By Julian Wong Jan.31.2013
In: uncategorized

Calvin Quek: China's energy plan on PM2.5 and water-energy nexus is "significant new thinking"

I had the chance to catch up with Calvin Quek, Head of Sustainable Finance at Greenpeace East Asia based in Beijing, and also the former executive director for the Beijing Energy Network, to discuss the recently announced 12th Five Year Energy Development Plan.  See also previous post on this topic.

Calvin Quek of  Greenpeace East Asia

GLF:  First of all congratulations, I saw that photo spread [link here] of you and your Greenpeace colleagues and, I must say, you are looking pretty hip and fashionable these days!

CQ: Thanks, thanks, what can I say, I’m just trying to keep up with you, and green is the new black.

GLF: Well I was just kidding really. But let’s get serious. Last week, the China’s State Council unveiled its overall 12th Five-Year Energy Development Plan. First of all, why is this five year plan that supposedly covers the five year period from 2011 to 2015 released in 2013? Isn’t that kind of late?

CQ:  It does seem odd. The public release of this 12 FY Energy Plan took significantly longer, coming out 24 months into the 12th five-year period (2011 -2015), compared to the 11th Five Year Energy Plan, which was released 16 months into the 11th five-year period (2006 – 2010).To me, this suggests that the new Plan required greater and deeper rounds of consultations among various stakeholders.

It is also worth to point out that this overarching Plan is designed to encompass previously released sub-sector industry energy plans such as Solar Power (Feb 2012) (), Coal Power (Mar 2012),Wind Power (Sept 2012) and Emission Reduction & Energy Savings (Aug 2012), which themselves, given the increasingly complexity and size of China’s energy sub-sectors required stronger coordination across various government departments. Thus, the overall energy plan, which encompasses the sub-sector plans may have been delayed as a consequence.

GLF: To your point, the plan does indeed seem all-encompassing and employs an “all of the above” strategy. Anything about the plan that is particularly notable?

CQ: Yes, in fact the new plan significantly introduces 2 new indicators both never before mentioned in previous five-year plans. The first is a cap on primary energy consumption at 4 billion metric tons of standard coal by 2015. The second is a total electricity consumption cap of 6.15 trillion kilowatt-hours in 2015.

GLF: What is the reasoning for setting these caps?

CQ:  There are several reasons for this. First, clearly, China needs to improve its energy efficiency in order to reduce a growing dependence on gas and oil imports. At the same time, China wants to reduce greenhouse gas emissions and negative environmental problems such as air pollution, water scarcity associated with the overuse of coal, its primary energy source. Although China has committed to lower its carbon and energy intensity, without a indicative cap setting some bounds on the topline, gross energy consumption would rise as the economy continues to grow. China recognizes that it needs to do both – grow its economy and improve energy efficiency, and the caps are part of that equation. I would also point out that the analysis of the numbers indicates that the government’s new energy and electricity
consumption caps are in line with previously announced carbon intensity reduction target of 16% and energy intensity reduction targets of 17% by from 2010 to 2015.

GLF: Are these targets aspirational or legally binding? Or is there perhaps little difference as a practical matter? I am thinking of rolling blackouts that were forced by local governments towards the end of 2010 because local officials wanted to ensure that they met their local energy intensity targets set by Beijing.

CQ:  The new energy and electricity caps are indicative (预期性), whereas the carbon and energy intensity reduction targets are binding (约束性). But since the energy and electricity caps are consistent and serve to achieve the binding carbon and energy intensity reduction goals, perhaps this distinction starts to blur. Also notable is that China has made indicative targets that over time, after being stress tested with reality, eventually became binding targets. For example, carbon intensity targets in the 11 FYP was indicative, but became binding in the 12FYP. Another example is China’s new water consumption caps; it’s 2015 and 2020 targets are indicative, while its 2030 target is binding.

GLF: How meaningful are these targets?

CQ: Well that’s a good question.  It is important to put these targets in perspective.   The primary energy cap implies compound annual growth rate (CAGR) of 4.3% over the 12th five-year period, compared to 6.6% CAGR over the 11th five-year period. In the context of coal power, the production capacity is projected to increase to 4.1 billion tons in 2015 from 3.2 billion in 2010 assuming such a cap is in place.   So there continues to be a substantial growth in the use of coal, albeit at a slower pace. Coal-based energy consumption will be reduced to 65% from 2012′s 66.4%, but of course the total energy consumption in 2015 will be larger than in 2012.

