Haven’t done a Green Hops for a long time, so there are lots of developments over the past weeks to catch up on!
Ten-Year New Energy Development Plan Closed to being Unveiled
State media is reporting that the National Energy Administration has finalized a 10-year new energy development plan that will require a cumulative investment of 5 trillion yuan ($740 billion) to realize. The plan, which is a strategy to help China realize its goals to achieve 15 percent of its primary energy mix from non-fossil sources and also to reduce its carbon intensity by 40 to 45 percent by 2020, will be sent to the State Council for approval.
This plan seems to be the long-awaited new energy stimulus plan that GLF blogged about more than a year ago with baited breath, and in fact seems to provide almost double the investment dollars. I would, however, strongly caution against assuming that this investment estimate will translate to direct funding by the central government. Most likely, just like the economic stimulus package of 2008, this amount represents a total investment amount that will be provided by a combination of central, provincial and local governments in addition to the private sector (see my presentation at CSIS earlier this year).
That said, the details released so far are still impressive. Important to note is the comprehensive breadth of sectors that fall under the “new energy” concept-its not just renewables such as wind, solar and biomass, but also energy efficiency, nuclear, smart (and strong) grid, transportation, unconventional natural gas, and more efficient use of fossil fuels.
A notable winner of this plan is natural gas, a hitherto minor energy resource for China (see picture). The NEA estimates that natural gas will account for 8 percent of China’s energy needs by 2015 at 260 billion cubic meters, compared to just 4 percent of a smaller energy supply base today at around 100 bcm. As the Financial Times blog recognizes, this strategic push for natural gas represents an economic opportunity for foreign firms with the right expertise.
New Energy Car Subsidies
In June, new subsidies for the private purchase of “new energy cars” came into effect ona pilot basis in five cities-Shanghai, Changchun, Shenzhen, Hangzhou and Hefei. The scheme provides up 3,000 yuan ($440) for fuel-efficient cars below 1.6 liters in engine capacity, and up to 50,000 yuan ($7,400) for plug-in hybrids and 60,000 yuan ($8,900) for pure electric vehicles for private consumers. This new program is different from the 13-city new energy vehicle subsidy a few years ago which targeted public fleets (this will be expanded to 20 cities).
Beijing was a notable omission from this new 5-city pilot program, and according to my conversations Read the full story
State Council presses for accountability for urgent energy conservation measure; NDRC issues 12-point circular to deepen economic reform.
If China is to achieve its 20 percent reduction in energy intensity in the current five year period, it will have to undertake some drastic actions in the months that remain.
And drastic action is just what the Premier has ordered.
Last month, the central government announced that energy intensity for the first quarter of this year rose 3.2 percent (from what baseline is not clear, although the press is saying its from Q1’09 rather than Q4’09). This represents a reversal of a downward trend-the first time since first half of 2006 that energy intensity has actually risen. This news also comes in a month after it was announced that China’s first quarter GDP grew by a remarkable 11.9% year-on-year, signaling that a recovery from the financial crisis is in full swing and stoking fears of inflation.
At the end of 2009, the government reported that China had achieved a 14.38 percent reduction in energy intensity from 2005 levels, putting it slightly behind pace (16 percent) to achieve its 2010 target of 20 percent. That said, no one I’ve spoken to about China’s energy intensity numbers understands how the government arrives at its statistics. Recall previous guest post on this issue, and this more recent reflection. At best, China is at 8 percent energy intensity reduction, folks tell me. But whether its 8 percent or 14 percent, the admission by the government that energy intensity has started to go up means that it will be extremely difficult under any circumstance to hit that cherished 2010 target.
The rise in energy intensity is attributed to the resurgent heavy industry sectors that were the beneficiaries of the economic stimulus program. So much for all that hype about China having the greenest stimulus in the world. (As I recently pointed out, the reality about China’s “green stimulus” is much more complicated.)
