The Contribution of Nuclear and Wind Energy to China’s Energy
Security Strategy: The Case of Guangdong
Master of Science (MSc) Research Project: The Political Economy of Energy 2019/2020 Political Science (Political Economy Specialization)
Author: Tiarna Mulvenna UvA-ID: 12778117
Date of Submission: 5th June 2020 Supervisor: Dr M. P. Amineh Second Reader: Dr. H. Houweling
Table of Contents
Acknowledgements 5
Abstract 6
Maps 7
List of Tables, Figures and Maps 9
List of Abbreviations 11
Chapter 1: Research Design 12
1.1 Introduction 12
1.2. Literature Review 13
1.3. Theoretical Framework and Concepts 18
1.4.1. Geopolitical Economy 19
1.4.2. Multi-level Perspective 21
1.5. Argumentation and Hypotheses 23
1.6. Data and Methods 25
1.6.1. A brief note on Methodological Rigour 26
1.7. Structure of the Thesis 26
Chapter 2: China’s Economy and Energy Portfolio 28
2.1. Introduction 28
2.2. China’s Economy 28
2.2.1. Macroeconomic Indicators: GDP, Unemployment Rate & Inflation Rate 30
2.3. China’s Energy Portfolio 34
2.3.1. Production and Consumption of Fossil Energy in China 35
2.3.2. China’s Energy Trade 38
2.4. China’s Clean Energy Portfolio 39
2.5. Conclusion 41
Chapter 3: China’s Energy System 42
3.1 Introduction 42
3.2 Reforms to China’s Power System 42
3.2.1. Pre-2002 42
3.2.2. 2002 43
3.2.3. Post-2002 47
3.3. China’s Nuclear Energy Sector 51
3.3.1. China’s Nuclear Energy Policies 52
3.3.2. China’s Nuclear Energy Market 53
3.4. China’s Wind Energy Sector 54
3.4.1. China’s Wind Energy Policies 55
3.4.2. China’s Wind Energy Market 58
3.5. Discussion 60
Chapter 4: Wind and Nuclear Energy Utilization in Guangdong 64
4.1. Introduction 64
4.2. Guangdong’s Economy 65
4.2.1. Macroeconomic Indicators: GDP, Unemployment Rate & CPI 67
4.3. Guangdong’s Energy Portfolio 69
4.3.1. Energy Production and Consumption in Guangdong 69
4.3.2. Guangdong’s Clean Energy Transition 72
4.4. Considerations for the Utilization of Nuclear and Wind Energy in Guangdong 75
4.4.1. Political 75
4.4.2. Environmental 75
4.4.3. Economic 77
4.4.4. Technological 78
4.5. Political Economic Environmental Technological (PEET) Framework 82
4.6. Conclusion 82 Chapter 5: Conclusion 84 Bibliography 88 Books/Book Chapters Peer-Reviewed Journals Primary Sources
Media/Newspapers & Online Resources
Appendix 1: Dataset for graph 3.5 101
Appendix 2: M. Biji Interview 102
Acknowledgements
First and foremost, I would like to express my gratitude to Dr. Mehdi P. Amineh for assisting me to carry out my research, his expertise and guidance was essential to the production of this thesis. I would also like to thank the second reader of this text, Dr. Henk Houweling for his time and comments.
I would like to thank my family who have motivated me to work to the best of my ability during this intense period of research. Especially to my parents for always supporting me. And, to my friends, Eimear and Fionnuala, for their morale and assistance. To my fellow classmates, and to Sarah and Nemanja, I sincerely value the advice and input regarding my work. I am grateful to live in a world of technology whereby I could independently arrange interviews for research via LinkedIn with actors involved in China’s energy sector – I am appreciative of the time given to me from interviewees. I would also like to thank myself for working multiple jobs outside of university to independently fund this master’s programme and for writing a thesis during quarantine. Lastly, my love goes out to my dog, Fearless, for keeping me happy during long days of work.
Abstract
The following thesis compares the contribution of wind energy and nuclear energy to China’s long-term energy security strategy. A theoretical lens combining Geopolitical Economy and Multi-Level Perspective theory utilizes the concepts of the ‘energy scarcity model’, ‘centralized-state-society complex’ and ‘socio-technical regime’ to analyse the development of wind and nuclear energy in China and within Guangdong. This thesis provides a holistic account of the benefits and drawbacks of the continual investment into nuclear energy and the rise of wind energy. The following analysis considers political, environmental, economic and technological forces at both the national and provincial level in China. The main line of argument proposed in this research is that, the growth of renewable energy in China is unprecedented and poses great potential to provide energy in the long-term. However, China cannot neglect nuclear energy in the interim because it plays a key role in China’s clean energy mix and it is indispensable for China’s transition from a fossil energy to a clean energy economy.
Maps
Map 1: Map of China
Map II: Map of Guangdong Province. Source: Chinasage, 2014.
