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Greening of China’s electric power system: 2021 update

By John A. Mathews and Carol X. Huang


China’s electric power system, now the largest in the world, continues to be a major source of strength for the country’s manufacturing system, also the world’s largest, but also a major source of carbon emissions. For the past several years we have documented the greening of China’s electric power system, focusing on the shift at the margin away from fossil fuels towards generation from water, wind and sun – from green, renewable sources. We have argued that China is doing this as a means of enhancing energy security, since the renewable sources are found within the country and the manufacture of the renewables devices is under national control. The positive impact on reducing carbon emissions is, from this perspective, a fortunate side effect.


The data for 2021 are now available from the China Electricity Council (CEC) and National Bureau of Statistics (NBS); they reveal that for the 14th year in a row China has expanded its generation of electric power from water, wind and sun both in terms of capacity (exceeding 1 trillion watts for the first time) and in terms of actual power generated. The all-important proportion of electric power capacity sourced from water, wind and sun (WWS) reached 43% in 2021, rising steadily from 20% in 2007. This implies a proportionate increase of 23% over 14 years, or more than 1.5% increase in green generating capacity each year. If this continues at the same rate (and there seem to be no obvious barriers standing in the way) then China’s electric power system will be based on green sources (WWS) for 51% of its generating capacity by 2026, i.e. within five years. This would be a momentous achievement, meaning that China’s electric power system would have become more green than black (in terms of capacity) by that date.


In terms of actual electric energy generated, China’s total reached a new high of 8, 377 TWh in 2021, of which 5,646 TWh came from thermal (coal fired) power sources and 2,323 TWh came from WWS (green) sources. This represents ten years of steady expansion of the proportion of electricity produced from WWS sources, reaching 28% by 2021, up from 17% in 2011.


No other major industrial country can match this degree of greening over recent years or its degree of consistency. The chart 1 reveals what has happened in terms of generating capacity and actual electricity generated, for comparison with earlier years as discussed in our earlier articles.

Fig. 1 Greening of China’s electric power system, 1990 to 2021



Data source: Authors’ calculation based on CEC and NBS China


Table 1 provides the full set of data, as supplied by CEC and NBS, covering the greening of China’s generating capacity, the shift towards green electricity in terms of power generated, and the levels of investment in the power generation system.

Table 1. China’s electric power sector, 2010 to 2021

1A. Installed Capacity (GW)


1B. Power Generation (TWh)


1C. Annual investment (CNY Billion)

Data Source: Authors’ calculation from CEC and NBS


Note that in terms of investment in power generation plants, the 2021 result shows that investment in WWS sources of power generation rose to RMB 432 billion (US$ 65 billion at an exchange rate of 0.15), up from RMB 157 billion in 2017, and accounting for 78% of total investment in power generating plant. This again shows the strength of the Chinese drive to green its electric power system, with a level of investment that far exceeds that of other industrial countries.


In Figure 2 we show China’s installed power generation capacity in 2021 compared with the situation in the year 2010, indicating what a substantial expansion in capacity there has been overall, and in terms of WWS sources, resulting from China’s greening policies.

Fig. 2. China’s Installed Power Capacity 2010 vs 2021

Data Source: CEC and NBS


In Fig. 3 we show results for actual power generated, revealing the steady rise of electric power generated from WWS sources, reaching 2,323 TWh by 2021, or 28% of total generation. Nevertheless Fig. 3 reveals that China’s electric power system is still largely black, with most power being generated from thermal (coal fired) sources. It is greening at the margins, but it is still a largely black system (as were the electric power systems of all major industrial powers).

Fig. 3. Annual power generation in China, 1990 to 2021

Data sources: CEC, NBS, World Bank


Looking more closely at the composition of the generating capacity added each year to China’s electric power system, we see from Fig. 4 that capacity added in 2021 was 179 GW, of which WWS sources accounted for 121 GW, or two thirds (68.3%). By contrast, thermal (coal fired) capacity added amounted to 52 GW, (29%), i.e. the green capacity added was more than double the black capacity added. This is why we can be confident in asserting that China’s greening of its electric power system can be expected to continue.

Fig. 4. China’s annual capacity additions, 1991-2021

Data source: UN and CEC


By way of international comparisons, Fig. 5 reveals the steady rise in proportion of total energy consumption sourced from WWS sources in all industrial regions. The chart reveals that the European Union (EU) countries have reached the highest level of total energy consumption sourced from WWS (18%) (given their long history of greening policies) while China is rising steadily, doubling from 7.5% in 2010 to reach 15% by 2021, with both the US and Japan reaching just 11%.