Source: EIA

GLF: That is kind of sobering considering that the U.S. Energy Information Administration just came out saying that in 2011, China consumed almost as much coal as the rest of the world combined [see chart above].  So are we to expect continued bad news for air quality in China? And not to mention an exacerbation of its already dire water situation considering how water intensive the coal value chain—from extraction to processing to combustion and cooling—that coal power plants are?

CQ:  Well actually the plan is also noteworthy in that it introduced two significant and unprecedented environmental policies.  First, PM2.5 [small particulate air pollutants] made its debut in the plan, marking increased environmental and health concerns about air pollution linked to coal consumption. Only a week earlier, Vice Premier Li Keqiang, made strong public statements regarding the need to address air pollution. According to the Plan, the emission intensity of small particles generated from energy use should be cut by at least 30% [Section III, Point V. In Chinese: "能源开发利用产生的细颗粒物(PM2.5)排放强度下降30%以上。"]. Greenpeace believes that this requires emission reduction measures from coal-fired power plants over and above previous mandated SOX and NOX emission control requirements.

Second, water resource constraints related to coal power were mentioned the first time in a five year plan. In the introductory portion of the Plan, large amount of water overuse and pollution is specifically mentioned as major challenges [Section II. In Chinese: 大量水资源被消耗或污染,煤矸石堆积大量占用和污染土地,酸雨影响面积达120万平方公里,主要污染物和温室气体排放总量居世界前列。国内生态环境难以继续承载粗放式发展,国际上应对气候变化的压力日益增大,迫切需要绿色转型发展。].

Following this, the first sentence of the coal portion compels officials to take into account water resource and ecological capacity into consideration in the development of large scale coal bases. [Chapter III, Section II, Point I. In Chinese: 稳步推进大型煤电基地建设,统筹水资源和生态环境承载能力,按照集约化开发模式,采用超超临界、循环流化床、高效节水等先进适用技术,在中西部煤炭资源富集地区,鼓励煤电一体化开发,建设若干大型坑口电站,优先发展煤矸石、煤泥、洗中煤等低热值煤炭资源综合利用发电].

This acknowledgement of water resource constraints comes on the heels of 2 recently announced water policy measures. The first was unprecedented binding cap on water consumption of 700 billion m3 by 2030 by the State Council on Jan 2nd 2013. The second was a joint announcement on Jan 7th 2013 by the National Development & Reform Commission, the Ministry of Finance, and the Ministry of Water Resources, regarding water price reforms  aimed to encourage the efficient use of water and to discourage water wastage.

It is important to neither of these concepts, water constraints and PM 2.5, appeared in draft versions of 12 FY energy plan, and in the 12 FY sub-sector plan for coal, water was mentioned, but not PM 2.5 This indicates significant new thinking by policy makers regarding the environmental costs of coal power base development, and signals greater regulatory constraints on both planned and existing coal-fired power plants in China.

I should mention that on both air pollution and water resources, my organization Greenpeace working together with other partners such as the Chinese Academy of Sciences and Peking University, have provided research into these environmental issues. And I would also add that the excellent work by Green Leap Forward. I believe that your blog was one of the first to really come out to highlight the interrelationship between energy and water back in 2008 [here, here and here].

GLF: Thank you for the kind words. But this history of PM2.5 and water resource constraints are fascinating stuff indeed.

CQ: Yes, but recognizing the problem is just the start. There’s a lot of work to be done to truly address these issues. China’s continued commitment to deploy renewable energy will help – whether its wind, solar or biomass – these are generally carbon and emissions free and use far less water than their fossil fuel counterparts. The renewable targets such as 21 GW of solar and 100 GW of wind capacity by 2015 in the Plan are quite impressive, assuming, of course they figure a way to ensure that such projects are properly connected to the grid, which they have not always been in the past. But that being said, I think the Chinese government is more committed now to ensuring that renewable energy capacity expansion really translates into increased renewable energy consumption. In the 12 FYP, China has a binding target to increase its proportion of non-fossil fuel consumption from 8.6% in 2010 to 11.4% by 2015.

GLF: Well this is all good stuff. I don’t want to monopolize your time and I know you have important photo-shoots, I mean research, to attend to. Thank you so much for sharing your thoughts with GLF Nation.

CQ: My pleasure! By the way, you have any hair gel?

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