List of Maps, Figures and Tables
Maps
Map I: China 7
Map II: Guangdong Province 8
Map 1.1: Distribution of the population in China (2018) 29
Map 2.2: China’s wind power installation by province in (2014) 58 Map 4.1: Population distribution in cities within the Pearl River Delta compared with 67 modern-day metropolitan areas in North America and Europe
Figures
Figure 1.1: Multi-level Perspective theory on energy transitions 22 Figure 2.1: Graph of China’s GDP (current $US): 2002-2018 31
Figure 2.2. China’s GDP growth (annual %): 2002-2018 31
Figure 2.3: Graph of China’s GDP per capita (current US$): 2002-2018 32 Figure 2.4. China’s unemployment rate (% of total labour force) 2002-2019 33
Figure 2.5: Chinas inflation (Annual %) 2002-2019 34
Figure 2.6: Total Primary Energy Supply (TPES) by source, PRC, 1990-2017 36 Figure 2.7: Total Primary Energy Consumption (TPEC) (%) by Source in China (2018) 36
Figure 2.8. Chinas total energy imports, 2017 38
Figure 2.9. China’s energy-related CO2 emissions, 1980-2015 39 Figure 3.1. Transmission Asset Structure of China’s Main Power Grid Operators (2002) 45 Figure 3.2: Chinese growth model, before the crisis and in the wake of the crisis 49 Figure 3.3 Selected components of China’s energy bureaucracy 50 Figure 3.4. Main government and corporate actors in China’s nuclear power sector 54 Figure 3.5: Electricity generation capacity of wind & nuclear Energy (China), 2002-2018 56 Figure 3.6: Top 10 developers and manufacturers of wind installations in China (2017) 59 Figure 4.1: GDP (per capita) and GDP total in Guangdong (2002-2018) 68 Figure 4.2: Unemployment Rate in Guangdong’s Urban Area (2002-2018) 68 Figure 4.3: Consumer Price Index of Guangdong Province (2002-2018) 69 Figure 4.4: Final Consumption of Electricity in Guangdong (01/01/2002 – 01/12/2017) 70 Figure 4.5: Energy consumption (%) by province in China, 2016 71
Figure 4.6: Energy consumption in Guangdong (2016) 72
Figure 4.8: Guangdong’s energy mix (2015). 75 Figure 4.9: Project development timeline for a typical offshore wind project in Europe 79 and China.
Tables
Table 3.1. The asset distribution of China’s ‘big five’ electricity generating companies 45 Table 4.1. China’s Offshore Wind Market - Provincial Breakdown 74 Table 4.2: Water consumption of conventional power plant and renewable energy-based 76 sources.
Table 4.3: Key assumptions: US Congressional Budget Office Reference Scenario (2008) 80
Table 4.4: Nuclear power technology pathway in China 81
List of Abbreviations
BP: Beyond Petroleum b/d: barrels per day
CCCPC: Central Committee Communist Party China
CO2: Carbon Dioxide
CGN: China General Nuclear CPC: Communist Party of China CPC: China Power Corporation CNNC: China National Nuclear Corporation
CWEA: Chinese Wind Energy Association EB: National Energy Bureau
EKC: Environmental Kuznets Curve ELG: National Energy Leadership Group FYP: Five-Year Plan
GBA: Greater Bay Area
GDP: Gross Domestic Product GHG: Greenhouse Gas Emissions GW: Gigawatt
GWEC: Global Wind Energy Council GWh: Gigawatt-hour
IAEA: International Atomic Energy Agency
IEA: International Energy Agency IPE: International Political Economy IR: International Relations
IRENA: International Renewable Energy Agency
ktoe: Kilotons of Oil Equivalent
LCOE: Levelized Cost of Electricity MLP: Multilevel Perspective Theory MW: Megawatt
NEA: National Energy Association NEC: National Energy Commission NOX: Nitrogen Oxide
NPP: Nuclear Power Plant
OECD: Organisation for Economic Co-operation and Development
PRC: People’s Republic of China PRD: Pearl River Delta
RAP: The Regulatory Assistance Project RE: Renewable Energy
REL: Renewable Energy Law SASAC: State Asset Supervision and Administration Commission
SEO: State Energy Office
SERC: State Electricity Regulatory Commission
SOX: Sulphur Oxide
SPC: State Power Corporation
SPIC: State Power Investment Corporation tce: Tons of Coal Equivalents
TPEC: Total Final Energy Consumption TPES: Total Primary Energy Supply TWh: Terawatt-hour (1000GWh) USD: United States Dollar
WTO: World Trade Organization YOY: Year on Year
Chapter 1
Research Design
1.1. Introduction
The damage done by climate change will be severe, widespread and harmful; the effects are already being felt by countries across the globe. The impacts of climate change pose wide-ranging consequences for political, environmental, economic, social progress; thus, the mitigation of these impacts stands as an international priority. The burning of fossil fuels, such as coal oil and gas, have a direct and significant impact on climate change by means of increased greenhouse gas emissions (GHG). Two years after the death of the communist leader of China, Mao Zedong, new leader Deng Xiaoping opened up China’s economy to the outside world with the aim of transforming China’s agricultural economy into an industrial one; on which it could build productive powers. The economic development of the Peoples Republic of China (PRC) since 1978 is unprecedented in history, millions of people in China have been lifted out of poverty and China has slingshot itself to a position of global leadership; altering international geopolitics. China’s economic development would have been impossible without the use of fossil fuels. Fossil fuels form the basis of modern industrialization and the continual use of them to power economies contributes substantially to increased levels of GHG; intensifying the impacts of climate change.