Fig. 5. Share of WWS in Total Energy Consumption, 2010 to 2021, by industrial region

Source: Authors’ calculation based on BP Energy Review 2022


The black counterpart to this picture of greening is shown in Fig. 6, which reveals the proportion of total energy consumption sourced from fossil fuels in international comparison. Here the EU has reduced its dependence on fossil fuels (FFs) from 77% in 2010 down to 70% in 2021, as world leader, while China has steadily reduced its dependence on FFs from a high of 92% in 2010 down to 82% in 2021 – a better result than that achieved by Japan (85%) and catching up with the US (81%).

Fig. 6. Share of fossil fuels in total energy consumption, 2010 to 2021, by industrial region

Source: Authors’ calculation based on BP Energy Review 2022


When looking more closely at China’s record of coal burning in electric power generation, we see that the pace of reduction has slackened in recent years, as coal burning has increased to keep pace with expanded energy generation and consumption. Fig. 7 reveals that thermal power generation exceeded 5000 TWh in 2021 for the first time, resulting in the burning of more than 2000 tonnes (2 Gt) of coal in power plants and more than 4.2 Gt coal in industry overall. This is another indication of how black the energy system in China remains, even as it greens at the margin.

Fig. 7. Coal Power Generation and Consumption in China (1980-2021)

Data Source: CEC, NBS and BP Energy Review


Compared with the year 2020, China’s 2021 coal consumption increased overall by 4.6% reaching 4.2 billion tons.[1] During the last decade, the share of coal in China’s total energy consumption has been decreasing from 71% in 2011 to 55% in 2022, which is still much higher than Japan’s 27% and US and the EU’s at 11%. In terms of the share of all fossil fuels (oil, gas and coal) in total energy consumption, China has 83% in 2021, second to Japan’s 85% and higher than US’s 81% and European Union’s 70%.


The 2021 power shortage has only reinforced China’s policy direction that burning fossil fuel is unsustainable. Economically, coal power generators faced continuing pressure to reduce their level of coal consumption. The government kept electricity prices low for social stability but the coal prices increased sharply from supply shortage. Coal power plants lost more than RMB 0.1 for every kWh of electricity they generated (or RMB 100 for every MWh of electricity generated) (BBC news, 2021; Xinhua Net, 2021).


In our view, China cannot resolve this dilemma by increasing coal production. In the past few years, the domestic coal supply reform and the latest carbon emissions target have been continuously suppressing coal production capacity, and closing high-polluting and low-efficiency coal mines (Liu, G-R, 2021).


The 2021 power shortage resulted from the central government’s determination to implement its “Dual Control”, i.e. the controls over energy intensity of GDP (also known as energy consumption per unit of GDP), and total energy consumption. This policy has incorporated energy-saving indicators into the provincial governments’ KPIs since 2015 (Hu, X-H and Jiang H-Z, 2021).


In August 2021, the National Development and Reform Commission issued high-level warnings to the provinces of Jiangsu, Guangdong, Yunnan over their coal consumption. The provinces subsequently switched off or rationed power to catch up with their control targets (BBC news, 2021).


The 14th Five Year Plan

China follows a planned and rational program of switching from fossil fuels to clean, renewable energy through its sequence of Five Year Plans. The latest such plan, the 14th FYP, covers the years 2021 to 2026. Like its previous plans, the 14th FYP has a central goal to reduce energy intensity of GDP, in this instance down to 13.5%. To achieve this result, China will need to support an annual growth rate of 5% in GDP with only a 2% annual growth rate in energy intensity. The principal means through which the Chinese leadership intend to achieve this is through raising the level of electrification of China’s industry, transport and domestic sectors. The target is to accelerate the expansion of renewable energy in its power generation, expedite energy electrification, push the transformation and upgrading of the high-energy-consuming industries such as iron and steel, nonferrous metals, construction materials, and chemicals (Li, M-J, 2022). The aim, as spelt out in the 14 FYP, is that the share of electricity in total energy consumption should rise from a projected 35% in 2025 to a projected 90% in 2060 – making China by far the most electrified of the major industrial powers by that time. This ultra-electrification strategy provides the foundation for China’s continued greening.

