Thu, Jan 11, 2018 - Page 8 News List

The promises of a ‘green’ economy

By Adair Turner

Many recent visitors to Beijing have been pleasantly surprised by blue skies rather than smog. In part, the cleaner air reflects heavy-handed policies: Polluting factories have been moved away from the capital and other major cities, and coal-fired heating systems have sometimes been closed down before alternative gas facilities have been put in place.

However, the change in Beijing also reflects China’s understanding that a truly “green” economy promises not only to improve quality of life, but also to create enormous opportunities for technological and political leadership.

China is the world’s largest greenhouse gas emitter, accounting for more than 25 percent of the global total. Even in per capita terms, it has just overtaken the EU average, while still at only half the US level.

This reflects an electricity system based 70 percent on coal, as well as China’s global leadership in heavy industries such as steel, cement and chemicals. However, China is already by far the biggest investor in wind and solar power, and is now canceling plans for further coal investment.

As China builds a low-carbon economy, it also enjoys a massive resource advantage.

A report by the International Energy Agency (IEA) includes a color-coded map showing which areas of the world have the most wind and solar resources. The largest lies in China’s sparsely populated western provinces of Tibet, Qinghai and Xinjiang, as well as Inner Mongolia.

In principle, covering just 5 percent of that total land area in solar panels could supply China with 6,000 terawatt hours of electricity per year, meeting its entire electricity demand — the wind resource is also massive.

Auctions in similarly favorable areas — such as northern Chile and Mexico — have produced bids to supply solar power at less than US$0.02 per kilowatt hour, with wind below US$0.025. Chinese power investors, in both solar and wind, are certain that within the next 10 years they could deliver renewable power to China’s booming coastal regions at a price well below prices for coal-generated electricity.

Of course, that would require massive investment: China’s National Energy Administration has announced a plan to spend US$360 billion on renewable power by 2020.

However, relative to China’s total savings and investments of more than US$5 trillion per year, and a banking system with total assets over US$30 trillion, this level of spending is easily manageable.

As China builds a low-carbon power system, it will reap a major industrial advantage. With lower costs for renewable electricity, the IEA report says, hydrogen could be produced more cheaply as well, via electrolysis rather than from methane reforming, creating huge opportunities for the decarbonization of steel, fertilizer and chemical production, and for the use of green hydrogen in long-distance trucking and shipping.

In a global zero-carbon economy, the logical location to base industrial production will be where wind and solar power is cheap.

Chinese companies already play a huge role in all the major technologies needed to power the green economy, including photovoltaic panels, wind turbines, batteries and the systems required to manage the interaction of intermittent electricity supply and time-varying demand.

Support for green technologies also features prominently in the Made in China 2025 program, which aims to push Chinese manufacturing to world-leading scientific and technical standards.

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