China, now an economic powerhouse, requires a lot of energy to maintain persistent, strong economic growth. China is not naturally endowed with primary energy resources to support its economy domestically, therefore, China relies on heavily on energy imports from other countries. Energy security is defined as a reliable and adequate supply of energy at reasonable prices with minimal harmful impact on the environment. The supply of energy to China from other regions is crucial to China’s energy security strategy, however, China’s energy supply security is beyond the scope of this research. The objective of this thesis is to examine the ways in which China can enhance energy security at the domestic level, through the development of clean, self-sufficient energy sources. China is currently in the process of transitioning from a fossil energy economy to a ‘cleaner’ energy economy through the development of energy sources that emit no GHG into the atmosphere during production processes and are largely self-sufficient. Therefore, the forthcoming thesis assesses the contribution of two clean energy
sources in China. A comparative framework is adopted to compare the contribution of clean, non-renewable, nuclear energy and clean, renewable, wind energy. This analysis is considerate of the great urbanization movement in China and the development of highly industrialized regions along China’s eastern coastline and Great Bay Area (GBA). Therefore, a selected focus is placed on energy transition in Guangdong province. China’s industrialized cities are major contributors to China’s high GHG, therefore, energy security solutions should be directed to these areas. Additionally, China’s cities are hubs for innovation and clean energy development that can act as pilots for energy transition in China. A focused provincial study effectively assesses the political, environmental, economic and technological pros and cons of established, active nuclear and wind energy industries in Guangdong province which China can learn from to implementing energy transition in other industrialized or industrializing provinces.
China’s concerns for energy security, climate change, economic growth and the development of self-sufficient clean energy sources cumulate to inspire an answer for the overarching research question:
Is persistent investment into nuclear energy a beneficial strategy for China to guarantee energy security in the long run? Is investment in wind energy a more beneficial strategy?
1.2. Literature Review
The following literature review serves two functions. First, to inform on how China directs energy transition. Second, to highlight how China can optimize energy security through the development of wind and nuclear energy. Through careful review and relay of existing scholarly work, it is clear that this thesis produces a socially relevant and unique comparative study on the contribution of wind and nuclear energy to China’s energy security strategy. Research specifically considering the contribution of nuclear energy to China’s energy security strategy, hedged against that of a renewable energy source, in this case – wind, is understudied in academia. The following section divides academic work thematically: energy transition in China, nuclear energy in China and wind energy in China.
Energy transition in China
China’s energy transition and the development of clean, renewable and non-renewable energy sources is a common topic within energy studies. Scholars acknowledge how technological change and industrialization have shaped the external global demand for energy which is, in
turn, being reshaped by China’s rise as a global power (Amineh & Houweling, 2007; Amineh & Guang, 2018). Studies have extended this focus to observe how “China’s… economic growth has made access to adequate energy supplies an increasingly important priority (Downs, 2006, p. 1). Scholars highlight how the governance of energy transition in China must be addressed (Cunningham, 2008) because of the instrumental role of the Chinese State in policymaking to promote energy transition (Zhou, Levine & Price, 2010). Therefore, the role of state and non-state actors, and their impact on energy transition is acknowledged. It is highlighted that the deployment of RE in China is highly dependent on effective long-term governance policies and consistent regulation (Schroeder 2009). Others highlight the role of industrial interest groups and corporations in the renewable energy policy process (Shen, 2017; Schmitz 2016). For example, through providing market data and information to policy makers (Deng & Kennedy, 2010). Studies of the direction of energy policy in Guangdong province note how “the national private sector, which is particularly active in Guangdong, is beginning to claim a representative position” (Arvanitis & Jastrabsky, 2006, p. 14). The debate as to whether the private sector in China is gaining a greater traction in policymaking processes or a rebuttal of this argument to state that China’s state retains the overpowering authority is elaborated in section 3.5.
The analysis of China’s governance style and its subsequent shaping of energy markets prompts recommendations from research to suggest ways in which China can improve its domestic energy security strategy. Yao & Chang (2014) pay homage to economic and technological dimensions of energy security in China. They suggest that “two urgent considerations the Chinese government must take are: (1) seek as many and as diverse energy and supplies as possible and (2) reduce carbon dioxide emissions as much as possible” (p. 602). Nee and Matthews (1996) argue that “interdependent changes in state policy and regulation, economic institutions (i.e. markets, property rights, and contracts), and informal norms and social networks that embed economic action [are at the root of the necessary institutional change and societal transformation for energy transition in China]” (p. 403). Existing literature on China’s energy situation, has argued that a lack of governmental coordination and lack of consistency in policy has hampered the progress of China’s energy transition (Zhang et al., 2007; Ma et al., 2010), prompting review of energy policy.
