Challenges to China’s Transition to a Low Carbon Electricity System Fritz Kahrl, UC Berkeley, E3 Ding Jianhua, E3 Jim Williams, E3 Hu Junfeng, North China.

Challenges to China’s Transition to a Low Carbon Electricity System

Fritz Kahrl, UC Berkeley, E3Ding Jianhua, E3Jim Williams, E3

Hu Junfeng, North China Electric Power University

China’s Power Sector is the World’s Largest CO2 Emitter

Energy-Related CO2 Emissions, Global and Chinese Power Sector

Source: IEA, 2009

China has Ambitious Goals for Renewable Generation Capacity

2009 Capacity

Existing Target

Proposed Target

Hydropower 196 GW 300 GW 300 GW

Wind 18 GW 30 GW 150 GW

Solar 0.3 GW 1.8 GW 20 GW

Biomass 1.1 GW 30 GW 30 GW

Sources: 2009 capacity is from CEC (2010). Existing and proposed targets are from Martinot (2010).

2009 Capacity, Existing and Proposed Targets for Renewable Capacity

PlanningInvestmentDispatchPricing

Regulation

Centrally Planned:Coal-fired

Generation Serving Industrial Loads

Post-Planned:Diverse Generation

Sources Serving Diverse Loads

An Incomplete Transition

China’s Electricity System is Relatively Expensive

Sources and Notes: China data are from SERC (2010); U.S. data are from EIA (2010).

Average 2009 Retail Electricity Prices in China and the U.S., Ranked by Province/State in Ascending Order

Industry Dominates Load

Source: Data are from CEG (2008).

Shares of Electricity End Use by Sector, China, 1980-2006

Forecasted Demand Growth in China is still High

2009 Actual and High/Low Forecasted 2020 Electricity Demand, China and U.S.

Sources: China “2009 Actual” is from SERC (2010); “2020 – Low Forecast” is from IEA (2009); “2020 – High Forecast” is from Zhang (2009). For the U.S., all data are from EIA (2010).

An Evolutionary Moment for China’s Power Sector

High forecasted growth

Structural shifts in demand

Growing environmental awareness and regulation

Rising wholesale and retail energy prices

Reducing Demand Growth is Key for Reducing Share of Coal

Shares of Coal and Non-Coal Generation, 2009 and Low and High Demand Growth Scenarios for 2020

Regional Power Grids in China

Western Inner Mongolia Power Grid (WIMPG)

State Grid: Northwest, Northeast, North, Central, EastSouthern Grid: South

Summary

Reforms in planning, investment, dispatch, pricing, and regulation are precondition for power sector decarbonization in China

Without capacity to better manage and allocate costs, will be difficult to meaningfully increase share of renewable generation in China

Progress possible through incremental improvements in institutional planning and regulatory capacity

Soft technology transfer in electricity sector management should be priority area in OECD-China climate policy dialogue