But now, Premier Wen and the State Council have apparently had enough. In a nationally televised videoconference, Premier Wen used very strong language, saying that energy conservation is a “fundamental national policy” that concerns the “survival and development of the Chinese people.” Government communications have gone on to attribute Premier Wen as using the vivid metaphor of needing to use an “iron hand” (“采取铁的手腕“) to eliminate backward heavy industrial production capacity.
Wen went on to describe seven broad points of urgent action (in Chinese). These seven points were a subset of 14 points outlined by the State Council (in Chinese), which consist of the following headings:
- Strengthen the sense of urgency and responsibility for energy conservation. Read the full story
A look at Lawrence Berkeley National Laboratory’s analysis on the energy conservation programs in China’s current five-year plan. For those of you in Beijing on Jan 20, you may listen to Dr. Mark Levine present these very findings at the Beijing Energy & Environment Roundtable (open free to public!). Details here.
Last month, I had the unique opportunity to gather with some of the top U.S-based thinkers on Chinese energy and climate policy. Participants hailed from World Resources Institute’s ChinaFAQs group of experts. Since it was a closed door session, I can’t spill everything that was discussed, but I did get permission to share what I thought was the most fascinating segment of the day’s programs. Mark Levine and Lynn Price of Lawrence Berkeley National Labs’ China Energy Group, presented a fascinating array of findings on how China is progressing on its energy conservation goals in its current five-year plan (2006 to 2010). The study, conducted by LBNL’s China Energy Group (in collaboration with Tsinghua University and McKinsey) analyzed China’s efforts in seven energy conservation programs–the Ten Key Projects, Enforcement of New Buildings Energy Standards, Building Retrofits, Top-1000 Energy-Consuming Enterprises, Structural Adjustments, Small Plant Closures, and Appliance Standards. A recent article in Science Daily also covered LBNL’s work in this study.
Lynn explained in an exclusive interview with The Green Leap Forward, the motivations for conducting such a study:
LBNL’s China Energy Group focuses on end-use energy demand, so we are always interested to learn more about the details behind the overall numbers. During this Five-Year Plan, China has been reporting remarkable progress in reducing energy use per unit of economic growth, but the question in our minds was how were they achieving this? With this project, we set out to really understand the end-use policies and programs that China established and how they were or were not contributing to the overall reduction in energy intensity.
The following slides, which are informative and comprehensive, were what was used in Mark and Lynn’s presentation. I highly recommend going through them in entirety.
LBNL’s findings is summed up best by Mark, lead author of the study and founder of the China Energy Group, who told The Green Leap Forward , also in an exclusive interview: Read the full story
As expected, the U.S.-China presidential summit in Beijing yielded an agreement on clean energy and climate change that focused on collaboration rather than emissions target setting (see my comments in Time.com and China Daily). Here’s a run-down on what this cooperation entails, in a piece published simultaneously at Climate Progress with my colleague Andrew Light.
“Very exciting day here in Beijing. There’s enormous interest in both governments in working together to fight climate change. The package announced today is far-reaching and can make a real difference in cutting emissions.” - David Sandalow, Assistant Secretary of Energy for Policy and International Affairs
Today, a comprehensive plan for U.S.-China cooperation on clean energy and climate change was announced in Beijing by President Barack Obama and President Hu Jintao. The overall plan is much more ambitious in scope and depth than we had anticipated and contains directives to create various institutions and programs addressing a wide array of cooperation on clean-energy technologies and capacity building, including very important efforts on helping China build a robust, transparent and accurate inventory of their greenhouse gas emissions.
These efforts include cooperation in the following areas:
1. Greenhouse Gas Inventory. A memorandum of cooperation between the U.S. Environmental Protection Agency and China’s National Development and Reform Commission sets out avenues for collaboration on capacity building in climate change, with an initial focus on helping China to develop a robust, transparent and accurate greenhouse gas emissions inventory.