Nuclear energy in China
The literature produced on the role of nuclear energy in China is categorised here into challenges and opportunities. Wang (2018) cites the major barrier to developing nuclear energy in China in large upfront construction costs of nuclear power plants. The problem with expensive nuclear energy development is echoed by Fairley (2018) who argues that “China’s nuclear sector is succumbing to the same problems affecting the West: the technology is too expensive, and the public doesn’t want it”. Zhou & Zhang (2010) provide different challenges to the development of nuclear energy, listing China’s shortage of uranium reserves, nuclear technology diversity and weak market competitiveness as major barriers. Yi-chong (2010) argues that the challenges to nuclear energy development in China stem from governance processes; a history of “inconsistent, contested and fragmented” policies have plagued positive development of the industry (p. 8), a view echoed by Zhou et al. (2011) acknowledging lack of transparency in China’s nuclear energy policymaking process, lagging public participation, inadequate nuclear workforce, and a need to strengthen the nuclear safety and security culture in China for more effective development of nuclear energy. Andrews-speed (2020) writes in a similar vein, acknowledging challenges of lagging public support for nuclear energy and cites this directly in a lack of public participation for the planning of nuclear power plants. The most convincing arguments are those which dictate the incremental role of policy is as a directing force in nuclear energy development. Studies that focus on public acceptance are indeed valid, however, as China is not a democracy, the public have little say in the development of nuclear energy in China. Stockamann & Gallagher (2011) argue that the Chinese central government provide sophisticated messages to serve the interests of the state. Wang, Li, and Li (2011) find that “pro-nuclear arguments were more frequently presented [in China’s media] than anti-nuclear arguments” (p. 220). State control of the media in China can sway public opinion towards favouring of nuclear energy development. For this reason, social considerations for the utilization of nuclear and wind energy are excluded from extensive examination in this thesis.
Regardless of aforementioned challenges to nuclear energy’s contribution to China’s energy security strategy, a lot of research has highlighted the potential of nuclear energy; advising on how China can optimize nuclear energy within its energy mix to help meet current energy demand and limit the effects of global warming. Xu, Kang and Yuan (2018) acknowledge high investment costs and weak market competitiveness as barriers to nuclear energy development in China. However, their study finds that the LCOE (levelized cost of electricity) of third
generation nuclear power technology will become competitive with coal power in 2030. Guo & Guo. (2016) suggest that “China will probably set nuclear power as the foundation of power generation system result from its cost advantage and increasingly mature technologies” (p. 1000). The IAEA (n.d.) argues that the nuclear fuel cycle must be revised in order to allow nuclear energy to become a widely used energy source, long term. “Concerted efforts are needed, for example, to increase sustainable uranium production; to better utilize uranium resources; to improve nuclear fuel performance; and to properly manage spent fuel through long term storage as well as reprocessing and recycling” (p. 8). Therefore, nuclear energy in China, post-Fukushima, requires “consistent policies and effective regulations” (Xu, 2014, p. 21). In addition to policy, lack of public support is an important challenge to resolve for China to successfully pursue nuclear energy development.
Wind energy in China
The literature produced on the role of wind energy in China can also be categorised into challenges and opportunities. Ma, H. et al. (2010) outline the reality that despite policy implemented by the Chinese government “the renewable energy economy is not yet cost-competitive with the fossil energy economy” (pp. 440). Zhang, S., Andrews-Speed & Zhao (2013) identify two reasons for the low proportion of grid-connected capacity. One is that installed capacity targets are set by the central government rather than for the actual generation of electricity. The other is rooted in coordination problems, worsened by a discordance between national and local government decisions on wind power projects and grid planning. Yang et al. (2016) build on challenges within wind project planning to emphasise inadequate electricity transmission infrastructure in China, not designed to support new forms of energy, showing a lack of confidence with renewable energy and a primary cause of wind energy curtailment problems. Despite inland transmission problems, a study from Zhang et al (2017) compares the energy performance of inland, coastal and offshore wind farms in China to argue hat land-based and coastal wind farms are more energy efficienct than offshore wind farms. This presents a challenge to regions in China such as Guangdong province which lack sufficient land develop onshore wind farms and have to direct resources to developing offshore wind farms. The challenges to China’s wind energy development are also considered within current world events as disrupted international supply chains and national lockdown regulations both hamper the productivity of the wind energy sector” (WWEA, 2020; Bahar, 2020).
Regardless of the aforementioned challenges to wind energy role in China’s energy security strategy, a lot of research highlights the potential of wind energy. Saidur et al. (2011) state that wind energy plays an indispensable role in energy transitions, outlining how “the energy consumed to manufacture and transport the materials used to build a wind power plant is equal to the new energy produced by the plant within a few months of operation” (p. 2424). Yuan and Xi (2019) emphasize the important role of wind energy to mitigate the effects of climate change; they praise China’s comprehensive policy system that has been implemented for wind energy development. Zhao and Luo (2017) argue that China’s “current income (GDP per capita) is far away from the turning point, and thus the renewable energy generation is rising exponentially along with the increase of income for a long time” (p. 54); insinuating that wind energy in China will continue to grow alongside and support economic growth. Scholars have thus advised on how China can optimize wind energy within its energy mix. Zhang et al (2017, p. 870) state that “wind power should be placed on the primary position of priority development at present and the near future, because of the more mature technology and lower cost”. Lam et al. (2013) contest that “the most important drivers of wind energy investment in China are perceived to be those that can have an immediate impact on a wind energy developer’s cash flow: government financial assistance, easy and inexpensive transmission access, wind energy cost decline, and a high feed-in-tariff” (p. 423). Therefore, economic policy to encourage action from wind energy development would increase the role of wind energy in China. Zhang et al. (2013) argue that provincial policies in China can effectively stimulate the growth of wind power; targeting the challenges that arise as a result of the disjuncture between national and local governance in China.
