China's shift to cleaner energy
China’s pollution problems are no secret and the Central Government has made it a priority to move toward cleaner sources of energy production. The country’s current five-year energy plan sets forth the goal of reaching 11.4 percent renewable energy generation by 2015.
In the first three quarters of 2014, China spent US$175 billion on clean energy projects, a 16 percent jump from the previous year, according to data from Bloomberg New Energy Finance. This comes on top of the US$54.2 billion invested in China’s renewable energy market in 2013, far more than any other country.
Today, China’s clean energy system is already the largest in the world – which by 2013 stood at 378 GW and generated just over 1 trillion kilowatt hours.
Furthermore, Chinese leaders took a crucial step by reforming the state-controlled electricity pricing system. Changing the system to stipulate that wealthier households and more profitable businesses pay more for the electricity they consume was a big move against the price barrier that has kept coal dominant. Now, it is expected that the electricity market can become profitable again and that more renewable energy sources will begin to play a bigger role in China's electricity generation mix.
A revealing indicator of the renewable energy revolution can be seen in China's investment data. Since 2007, the share of investment in renewable electric generation has increased steadily, from 32% of the total investment in 2007, to passing 50% in 2011 and reaching 52% in 2013. Adding the investment in nuclear power, the proportion of investment in all non-fossil fuel-based electric generation increased from 37% in 2007 to 75% in 2013 while investment in thermal power plants declined from 62% to 25%. These investment trends have continued over the last two years also.
One of the challenges facing increased renewable energy generation is that grid companies have been resistant to adding a significant amount of renewable energy to their networks. However, as the Chinese Central Government is expected to break up the country’s main electric monopoly, that is expected to change. Deploying such a high amount of renewable energy will also require significant investment in the country’s transmission infrastructure.
An additional area to watch is China’s nuclear target, which has shifted considerably in recent years. The country’s nuclear roll-out has been slower than expected after several projects halted following the Fukushima disaster in Japan. This is of benefit to the renewable energy investment preposition.