China

China’s growing energy needs are increasingly met by renewables, natural gas and electricity. The scale of China’s future electricity demand and the challenge of decarbonising the power supply help explain why global investment in electricity overtook that of oil and gas for the first time in 2016, and why electricity security is moving firmly up the policy agenda. That said, cost reductions for renewables are not sufficient on their own to secure efficient decarbonisation or reliable supply.

Between 2019 and 2024, China will account for 40% of global renewable capacity expansion, driven by improved system integration, lower curtailment rates and enhanced competitiveness of both solar PV and onshore wind. During the same period, China is forecast to account for almost half of global distributed PV growth, overtaking the EU to become the world leader in installed capacity by 2021. China is also set to lead global growth in biofuel production, given the rollout of ethanol blending in a growing number of provinces and increasing investments in production capacity.

However, China’s coal demand and production capacity remain high. Currently, one of every four tons of coal used globally, is burned to produce electricity in China. The government is pushing for emissions reductions and improved air quality by switching to gas in industrial and residential sectors, but China’s coal fleet is young, highly efficient and still ten times larger than its gas-fired fleet. At the prevailing gas prices, new onshore wind and solar photovoltaic (PV) are much cheaper ways to generate electricity than new combined-cycle gas turbines (CCGTs). Under these circumstances, the major contribution of gas-fired generation to displacing coal is likely to be an indirect one, by aiding the integration of renewables.

The policy challenge is to ensure sufficient investment in electricity networks and in a mix of generation technologies that are the best fit for power system needs. The latter can provide the flexibility that is increasingly vital as the contribution of wind and solar PV increases (reinforcing the links between electricity and gas security).

Last updated Feb 1, 2021