In sum, this literature review has shown the potential for China to enrich its energy transition strategy. It began by noting the deficiencies in China’s existing energy transition strategy, located in inconsistent and fragmented energy policies which is worsened by China’s centralized decision-making structures. Different arguments dominate the debate on how powerful China’s private sector has become. However, it is made clear that China can optimize its energy security strategy through more efficient policymaking. Second, the review pointed to the challenges and opportunities presented within nuclear energy in China. The challenges echoed problems stemming from inadequate policies, worsened by lack of public support for nuclear as well as high costs associated with developing NPP’s. The opportunities show that nuclear energy in China poses huge potential on the premise of proper safety measures and regulation of the industry. Additionally, more benefits are long-term to allow for a level of
nuclear energy technology maturity whereby costs fall. The final review of wind energy in China, again, examines challenges and opportunities. Barriers to wind energy development are rooted in the disconnect between national and subnational governments, posing both policy process and physical transmission gridlock. Wind energy plays a productive role in China’s energy transitions as wind energy expansion significantly reduces China’s emissions and contributes to meeting energy demand. Through the examination of existing literature, an array of political, environmental, economic and technological considerations recur. Tan (2017) utilises the STEP (Social, Technological, Economic and Political) model to analyse China’s generation resource utilization. Tan (2017) focuses on solely renewable energy and does not include nuclear energy within the STEP analysis, however, the approach is inspiring. A comparative analysis of nuclear energy as part of China’s energy security strategy, hedged against a renewable energy source is understudied in academia. A detailed comparison of nuclear and wind energy in this context is totally unique and contributes to filling a gap in the existing literature.
1.5. Theoretical Framework
The linking of theory and data allows this research to investigate and question the social conditions that shape energy transition in China. The evidence proposed in this research is analysed via a dualistic theoretical lens of Geopolitical Economy, proposed by Amineh and Houweling (2007); Amineh and Guang (2018), and Multilevel Perspective Theory (MLP), proposed by Geels (2002; 2011; 2015). Geopolitical Economy and MLP are similar in that they take a systematic view of societal structures. They both advocate that change to an existing system takes place over time and that these changes threaten the stability of a given system. MLP is a solid theory to trace energy transition in China as it is considerate of the socio-technical regime that forms a ‘deep structure’, based on a set of semi-coherent set of rules which maintain the stability of an existing socio-technical system (Geels, 2011). China, and Guangdong, uphold a socialist market economy via institutions, regulations and routines that support economic growth and foster the growth of new technology. However, the majority of transition studies have been carried out in industrialized countries with highly developed state apparatus. Therefore, the findings may not fully translate to [China’s] unique characteristics (Osunmuyiwa, Biermann & Kalfaganni, 2018). These characteristics, as outlined by Hess (2014; as cited in Osumuyiwa et al. 2018) may constitute a “deficit in electricity access… fragile institutional and regulatory structures [and] a well-established coalition of industry
actors that may perceive low carbon transitions as harmful to their interests” (p. 145). Geopolitical Economy highlights the role of power and politics in China’s governance through the centralized state-society-complex. MLP fleshes out consideration of the political, environmental, economic and technological dimensions of China’s energy transition. However, “MLP has been criticized for underplaying [–] the role of agency in transitions” (Geels, 2011, p. 29). Therefore, Geopolitical Economy serves to enrich the standard energy transition theoretical framework proposed by MLP. The three main concepts used within this analysis, ‘energy scarcity model’, ‘centralized state-society complex’ and ‘socio-technical regime’ guide a balanced, comparative review of the contribution of nuclear and wind energy to China’s energy security strategy; in line with the declared thesis objectives in section 1.1.
1.5.1 Geopolitical Economy
Since the beginning of the industrial revolution, in the early-to-mid 19th century, countries have used fossil fuels to provide energy for the manufacturing of goods in search of profit. Fossil energy has been the foundation to modern economic activity. Some regions, namely the Middle East, are resource rich whilst others, Europe, are resource scarce. Fossil fuels remain the dominant energy source across the globe, therefore, states require their continued availability and develop strategies to guarantee energy security. However, the use of fossil fuels emits harmful GHG into the atmosphere; making them primary contributors to global warming and climate change. The history of technological change since the 1850s has rendered access to fossil energy more, not less, important for the production of wealth and power. From a historical perspective, the transition to clean energy falls in line with the global energy evolution trend. After fast economic development, China’s energy sectors are accelerating the transition from a fossil-based energy system to a low-carbon energy system; igniting a new energy era. Cox (1981) postulates that material capabilities, in their dynamic form, exist as technological and organisational capabilities. In their accumulated form, they are natural resources which technology can transform, and which wealth can command. China’s material capabilities have given its economy the ability to expand through export-led policies which, in turn, have merited China with the international reputation of ‘the world’s factory’. “The process of sequential industrialization of human groups increases demand” (Amineh & Houweling, 2007, p. 375). And, most significantly, the growth of China has altered the global demand for energy. For this reason, China’s energy security strategy and subsequent energy transition must be studied within the context of the ‘energy scarcity model’.
Geopolitical Economy (2007; 2018) lists three types of energy scarcity within its model that threaten energy security. The first is ‘demand-induced scarcity’ which is caused by (1) population growth, (2) rising per capita income, and (3) price of substitutes. China’s rapid industrialization has caused all three demand-induced scarcity forces impact its energy security. (1) China is the most populous country in the world, (2) rapid industrialization in China has expanded its middle-class, and (3) the price of clean energy sources are not yet cost competitive with fossil fuels in China. The second type is ‘supply-induced scarcity’ that refers to energy extraction costs, refining, and retail mark-ups which determine the market price of energy sources. China has led its industrialization process via the use fossil energy. Therefore, many clean energy sources are relatively new to the market and the cost of clean energy is still higher than fossil energy, constituting a major barrier to the advancement of China’s clean energy transition. The third type is ‘structural scarcity’ which is supply induced scarcity, caused by the “deliberate action of major industrialized powers” (p. 15) such as powerful State-Owned Enterprises (SOEs) in China’s energy sector.