Fig. 8 China’s accelerating electrification, 2025 to 2060 (projected)

Source: authors, adapted from Yin Z-S, Huang S-B and He L, 2022 at https://finance.sina.com.cn/stock/stockzmt/2022-06-12/doc-imizmscu6360224.shtml


The 14 FYP reaffirms China’s commitment to long-term intensification of its switch to renewable energy and the shift away from fossil fuels. This has been emphasized in both the 14 FYP document itself and in subsequent events such as the Central Economic Work Conference staged at the end of 2021, where renewed emphasis was placed on renewable energy substitution. The Government Work Report 2022 reiterated the importance of constructing large-scale wind and solar farms and improving the grid's ability to absorb renewable energy (Huang, D-Z, 2022).


The 14 FYP has also substantiated the acceleration of the substitution of fossil fuels by renewable energy. According to the plan, China’s renewable energy development will be characterised four features: large scale installation; rapid increase in clean power consumption; more market-oriented expansion (less subsidies), and high stability and reliability.


RE development in the 14 FYP will focus on building up wind and solar generation capacity as well as promotion of downstream industries like green hydrogen. In Table 2 we discuss these targets, drawing on the Chinese literature and making the results published therein available to the English speaking world for the first time.

Table 2. Targets of Renewable Energy Development in the 14th Five-Year Plan (2021 – 2026)

Source: Authors based on NDRC (2022) and Yin Z-S, Huang S-B and He L, 2022


The targets outlined in the 14 FYP are aligned with China’s announcement that its installed capacity of wind and solar power will exceed 1,200 GW (1.2 TW) by 2030 to achieve the carbon neutral target to peak CO2 emissions before 2030. Note that installed capacity of generating equipment utilizing WWS sources reached 1 TW for the first time in 2021.


Based on the construction plans of the major power generators and the provinces’ 14th Five-Year Plans, the target of 1,200 GW is very likely to be achieved before 2030. By now, the installation plans released by 14 state-owned power generators have amounted to over 623 GW (Shui, Q-M, 2022). A total of 24 provinces planned to add 649 GW, which represents a growth rate of 143% during the 14 FYP period (Zhongtai Securities, 2022).


Results to date

By the end of 2021, the first year of the plan period, 41% of the solar and onshore wind target (304 GW) had been installed in the nine clean energy bases and 33% of the offshore wind target (26 GW) had been installed in the 5 offshore wind power bases (Yin Z-S, Huang S-B and He L, 2022). In the first half of the year 2022, no less than 53GW of WWS capacity had been installed, representing 81% of the total newly added capacity (Fig. 8).

Fig. 9. Newly installed generating capacity in China, 1H 2022

Data Source: authors’ calculation based on CEC report (https://cec.org.cn/detail/index.html?3-311529)


Vzkoo.com (未来智库), a Chinese thinktank, estimated that the cumulative installed capacity of wind and solar would reach 1,150 GW in 2025 and 1,710 GW (1.7 TW) in 2030 (Yin Z-S, Huang S-B and He L, 2022), exceeding the 1,200 GW target by 42.5%.


Transmission

China’s greening of its electric power system is not confined to investing in WWS sources for power generation. It also encompasses investing in upgrades of the grid’s transmission system, utilizing China’s own Ultra High Voltage (UHV) technology which enables the grid to carry high levels of renewable power across vast distances. UHV will remain the focus of grid investment in the 14 FYP, indicating that the grid technology is here to stay in China. The investment in UHV projects is proposed to reach RMB 450 billion (equivalent to USD 67.5 billion at an exchange rate of 0.15), a 30% increase from the RMB 346.2 billion (USD 51.9 billion) in the "13th Five-Year Plan" period. There are 12 UHV channels planned with a distribution capacity of 120 GW of WWS power (Yin Z-S, Huang S-B and He L, 2022). In 2022, State Grid refreshed its plans to construct 13 UHV lines (10 AC and 3 DC). The construction of six lines had been started by April 2022 (CEC, 2022a). It is worth noting that China stands alone amongst leading industrial powers in its drive to upgrade the grid with UHV technology, providing an insight into the degree to which its greening strategies are now based on innovation rather than imitation.


