China freezes wind projects in the Northern provinces despite Paris deal pledges
In China, hope for a swift energy transition has been chilled by the news of a freeze of wind projects in the northern provinces. The government has decided to slow down the expansion of this sector because of efficiency and overcapacity issues. This decision also reflects the persistent supremacy of coal-fired power plants, especially in the plans of local authorities that are fighting the energy transition tooth and nail. Indeed, if the Chinese government is to meet the targets it has recently set to improve the environmental situation it will have to take more decisive action to make sure its energy policy materialises in the provinces.
Freeze of wind projects in the North because of energy waste
The Chinese government has announced at the end of March that all new wind projects in the North of the country would be frozen and would not receive approval. The provinces of Xinjiang, Gansu, Ningxia, Inner Mongolia, Jilin and Heilongjiang were thus ordered to stop launching new windmill projects. This decision is very bad news for those who hope for the reduction of the Chinese air pollution, responsible for many health issues in the country but also for a growing part of global warming. The provincial authorities retain the right to finish the projects already approved but it's unlikely that they will because many windmills have been stopped this year and are just not being used, hence the decision of Beijing to limit the financial waste. The North of China is the part of the country with the highest wind potential, which is why so much of the Chinese wind capacity has been built in these provinces. Together, the six provinces combine 71 gigawatts of turbines, a higher figure than all the other provinces put together. The last few years have indeed been very dynamic for wind projects in that part of China, thanks to government subsidies and to the government strategy to set China on a path of energy transition. In 2015 alone, 33 gigawatts of wind power have been installed throughout the country, more than half of the worldwide total. But at the same time, it's the fourth time in five years that such a freeze is decided, proof that the development of wind energy in China isn't quite smooth sailing yet.
The reason behind this decision to freeze new projects is the rapid growth of energy waste over the last few years. A big part of the energy generated by the windmills is not used and goes to waste, either because the windmills are not connected to the energy grid or because the grid is not able to deal with the amounts of energy that need to transit. Indeed, most parts of these northern provinces with a lot of windmills are far away from the most heavily populated areas in China, located along the coast. And therefore the energy must travel hundreds of miles from its area of production to the place where it is needed. This points to a big flaw in the Chinese energy strategy. The development of the energy infrastructures should have followed the development of the wind capacity but obviously it's much slower. In 2015, the discrepancy between the wind capacity and the power that could be processed was around 34 billion kilowatt-hours, which is about what 3 million American households use up in a year. Worse, this amount represents about 15 % of the electricity produced thanks to windmills in China, and the waste is growing because in 2014 “only” 8 % of the wind electricity was lost. Since 2010, around 100 billion kilowatt-hours have been produced in vain, as much as the combined electricity production of China's two biggest hydro-electric dams in 2015. That's a lot of wasted energy for a country in which the production of electricity is a big part of the pollution issue ! And the authorities expect the issue to get even worse. The National Energy Administration stated that : "Energy waste on wind farms in China has already become a major problem impacting the healthy development of the wind power sector (…). Unless we take tougher measures to cut waste, the rate of wasted wind power will continue to get worse this year."
A missed opportunity to accelerate the reduction of coal energy
The waste of wind energy is not only due to the ill-adapted infrastructure. It can also be explained by the fact that the demand for electricity barely grew in 2015 in China with a tiny 0.5 % increase in 2015. This is much less than the Chinese expected and it's doubtless linked to the overall slowdown of the Chinese economy. The result is that China produced more electricity than it needed because it expected to need more. This should have been good news because it could have enabled China to accelerate the switch from coal-fired power plants and the transition to new sources of electricity like windmills. This was a great opportunity to close down these dirty coal plants, especially the subcritical coal-fired plants, the least efficient of the coal plants and therefore the ones that pollute the most. And China has a lot of these polluting, outdated plants. Chinese state-owned companies such as China Huaneng Group, Huadian Group, China Guodian Group or China Datang Group all rank among the companies with the most subcritical coal-fired power plants. And this coal-generated power is responsible for the dramatic air pollution that is slowly killing the Chinese people. In 2013, 1.6 million Chinese citizens died because the air was unclean, full of pollution. This slowdown of the energy demand growth was therefore a perfect opportunity to tackle the issue of coal and save the lives of countless citizens. But local interests got in the way.
The reason windmills are the ones being turned off and not the coal plants is that the coal industry still has a very big influence in China, and that in many places, coal is given the priority over renewable energies such as wind, which is the opposite of what China has pledged these last few years. Until the end of 2015, government regulations still gave coal-generated electricity a priority access to the grid which made it close to impossible for renewable energy to develop in areas where the grid is only starting to be deployed. This has changed on the national level, but locally, provincial authorities still favour coal energy and place windmills at a disadvantage. These local authorities are obsessed with short-term achievements, at the cost air quality and the health of their citizens. Against a backdrop of sinking coal prices, these coal producing provinces want to prevent their GDP from dropping too much, because it would lead to budget cuts, in part linked to the GDP figure. Furthermore, the coal industry employs about 6 million people and the local authorities are struggling to avoid massive unemployment. But these short-term gains are outweighed by the terrible cost China is paying because of coal energy. The health costs are already tremendous and will keep rising at a rate higher than 10 % predicts Deloitte. Furthermore this priority to coal energy is preventing the wind industry from developing smoothly and creating thousands of direct and indirect jobs. These provincial authorities are playing with fire because, as Gao Jin'An from the China Daily point out, it the dynamic is broken the promising Chinese sector of wind energy might never be the world leader it seemed poised to become.
The central government must be more active to meet Paris deal pledge
The central government has announced a deep change in the energy policy of the country, with a shift towards renewable and clean energies. This is a big part of the 13th Five-Year Plan for the 2016 to 2020 period. This is consistent with the pledge China made at the COP21 conference in 2015. China promised to cut coal emissions by 60 % by 2020, and to do that it will have to modernize some of its plants but also close the most inefficient one, especially the subcritical coal plants, and rely on cleaner sources of energy to meet the country's needs. The main issue in China, is to make sure that the policies decided in Beijing are followed in the provinces ! To that end, the Chinese government has issued a new regulation in November that will give clean energy a priority access to the electrical grid and make sure they are not blocked out as is often the case. The rule defines a quota of electricity of 5 % that has to be allowed to non-hydro renewables such as wind or solar. The grid operators will therefore have to make sure that at least 5 % of the electricity they process comes from non-hydro renewables. While this is a step in the right direction, it's far from being a very decisive one ! The target of 5 % is much too low : in 2013, wind, solar and biomass already accounted for 8% of the installed electric capacity in China according to the IEA. Therefore the figure should at least be 8% and should be raised regularly to account for the strong growth of renewable energies in China. Besides, the new regulations didn't define a penalty if the quota is not met by the grid operator, which is not a very good sign because local authorities will not feel compelled to follow the regulation. This brings us back to the initial decision to freeze new wind projects. This is not the sign of a strong-willed energy transition policy, it’s the sign that Beijing is still humouring the reluctant provincial authorities, at the risk of slowing down the transition that China desperately needs.