The unit of analysis within Geopolitical Economy (Amineh & Guang, 2018) is the state-society-(market) complex. This refers to the interaction between the state and society (and market). Amineh and Guang (2018) differentiate between two modern types of state-society-(market) complexes within International Relations (IR) and International Political Economy (IPE). A ‘liberal state-society-complex’ and an authoritarian or centralized, contender ‘state-society-complex’. A liberal state-society-complex constitutes a self-regulating society whereby markets can enjoy relative autonomy vis-à-vis the state. In these societies, business and enterprise can influence the state’s policy making process by producing market data, lobbying, coalitions and campaign funding. A ‘centralized state-society-complex’ is one whereby “civil society, based on social classes and forces, especially a business (or capitalist class), is non-existent, underdeveloped, or too weak to act independently of state power” (p. 11). China constitutes a centralized state-society-complex as the formal sources of political power and authority are retained by the Communist Party of China (CPC). The National People’s Congress (NPC) and the State Council serve as subsidiaries to the CPC (Andrews-speed, 2020).
China’s energy system constitutes the governance structure of the Chinese state and subsequent organization of its energy industries. The governance of China represents a form of ‘top down’ systematic power whereby the state coordinates what the market cannot. China’s energy system
constitutes the promotion of national policies that translate to provincial, local and city levels of government. The interaction between national and subnational governments in China and how policy processes affect the contribution of wind and nuclear energy is essential to examining the role of both energy sources under study. Thus, the centralized state-society-complex encourages an examination of China’s energy system which observes the impact of institutional reform. For example, the impact of China’s opening up policy (1978), energy system reform (2002) and production of specific policy such as the Renewable Energy Law (2005) and the Medium- and Long-term Nuclear Power Development Plan’ (2005–2020). Laws and policies enhance the contribution of wind and nuclear energy at various levels. For this reason, alternative IR theories are inadequate for analysing the contribution of wind and nuclear energy to China’s energy security strategy. Realism places focus on state actors. A complete clean energy transition in China would place China in a stronger position vis-à-vis contender states. However, China’s clean energy transition must account for actors at the global, national and local level; realism does adequately consider all relevant actors. Another IR theory, modern liberalism is a practical theory to analyse the role of institutions and markets in clean energy transitions. However, the immense power of the Chinese state reduces a solid application of modern liberal theory to energy transition because the Chinese market is largely regulated and controlled by the state.
1.5.3. Multi-Level Perspective
Geels (2002) postulates that “the stability of established sociotechnical configurations results from the linkages between heterogeneous elements” (p. 1259). The idea of a configuration of heterogeneous elements working together to fulfil a given function, such as energy transition, was previously developed by Rip and Kemp (1998). They propose that modern technology is organized as a “configuration that works” (p. 330) whereby technology is stratified, so far as it is “composed of materials and components, combined into linkages and devices that, in turn, are combined into an overall system” (p. 330). As outlined by Freeman and Perez (1988), innovations are much more than sporadic clusters of innovations, they are “a combination of interrelated product and process, technical, organisational and managerial innovations, embodying a quantum jump in potential productivity for all or most of the economy and opening up an unusually wide range of investment and profit opportunities” (p. 47). Contributions to MLP solidify the process of how new technologies are subject to the whims and wills of a socio-technical regime.
Geels (2002; 2011; 2012) traces clean energy transitions through the theoretical lens of MLP, emphasising the interaction between society and technology. MLP theory views energy transition as the result of interactions at three analytical levels: “niches (the locus for radical innovations), socio-technical regimes (the locus of established practices and associated rules), and an exogenous socio-technical landscape” (Geels, 2012, pp. 472). As demonstrated in figure 1.1., when innovations from a technological niche arise, they are released to the market and subject to the existing socio-technical regime. A socio-technical regime is made up of various “deep structural rules that coordinate and guide actor’s perceptions and actions” (Geels, 2012, pp. 473). The socio-technical regime is a concept within MLP that accounts for the multi-dimensional exchanges between industry, technology, markets, policy, culture and civil society. The socio-technical landscape in MLP is beyond the scope of human control, it is the wider context that influences regime and niche dynamics such as “spatial structures, political ideologies, societal values, beliefs, concerns, the media landscape and macroeconomic trends” (Geels, 2012, p. 473).
Source: Geels, F., 2011, 28.
The conventional energy regime of China is shaped by energy generation, energy transmission, and energy utilization. Due to the various levels involved within China’s energy system, a theory that highlights the role of the socio-technical regime within China’s energy transition is vital. The concept of a ‘socio-technical regime’, derived from MLP, guides examination of the utilization of wind and nuclear energy in the context of Guangdong’s economy. Guangdong has embraced the development of both wind and nuclear energy to meet domestic energy demand, therefore, the ongoing processes that accommodate and/or hinder the utilization of wind and nuclear energy are best observed within this qualitative case study. As stated in section 1.5., MLP is most commonly applied to industrialized regions. Guangdong is one of China’s most industrialized provinces, boasting a heavy manufacturing industry and contributing significantly to China’s GDP. Guangdong’s ‘socio-technical regime’ is examined through the consideration of environmental, economic and technological forces which affect and are affected by the utilization of wind and nuclear energy.
