Of walls, windmills and power lines: China’s long-term energy strategy
China is now the undisputed leader in renewable-energy manufacturing worldwide. Yet along the routes of its Belt and Road Initiative – the largest foreign-investment strategy in history – alternative-clean-energy projects pale in comparison with coal-fired power plants.
This has led many commentators to question Beijing’s commitment to renewable energy beyond its borders, but enormous Chinese investments in national and regional power transmission lines should not be overlooked.
Grid developments, coupled with plummeting solar and wind prices, indicate that demand for large-scale clean-energy projects in developing countries will blossom. When it does, the BRI will bear fruit, putting China in the best position to achieve economic and national-security goals, as well as international commitments.
Beijing is cementing lasting relationships with emerging alternative-energy markets while the United States withdraws from global climate-change solutions, giving literal meaning to the Chinese proverb, “As the winds of change blow, some people build walls, others build windmills.”
Beijing is cementing lasting relationships with emerging alternative-energy markets while the United States withdraws from global climate-change solutions, giving literal meaning to the Chinese proverb, ‘As the winds of change blow, some people build walls, others build windmills’
On paper, the BRI strongly supports clean energy, but commitments have yet to materialize. China’s decision to stop or cancel hundreds of coal-fired power plants at home has led its companies aggressively to seek opportunities abroad, and Chinese investments in coal plants spiked after President Xi Jinping’s announcement of the initiative in 2013. By the end of 2016, Chinese companies were involved in 240 coal projects in BRI countries and will be responsible for more than half of the world’s new coal capacity in the next decade.
These are grim developments for climate-change mitigation, but there is an important footnote: Before China can export clean technologies, countries need grid infrastructure to deploy them cost-efficiently.
Efficient power lines reduce two implicit costs of utility-scale renewable projects: their distance from industrial centers – which causes electricity losses over transmission – and their intermittency (sources can generate too much or too little electricity depending on weather conditions). Grid connectivity allows countries to send energy from various sources to where it is needed, reducing uncertainty and promoting greater reliance on clean energy.
Under the BRI, China is investing massively in grid infrastructure. Led by the State Grid Corporation of China (SGCC), the largest power utility in the world, Chinese companies have invested US$123 billion in power transmission outside China since 2013, or nearly 30% of all BRI energy deals.
A headlining project in Pakistan is the Mahore-Latiari high-voltage direct current (HVDC) transmission, which, although delayed, promises to deliver energy from southern provinces to more densely populated northern ones. In Kenya, a $131 million Chinese loan funded a transmission line to connect a large solar plant that was also built and financed by China.
These investments facilitate utility-scale renewable-energy projects within countries, as well as energy trading between countries.
China has become the dominant player in ultra-high-voltage transmission-cable technology, which transmits electricity at remarkable efficiency over long distances. Using these cables, China has aspirations to create interconnected regional supergrids linking countries with surplus energy to others in need. For example, excess hydropower in Laos during rainy months could be transmitted to countries otherwise reliant on fossil fuels such as Vietnam.
One such supergrid is making progress. In 2016, China, Russia, South Korea and Japan signed a memorandum of understanding to conduct technical and economic feasibility studies for an “Asia Super Grid,” the energy for which would come from a gigantic 8-gigawatt system of planned wind-power capacity in Mongolia and be transmitted to load centers throughout participating countries.
In April 2017, a team of experts and business leaders determined that the supergrid was economically and politically viable. The plan is being led by the SGCC, which also has plans for five other supergrids throughout the continent. If not formally part of the BRI, supergrids will certainly facilitate the deployment of renewable projects along its corridors with unprecedented economies of scale.
China has clear economic, geopolitical and national-security incentives to build grid infrastructure in developing countries. First, grid projects actively develop markets for renewables, rather than waiting for them to grow. Once demand for renewable energy takes off in BRI countries, China – already the leading exporter of solar panels, wind turbines, batteries and electric vehicles – will realize immense economic gains.
Moreover, China supplies nearly 90% of rare-earth metals, a key ingredient in clean technologies such as photovoltaics and batteries. It has 44 million tons of rare-earth reserves, compared with just 1.4 million tons in the United States.
Grid infrastructure, especially supergrids in Asia, also shifts China’s energy supply away from geopolitical disadvantages. Currently, 43% of its oil imports go through the Strait of Hormuz and 82% through the Strait of Malacca. These are chokepoints; political instability or diplomatic confrontations could have grave consequences for China’s energy supply. Instead of relying on energy imports from the United States and elsewhere, transmission lines would connect China to the vast renewable-energy potential in its own back yard.
Grid connectivity along BRI corridors will also help China with its domestic overcapacity issues. When energy sources produce more than necessary, they must be curtailed, greatly reducing their cost efficiency. China has the worst curtailment rates in the world due to an overabundance of renewable energy in its western provinces. If, rather than wasting that energy, China can export it via HVDC lines to such places as Myanmar, Nepal, even the European Union, this would greatly increase returns on its domestic renewable-energy ventures.
China’s coal projects along the BRI undoubtedly risk making countries dependent on coal for several decades. But at a certain point, building new renewable-energy facilities becomes cheaper than continuing to operate existing coal plants. Between 2008 and 2015, prices for wind and solar dropped by 35% and 80% respectively, and while global demand for renewable energy grows rapidly, demand for coal power is stagnating. Grid improvements ensure that this tipping point comes even sooner.
Developing countries still face immense political, financial and technical barriers to renewable technology deployment. But with its transmission investments along the BRI, China is building the infrastructure necessary to facilitate changes in the global energy mix.
US clean-technology tariffs, support for sunset industries and retrenchment from climate negotiations will do little to combat Beijing’s growing influence in emerging renewable-energy markets. The BRI is more than an infrastructure investment plan; it is a long-term strategy to make China the literal and figurative powerhouse of the world’s low-carbon future.