China’s green strategy is paving the way for an Asian renewable boom

“When the wind of change blows, some people build walls, others build windmills”, so runs an old Chinese proverb, but the phrase could just as easily have been conjured up to illustrate China’s present strategic position. While President Donald Trump’s leadership is pushing the US away from renewables, China is radically stepping up its pace of change, and is increasingly looking overseas for further investment opportunities in the sector.

At the beginning of the year, China’s National Energy Commission announced $363bn would be channelled into renewable power generation by 2020. Beijing also stepped up its targets from those made in 2014, now aiming for ever-more ambitious goals in terms of wind and solar capacity by 2020.

However, even before these announcements were made, China was the unrivalled global leader in terms of the size of its investments in renewables, which dwarfed those of the US 2.5 times over in 2015. Assuming these trends continue, China could have an electric power system that is beyond 50 percent green within the next decade.

As the world’s biggest polluter, a serious burden lies on China to reduce its carbon footprint

Going green
Professor John Mathews, co-author of China’s Renewable Energy Revolution, underscored the impact of China’s approach on the global energy industry: “China is having enormous – and largely unrecognised – influence in shaping world energy choices. As it ramps up its production of renewables and expands the global market, so it reduces costs – creating business opportunities in Africa, south Asia and south-east Asia for countries to get themselves off the grind of fossil fuels and onto a new, clean trajectory that has enormous economic [and] environmental benefits.”

Greenpeace put some of this into perspective, estimating that, for every hour of 2015, enough solar panels to cover the surface area of an entire football pitch were installed in China. Looking ahead, the International Energy Agency has predicted China will account for over a third of global expansion in wind, solar and hydro energy between 2015 and 2021.

As the world’s biggest polluter, a serious burden lies on China to reduce its carbon footprint. However, the country’s renewables drive is underscored by more than just a heavy conscience: the strategy is deeply intertwined with the health of its manufacturing sector and concerns for its energy security, as well as the immediate need to cut through the cloud of smog that engulfs many of its cities.

Secure future
According to Mathews, China faces a “bleak future” if it fails to break its dependence on fossil fuel imports, which have continuously increased over recent decades. He argued the key driver of China’s rapid uptake of renewables was the improved energy security they bring: “As it happens, it is an extremely convenient truth that the strategy of enhancing energy security via renewables also lowers carbon emissions as a fortunate side effect.”

Indeed, the case for bolstering energy security in China is strong. As oil imports continue to grow, China’s established oil fields are running dry. Despite extensive exploration, few new discoveries have been made and production by China’s own energy fields has peaked. On top of this many key oil-producing countries are plagued by instability; some of China’s key suppliers are Iraq, Nigeria, Iran, Russia and Venezuela, where political entanglements are unpredictable to say the least. Mathews characterised this situation as the existence of “geopolitical limits” to future expansion.

“If China continues to scour the world for fossil fuels and resources, it will run up against limits in the form of civil wars, revolutions and terrorism – as has already happened in Niger and in South Sudan”, Mathews said. As a result, renewables should be approached as an important opportunity for energy security. “A renewables strategy under domestic control, combined with urban mining for resources, is a feasible strategy for getting around such geopolitical limits.”

Breathe easy
In part, the accelerated speed of renewables investment can be linked to China’s immediate environmental concerns. Air quality is an increasingly pressing issue, having sent the country’s capital into crisis late last year. Indeed, an ordinary day in Beijing is said to be as bad for your health as smoking 40 cigarettes.

If China continues to scour the world for fossil fuels and resources, it will run up against limits in the form of civil wars, revolutions and terrorism

According to Simon Nicholas of the Institute for Energy Economics and Financial Analysis: “Recent comments from the Chinese premier that ‘we will make our skies blue again’ are revealing. Air pollution is a major issue in Chinese cities that the government must be seen to be able to control.”

While the country remains heavily dependent on coal, some progress has been made: the amount of coal burnt for energy reached its peak in 2014, but the reduction has not been near drastic enough to clear the skies of China’s cities. “China’s battle with air pollution has being going on for years now, and is a major factor in the nation’s refocusing on more renewables and away from coal”, said Nicholas.

Opportunity knocks
The Chinese approach is casting the renewables sector in a new light by demonstrating a commitment to the industry can be an economic opportunity. In this sense, the divergence between China and the US is stark: while President Trump paints environmental commitments as a drain on productivity, in China, investment in renewables is closely intertwined with its broader development strategy. “Energy targets are viewed in the US as ‘market interference’, whereas China has no such hang-ups, and views state involvement in the economy as a necessary and desirable feature of a catch-up strategy”, said Mathews.

The details of China’s most recent five-year plan demonstrated a profound shift in its economic strategy towards the incorporation of huge investments in renewable energy. The approach is a push towards the creation of a more modernised economy: one that can provide increasingly skilled employment for the Chinese workforce. Ramping up the production of renewables will also be a step towards achieving the long-standing Chinese goal of moving up the value chain in manufacturing. Crucially, by carving out a large portion of global market share early on, Chinese firms can consolidate their lead in a fast-growing export market. China’s firms already have a significant presence in promising future markets, including those for batteries, solar panels and wind turbines, and are poised to become ever more dominant.

“While the US under Trump is looking to the past and fossil fuels, China is looking to new industries based on renewables generation, energy storage, smart grid distribution systems, and new ventures such as fuel cells”, said Mathews. “In each case, China is strategically sourcing and adapting technology, and ensuring it is available to Chinese firms, as well as building export industries and providing for intellectual property rights recognition.”

In the present landscape, there is a strong focus on President Trump’s failure to cede to overwhelming scientific judgement regarding the existence of climate change. The Chinese approach, on the other hand, seems to indicate belief may no longer be the main issue. Instead, there are far more wide-ranging benefits at stake, and China is carefully positioned to maximise them. The US leadership would do well to take note.