1.2. Delineation of Research
The timeframe for this research from 2002 onwards begins under the 16th National Congress of the Communist Party of China (CPC), led by the Hu-Wen administration (President Hu and Premier Wen Jiabao). The Hu-Wen administration encouraged impressive growth in China’s coastal urban areas through stimulation of domestic consumption and economic growth. This gives a complete picture of the reforms to China’s governance and energy industries that have impacted the development of China’s energy security strategy. This timeframe encompasses the 10th 11th, 12th and 13th Five-Year Plans (FYP), prompting a well-rounded view of China’s energy system reforms. The analysis continues to present day China in order to provide up-to-date analysis of current events and prompt realistic policy recommendations. The delineation of space for this research is entirely confined to China with a focus on Guangdong province.
1.6. Operationalization and Hypotheses
As stated in section 1.1, the overarching research question of this thesis is: ‘Is persistent investment into nuclear energy a beneficial strategy for China to guarantee energy security in the long run? Is investment in wind energy a more beneficial strategy?’. To answer the main research question, in line with the proposed theoretical framework, this thesis makes use of
several research sub-questions. Sub-questions have been chosen strategically to give linear focus to the evaluation of China’s energy security strategy. They are:
1. ‘What is the current economic situation in China?’ and ‘What is China’s current energy portfolio?’.
2. ‘How is China’s energy system structured?’ and ‘How does the structure of China’s energy system impact wind and nuclear energy utilization?’.
3. ‘What political, environmental, economic and technological factors need to be accounted for in the utilization nuclear and wind energy in Guangdong?’.
The first sub-question is concerned with the development of China’s economy and China’s energy portfolio. Answering these questions will provide insight on the relationship between China’s economic growth, energy portfolio and energy transition. These questions will be answered through the operationalization of the ‘energy scarcity model’ concept adopted from Geopolitical Economy. From this, it is argued that China’s current energy portfolio is unable to support long-term economic growth and meet environmental goals thus a transition to clean energy supply is the most effective strategy to safeguard long-term energy security.
The next set of research sub-questions prompt exploration of how China’s energy system dictates China’s energy security strategy. Sub-questions are guided through the operationalization of the ‘centralized state-society-complex’ concept, adopted from Geopolitical Economy. In answering the second set of research sub-questions, the research provides a synopsis of how the ‘top down’ structuring of China’s energy system impacts the implementation of energy policy at the subnational level, outlining a disjunction between national and local interests. Furthermore, it is explored as to how this impacts the development of wind and nuclear energy in China.
The final research sub-question is placed within the context of Guangdong to observe energy transition in an industrialized region in China. China’s industrialized cities pose high energy demands and high emissions on China, but they are also leaders in energy innovation and can act as ‘pilots’ for the increased adoption of new energy sources. This question will be answered through the operationalization of the ‘socio-technical regime’ concept adopted from MLP. In line with MLP theoretical framework, the considerations that are examined for the utilization
of nuclear and wind energy in Guangdong are political, environmental, economic and technological.
In the amalgamation of the above arguments, the following hypotheses are proposed:
Hypothesis 1: China cannot halt investment to nuclear energy without threatening energy security.
Hypothesis 2: Nuclear energy poses greater political, environmental, economic and technological demands on China’s energy security strategy than wind energy.
1.7. Data and Methods
Primarily, the focus of this study is of a qualitative nature. Independent analysis of China’s government policy is carried out. Policies mentioned are the Five-Year Plans (10th, 11th, 12th, 13th), the Renewable Energy Law (2005), the Paris Agreement (2015) and the ‘Framework Agreement on Deepening Guangdong-Hong Kong-Macao Cooperation in the Development of the Greater Bay Area’ (2017). To support independent policy analysis, semi-structured interviews were carried out with actors who have first-hand experience in the Chinese renewable energy market and within China’s nuclear energy industry. The interviews provide an in-depth view of the Chinese energy market, the experiences of foreign companies in the Chinese market and first-hand observations about the operations and development of nuclear energy in China. Accompanying independent analysis of data, the surveying of academic works gives insight to the topic of study. Qualitative data is derived from peer-reviewed journals such as: Energy Policy, Renewable and Sustainable Energy Reviews, Journal of Modern Power Systems and Clean Energy, Advances in Climate Change Research and China Perspectives, among others. Books have contributed productively to qualitative data collection, notably ‘The Politics of Nuclear Energy in China’ by Yi-chong (2010). The penultimate chapter of this thesis contains an exploratory case study of Guangdong province that analyses specific issues related to the utilization of wind and nuclear energy.
Qualitative methodology is triangulated with the analysis of empirical data to give an accurate and well-rounded response to the overarching research question. The empirical data used in
this thesis is adopted from various sources. National and provincial data used for China has been obtained from China National Bureau of Statistics and additional provincial data from Climatescope2015. Empirical data has also been adopted from trusted international organizations such as: Organisation for Economic Co-operation and Development (OECD), Beyond Petroleum (BP), International Energy Agency (IEA), International Renewable Energy Agency (IRENA), International Atomic Energy Agency (IAEA), Chinese Wind Energy Association (CWEA) and the World Bank.
