What are the implications of China’s announcement last week that it will be spending $360m over the next four years to build up its renewable energy sector? There are many reasons behind the move, from Beijing’s growing concern about the impact of climate change to the political imperative of reducing low level pollution in the smog-ridden cities. The scale of the investment, however, suggests that two closely related policy objectives are driving energy strategy: an effort to create a modernised economy that can provide employment for the Chinese workforce and a determination to limit dependence on imported supplies. China has already begun to take action to limit coal imports. The rapid growth up to 2014 has been halted, with imports used sparingly as an interim source of supply while the domestic coal industry is restructured. Hundreds of small and inefficient mines are being closed but the trend of total coal consumption looks set to grow further, towards the National Energy Administration’s target ceiling of power production from coal of 1,100 gigawatts. Coal generated 990 GW in 2015. Anyone under the impression that the Chinese coal industry is in terminal decline should note that new mines are still being opened and a new coal-fired power station is being brought onstream each week. Increasingly, coal is supplied by modernised local mines; total coal output is not likely to fall and it is possible that coal imports will be reduced to a minimum by 2020. The Chinese government’s plans lies in a rebasing of the economy in favour of electricity, with power supplied by local coal, shale gas, locally built n uclear power stations and renewables such as wind and solar power.
FT 16th Jan 2017 read more »