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The Complexities of Decarbonizing China’s Power Sector
August 27, 2010 By Wilson Center StaffOver the past year, there have been a series of new initiatives on U.S.-China energy cooperation. These initiatives have focused primarily on low-carbon development, and have covered everything from renewables and energy efficiency to clean vehicles and carbon capture and storage. Central to the long-term success of these efforts will be strengthening the U.S.’s incomplete understanding of China’s electricity grid, as all of the above issues are inextricably linked to the power grid itself.
As both the United States and China try to figure out how to decarbonize their power sectors with a mixture of policy reform and infrastructure development, China’s power-sector reforms could present valuable lessons for the United States. At a China Environment Forum meeting earlier this summer, Federal Energy Regulatory Commission (FERC) Chairman Jon Wellinghoff joined power sector experts Jim Williams, Fritz Kahrl, and Ding Jianhua from Energy and Environmental Economics (E3) to address the subject, discussing gaps related to electricity sector analysis and presenting research on decarbonizing China’s electricity sector.
Addressing Shared Challenges
Chairman Wellinghoff kicked off the presentation with an overview of the similarities and differences in the U.S. and Chinese power sectors. Wellinghoff stressed that both countries face common obstacles in expanding renewables, namely that wind- and solar-energy sources are located inland, far away from booming coastal cities where energy demand is highest. He added that market and regulatory incentives to integrate renewables into grids are currently insufficient.
However, Wellinghoff also made the point that each side has comparative advantages. For instance, while China has superior high-voltage grid transmission technologies, the United States has been developing advanced demand-side management practices and markets to spur energy efficiency and renewable integration in the power sector. Wellinghoff argued that mutual understanding of each others’ power sectors is important for trust-building and effective cooperation, and can result in net climate and economic benefits for both sides.
Achieving these benefits will not be easy. E3’s Jim Williams noted that the Chinese power sector is currently in transition, a process that is producing some increasingly complicated policy questions. How these questions are answered has the potential to drastically shift the outlook for China’s carbon emissions. For instance, if the United States can help push China’s power sector to become less carbon-intensive, there could be substantial benefits for lowering global greenhouse gas emissions.
One of the major issues at the moment is assessing the cost-benefit analysis of renewable and low-carbon integration and trying to ascertain what the actual cost of decarbonizing the power sector would be. Due to a lack of “soft technology” — analytical methods, software models, institutional processes, and the like — policymakers in China still do not have a good sense of what level of greenhouse gas reductions could be achieved in the power sector for a given cost.
More Intensive Research Needed
Fritz Kahrl and Ding Jianhua, also from E3, went on to explain that for China, as with the United States, the underlying issues of how to decarbonize the power sector will demand considerable quantitative analysis. The United States has more than three decades of experience with quantitative policy analysis in the power sector, driven in large part by regulatory processes that require cost-benefit analysis. In China, policy analysis in the power sector is still at an early stage, but there is an increasing demand among policymakers for this kind of information.
For instance, over the past five years, China’s government has allocated significant amounts of money and attention to energy efficiency. However, standardized tools to assess the benefits and costs of energy efficiency projects are not widely used in China, which has led to a lack of transparency and accountability in how energy efficiency funds are spent. This problem is increasingly recognized by senior-level decision-makers. Drawing from its own experience, the United States could play an important role in helping Chinese analysts develop quantitative approaches for power sector policy analysis.
Pete Marsters is project assistant with the China Environment Forum at the Woodrow Wilson Center.
Photo Credit: “Coal Power Plant (China),” courtesy of flickr user ishmatt.
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