Future prospects for the greening of China’s electric power system

Based on the results reported so far, as outlined in this article, we are confident that China will continue to green its electric power system, accelerating the switch-over from fossil fuels (mainly coal) to renewable energy sources based on water, wind and sun (WWS). We see this as a smart move for China as it increases the level of electrification of its economy and reduces its dependence on burning of fossil fuels for its energy supplies. The process of reducing dependence on coal involves a major economic and social revolution as established companies and communities based on coal are forced to switch over to renewables, something that cannot be pushed too hard. But the more that China drives its greening of electric power the greater its protection of energy security, promising to leave the “Wild West” era of fossil fuel dependence behind it. This is the essence of China’s modernization, which promises to be based on clean and green energy.


References

BBC News, 2021. Three reasons for China's daily life impacting power outages (中国拉闸限电冲击居民生活 背后三个原因), at https://www.bbc.com/zhongwen/simp/chinese-news-58707959


Beijixing Storage Net, 2022. 39.7GW in 12 provinces and cities! The "14th Five-Year" energy storage planning target disclosed (12省市39.7GW!“十四五”储能规划目标来了), at: https://news.bjx.com.cn/html/20220520/1226924.shtml


CCTV Net, 2021. Why power switched off? Experts explain key issues (为何“拉闸限电”?专家解读几大焦点问题), at: https://china.chinadaily.com.cn/a/202109/29/WS61545dbca3107be4979f0a00.html


CEC, 2022a. Operation overview of the power industry (January to May 2022) (2022年1-5月份电力工业运行简况), at: https://cec.org.cn/detail/index.html?3-310428


CEC, 2022b. Operation overview of the power industry (January to June 2022) (2022年1-6月份电力工业运行简况), at: https://cec.org.cn/detail/index.html?3-311529


Hu, X-H and Jiang H-Z, 2021. Seven key issues on power outage (“拉闸限电”七大焦点解读), at: https://m.in-en.com/article/html/energy-2307978.shtml


Huang, D-Z, 2022. From "dual control over energy consumption" to "dual control of carbon emission": has the wind direction of new energy changed? (从“能耗双控”转向“碳排放双控”,新能源的风向变了吗?), at: http://finance.sina.com.cn/zl/china/2022-03-08/zl-imcwipih7226478.shtml


Li, M-J, 2022. Technology upgrade under "Dual Control over Energy Consumption" (“能耗双控”背后的技术升级), at: https://www.bbtnews.com.cn/2022/0419/434683.shtml


Liu, G-R, 2021. Power rationing did more harm than benefits in long run, and returning to market is the best way to energy-saving and emission reduction (拉闸限电长期弊大于利,回归市场才是节能减排的最佳出路), at: https://m.yicai.com/news/101201652.html


NDRC, 2022. Renewable Energy Development Plan in the "14th Five-Year Plan" (“十四五”可再生能源发展规划), at: https://www.ndrc.gov.cn/xwdt/tzgg/202206/P020220602315650388122.pdf

(National Development and Reform Commission)


Shui, Q-M, 2022. Targeting 623GW! The "14th Five-Year" new energy plan of 14 state-owned enterprises and the achievement of the first year (目标623GW!14家央企“十四五”新能源规划及首年“成绩单”), at: https://guangfu.bjx.com.cn/news/20220117/1199673.shtml

Xinhua Net, 2021. Why power switched off or rationed? Can subsequent power supply be guaranteed? (多地为何“拉闸限电”?后续电力供应能否保障?), at: http://www.xinhuanet.com/energy/20210929/8bd30b38ba304dd39f2ca1ae04b8b0f2/c.html


Yin Z-S, Huang S-B and He L, 2022. New Energy Bases Accelerate UHV Construction: a special report on UHV of power equipment industry: (电力设备行业特高压专题报告:新能源大基地加速特高压建设), Everbright Securities. At: https://finance.sina.com.cn/stock/stockzmt/2022-06-12/doc-imizmscu6360224.shtml


Zhongtai Securities, 2022. Wind and solar in "14th Five-Year Plan": 24 provinces plan to add 649GW of installed capacity (“十四五”风电、光伏规划梳理:24 省规划新增装机 649GW), at: https://pdf.dfcfw.com/pdf/H3_AP202205091564469437_1.pdf?1652095193000.pdf

[1] See http://www.stats.gov.cn/tjsj/zxfb/202202/t20220227_1827960.html and https://mp.weixin.qq.com/s/HGy9pIlUT6g4YhFYfWJEmA

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