2. Joint Clean Energy Research Center. Originally announced this July, more details were provided on the joint center that will “facilitate joint research and development of clean energy technologies by teams of scientists and engineers from the United States and China, as well as serve as a clearinghouse to help researchers in each country.” Financial support from public and private sources of at least $150 million over five years, split evenly between the two countries, will be provided. The Center’s research will initially focus on building energy efficiency, clean coal including carbon capture and storage, and clean vehicles. (Factsheet)
3. Electric Vehicles. Those initiative will “include joint standards development, demon Read the full story
Guest blogger Tristan Edmondson (right), partner at Mint Research, a clean tech consultancy, describes China’s growing Energy Service Company (ESCO) industry.
China has one of the worst ratios of energy use to GDP in the world, two and a half times the world average. This undoubtedly creates investment opportunities for a country that is awash in capital. But despite the huge potential of China’s ESCO industry, it has yet to approach the size of the ESCO industry in the US where it is an industry worth six billion dollars a year.
What is an ESCO?
Under an energy performance contract, ESCOs install energy saving technologies and methodologies and then share the resulting savings with the customer, so paying off the capital investment. Here are some examples:
- Honeywell International, acting as an ESCO, helped Asahi’s Shenzhen brewery become more energy efficient. Energy saving methods included upgrades to heat recovery, cooling and control systems, with the resulting energy cost savings shared between the Honeywell and Asahi. After the energy performance contract expires Asahi will continue to enjoy reduced energy bills at no additional cost.
- The production of electricity using energy that would otherwise be discarded is also organised along ESCO lines. Dongying Shengdong EMC Ltd (DSE) installs electricity-producing boilers that burn waste gases, such as coal mine methane or waste gas from coking plants. Clients of DSE provide waste gas free of charge to act as a feedstock, and buy the on-site electricity from DSE at a lower cost than grid electricity. Revenue-sharing arrangements usually lasting 10 years enable DSE to recoup its capital in about two years, and then maintain a profitable operation and maintenance relationship for the rest of the contract.
- Beijing PowerU is a provider of chilled water cool storage technologies that save energy. The company has installed solutions under energy performance contracts for a variety of customers including Shanghai’s Pudong Airport, LG Philips’ electronics factories, semiconductor manufacturing plants, five-star hotels and other large-scale air conditioning users.
Although energy is relatively cheap and often subsidized in China, the sheer scale of energy inefficiency means there are Read the full story
Here’s a 7 minute television interview I did with the US television foreign policy program “Foreign Affairs”, discussing China’s clean energy policies. If you based in the U.S., it may not be too late to catch this on the TV (check schedule).
(p.s. not sure what the first visual on “a new direction for Hong Kong” means!)
I suspect there may be some questions regarding my remarks about Read the full story
Guest blogger John Romankiewicz a/k/a Sustainable John (pictured right), a carbon markets analyst at New Energy Finance and director of the China’s Green Beat video blog, questions the consistency of NRDC’s announced progress on energy intensity reductions with his own calculations using NBS data.
China’s energy intensity target is perennially referred to by Chinese negotiators in international talks, but also regularly mistaken by the foreign press as some carbon emissions reduction target. Here’s the low down on what it is, progress to date, including the most recent announcement, and exploration of some curious inconsistencies.
What is China’s energy intensity target?
From 1980 to 2000, China led itself down a path of increasing energy efficiency and concern for the bottom line by introducing market incentives and competition such that by 2000, GDP output required two-thirds less energy than it did in 1978. From 2001-2005 however, China – with a realization of its new found wealth – went to a tremendous building boom. Industry could not keep its eye on such rising demand and energy efficiency improvements at the same time, so energy efficiency took the back seat. The government, realizing this in 2005, set a plan in the 11th Five Year Plan to once again improve on energy efficiency. Specifically, the headline target was to reduce energy intensity (the amount of primary energy consumed per unit of GDP produced) by 20% from 2006 to end of 2010. Using energy intensity as the cursor of progress leaves room for GDP to grow as it will even as energy efficiency is being improved.
