regions

including Qinghai, Tibet, Sichuan, and Yunnan. The Action Plan also set a

target to add 40 million kilowatts of hydroelectric power capacity.

Nuclear power, meanwhile, must be developed in an ‘orderly and

reasonable’ way to ensure its safety. Among other proposals, the Action Plan

calls for ‘promoting advanced reactor-type demonstration projects, such as

high-temperature gas-cooled reactors, fast reactors, modular small-scale

reactors, and offshore floating reactors.’

The Action Plan also calls for the development of other renewable forms of

Many of the challenges presented by DERs stem from the fact that they are largely invisible and

cannot be controlled by grid operators, which means it is difficult to integrate them into the overall

operation of the grid. Digitalisation can help address this challenge. Smart digital solutions enable

DER owners to monitor and manage their resources in real-time. This can help grid operators more

closely monitor and influence DER operations, boosting the value of DERs to the grid as a whole.

Digitalisation is especially powerful as it can be scaled to any aggregated level, from individual

devices to buildings, communities, or even a larger region.

It is important to emphasise that the complexities of the new energy ecosystem should not

Recent years have demonstrated the interconnectedness of the global

both medical and economic crises. More recently, both parties have faced a

natural gas supply crunch, underlining what they have in common when it

comes to their energy goals.

The shortage of natural gas globally has driven unprecedented increases in

wholesale gas prices, bringing into focus not just the increasing integration

of gas markets globally but also the commonality in national risks, and by

extension policy goals, in the EU and China.

The issue of energy security is of central importance to both China and the

EU. Both are increasingly dependent on imports of natural gas to secure

their energy needs. EU gas imports stood at 80% of consumption in 2020 as

domestic production declined, most notably in onshore Dutch production.

Similarly, China’s import exposure, whilst slightly lower at 40%, continues

In response to this common challenge, both China and the EU can point to

common areas where cooperation and dialogue could prove mutually

growth for many years to come. This will contribute to a tight market up

until 2025. However, anticipated capacity increases will exceed annual

demand increases post 2025, when the gas market will loosen.

Baringa’s analysis of future LNG projects shows that around 70% of

additional capacity post-2025 will come from the US. Biden’s target for a

zero carbon power generation sector by 2035 is expected to create a huge

surplus of domestically-produced gas. Much of this capacity resides within

crucial swing states in the US, where previous Republican presidential

candidates have made political traction from weaponising Democrat

incumbents’ decarbonisation agendas, which they describe as ‘a war on

jobs’. To manage this political risk from the decarbonisation of power

generation, a policy pivot to export offers a natural solution. This additional

US capacity would provide extra liquidity to global markets, providing both

develop transparency requirements for global gas could raise consumer

greater transparency is likely to create competitive incentives for shale

producers to work to reduce emissions.

notably a target to reduce methane emissions by 30% by 2030, has the

capacity to improve the image of US shale gas. After a series of rollbacks of

regulations on methane venting, flaring and leakage from the Trump

administration, Biden era targets provide the opportunity to incorporate US

LNG into the global LNG market.

deliver additional supply to a tight market.

energy mix, additional flexibility in grid management is required in order to

significantly reduced marginal costs from renewables increases the

efficiency advantages of market-based dispatch, with lower price sources

deployment of renewables at scale. Supply and demand are managed by

means of state dispatch, with industries being offered set supply

requirements at a standardised price. These terms favour base-load power

technologies which can provide predictable capacity, as opposed to more

volatile generation from renewables. Flexibility is provided by some

ancillary markets, with power companies paid to provide usable ramp-up

capacity to meet changes in demand.

As renewable energy production increases, greater flexibility is required in

order to match supply and demand. China is currently trialling eight spot

markets which allow for market-based dispatch. Leveraging price signals

allows for a market-based allocation of supply to meet power demand,

incentivising flexible dispatch from generators and rewarding the lowest

levers which Chinese authorities have traditionally used to achieve specific

economic and social goals. Namely, price setting has allowed authorities to

subsidise commercial activities and to encourage social stability through

capacity markets, day ahead markets and balancing intraday markets to

manage supply and demand based on price signals. In addition, the depth of