Two of the most noteworthy programs have been the shutting down of old, inefficient coal-fired capacity and the Top 1000 Energy-Consuming Enterprises program. Additionally, many industrial enterprises have been installing waste heat and gas recovery equipment at their facilities. There are plenty of other smaller initiatives like Read the full story
A common refrain from climate action naysayers is that, “China is building two coal-fired power plants a week!” They insist that the United States should wait until this major emitter takes on binding commitments to climate change mitigation before it decides to adopt global warming pollution reduction policies in the American Climate and Energy Security Act (H.R. 2454). They further claim that if such a bill became law, the United States would be transferring its jobs to countries such as China and India that are doing nothing to curb emissions. But that thinking is exactly wrong.
Critics fairly point to the fact that 80 percent of China’s power is derived from dirty coal, and that China recently surpassed the United States as the word’s largest emitter of carbon dioxide. Yet China’s per capita emissions remain a fifth that of the United States, and its historical cumulative per capita emissions from 1960 to 2005 are less than one-tenth that of the United States.
Still, the Chinese have recognized that it’s climate inaction—not climate legislation—that will lead to its own economic undoing. As the U.S. Congress debates the merits of enacting renewable electricity and energy efficiency standards, China has already forged ahead with building its own low-carbon economy, laying the foundation for clean-energy jobs and innovation.
China ranked second in the world in 2007 in terms of the absolute dollar amount invested in renewable energy, according to the Climate Group. It spent $12 billion, which put it just behind Germany’s $14 billion. These investments have placed China among the world leaders in solar, wind, electric vehicle, rail, and grid technologies. And now approximately 9 percent of China’s $586 billion economic stimulus package will go toward sustainable development (excluding rail and grid) projects.
China is expected to unveil in the coming weeks another extensive and unprecedented stimulus package—reported to be in the range of $440 billion to $660 billion—dedicated solely to new energy development over the next decade, including generous investments in wind, solar, and hydropower. If those expectations are fulfilled, China could emerge as the unquestioned global leader in clean-energy production, significantly increasing its chances to wean its energy appetite off coal, and at the same time ushering in an era of sustainable economic growth by exporting these clean-energy technologies to the world.
The bottom line: China is not there yet, but it is beginning to transition to a clean-energy economy through a wide range of actions. The United States should recognize China’s efforts and encourage China to expand upon them. We have sketched this claim before, but let’s run though the numbers in more detail. Read the full story
Editor’s Note: This edition of Green Hops contains an inexplicably frequent number of references to Guangzhou and Guangdong. We wonder why that might be…
Water issues continue to dominate China’s environmental agenda thanks to the recent World Water Forum in Turkey. The forum ended pathetically, failing to recognize water as a basic human right. But in more positive news, Guangzhou (capital city of southeastern Guangdong province) received the “Compromiso Mexico” water prize, which rewards “the best local public policies that have had a positive impact on the drinking water, sewerage and sanitation services in the communities they interact with.” According to Xinhua:
Since 1997, the government launched a number of water initiatives, which greatly improved the once heavily polluted inlets of the city’s Pearl River. The government is expected to allocate 48.6 billion yuan (some 7.11 billion U.S. dollars) for water management in 2009 and 2010, which accounts for one third of its financial budget.
This edition of Green Hops is dedicated to Andrew Symon, a Singapore-based journalist specializing in energy and whom I have had the pleasure and honor of making an acquaintance of as a result of his writings at Asia Times Online. He passed away unexpectedly on February 24, 2009. Andrew’s generosity, sense of mission and powerful intellect will be sorely missed.
Energy intensity (energy consumption per unit of GDP) last year was reduced by a further 4.59%, bringing the three year total in energy efficiency gains in 2006 through 2008 to 10.08%. This means that to reach its 20% energy intensity reduction target over the five year period for 2006 through 2010, it will have to reduce almost another 10% in energy intensity over 2005 levels. Even if it seems difficult to achieve, such efforts much press on. To sobering reality is that China’s annual greenhouse gas emissions surged 45% from 2002 to 2005 alone due to a combination of structural changes in industrial activities and increased consumption. Half of that increase, apparently, was driven by manufactured exports. But the Chinese authorities say that exports in general are declining (25% year on year) and that the amount of “high-energy-consuming products” exported in 2008 declined 16.2% from the previous year. Read the full story