1.7.1 A Brief Note on Methodological Rigour
As stated, the methodology employed for this thesis was largely qualitative. The qualitative data used in this thesis ensures validity by using thick descriptions throughout analysis and making use of a wide variety of sources for data collection. Data was collected on an exploratory basis with semi-structured interviews and document analysis informing the views proposed in this work. The methodological approach is beneficial as it produces an original piece of work, however, it can be viewed as detrimental to the validity of research because it is difficult for others to replicate. The semi-structed interviews conducted for this research were highly productive and gave direction to the focus of this research. Ideally, more interviews would be conducted to refine the arguments proposed in this thesis. Academic interviewees would have provided valuable contributions to the discussion of China’s state-market relationship. However, in light of current events, some interviewees became unavailable. Much of the empirical data on wind and nuclear energy in China was incremental to the analysis. A combination of data released by China’s state was triangulated with empirical data from international organizations to ensure reliability. However, subnational provincial data in China is difficult to locate, a more on-site, first-hand, localized research approach would be highly beneficial for further research in this area to be enhanced.
1.8. Structure of the Thesis
This thesis will address the overarching research question comparing the contribution of nuclear and wind energy as part of China’s long-term energy security strategy by analysing three dimensions of China’s energy security strategy. (i) The relationship between economic conditions and energy usage in light of China’s energy import dependence and reliance on fossil fuels, (ii) the relationship between the structure and reforms to China’s energy system and what impact this has had on the wind and nuclear energy sectors, and (iii) factors that
influence the utilization of wind energy and nuclear energy in one of China’s most industrialized provinces, Guangdong.
Chapter 2 investigates the economic and energy situation in China through an outline of China’s macroeconomic indicators and China’s current energy mix, energy trade and clean energy situation. The ‘energy scarcity model’ elucidates the challenges that China faces whilst transitioning to a clean energy economy and simultaneously supporting economic growth.
In light of the current economic and energy situation in China, Chapter 3 is devoted to an analysis of the relationship between China’s energy system, defined in section 1.5.1, and the development of China’s wind and nuclear energy sectors. It is illustrated how reforms to China’s energy system through ‘top down’ policymaking has impacted the development of given energy sources at provincial and city level. The analysis of energy sources in China through the ‘centralized state-society-complex’ gives rise to the role of politics and power within China’s energy system that in turn impacts the utilization of wind and nuclear energy.
Chapter 4 analyses the environmental, economic and technological factors that affect and are affected by the increased utilization of wind energy and nuclear energy in Guangdong. The concept of a ‘socio-technical regime’ is most commonly applied to developed, democratic regions. China’s unique political situation requires extra attention that is insufficiently analysed through MLP theory. Chapter 4 serves to supplement the analysis proposed in Chapter 3 with a summarized framework of the political, environmental, economic and technological considerations to developing wind energy and nuclear energy, as part of China’s energy security strategy.
Chapter 5 concludes the research by answering the research question(s) and a testing the hypotheses set forth. As a final note, policy recommendations on how China can enhance the contribution of wind and nuclear energy sectors within its energy security strategy are given.
CHAPTE
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2
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HINA’
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CONOMY&
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NERGYP
ORTFOLIO2.1. Introduction
The objective of Chapter 2 is to provide a comprehensive portrait of the development of China’s economy and current state in combination with an outline of China’s energy portfolio. This will be achieved through answering a set of research sub-questions: ‘What is the current economic situation in China? and ‘What is China’s current energy portfolio?’. Answering these questions will give an overarching ‘macro’ account of the conditions that characterize energy transition in China. Chapter 2 lays a foundation to compare investment into nuclear energy and wind energy as a beneficial strategy for China to guarantee energy security in the long run. To achieve the set objectives, Chapter 2 adopts a descriptive design which focuses on China’s economy and energy needs in light of a growing economy and dynamic energy portfolio. The analysis begins with China’s economy (2.2), paying specific attention to macroeconomic indicators such as GDP, unemployment rate and inflation rate (2.2.1). Then, a breakdown of China’s energy portfolio is provided (2.3) to encompass production and consumption of fossil-fuels in China (2.3.1), China’s energy trade (2.3.2) and China’s clean energy portfolio (3.3). Concluding remarks of this chapter (3.4) argue that China’s energy use and CO2 related emissions are rising alongside economic growth. Energy reductionist and efficiency policies are beneficial to reduce emissions, short-term. However, to ensure an efficient long-term energy security strategy, China must diversify its energy portfolio to include more clean energy sources, in which wind and nuclear energy play a key role.
2.2. China’s Economy
China’s economic growth and consequent energy dependency must be considered as a whole rather than as two separate parts because China economy requires increasing amounts of energy to support productive power. Currently, there are two major threats to China’s continual economic growth: energy security and climate change. China’s transition to clean energy aims to resolve both these pressures in tandem whilst maintaining economic growth. In terms of area, China is the fourth largest country in the world; following Russia, Canada and the United
States (Plecher, 2019). Today, China is the most populous country in the world. In 2018, China’s population was estimated at 1.393 billion people (The World Bank, 2019). China is unique in its population distribution - with a large disparity between the high-density southeast and low-density northwest regions; illustrated in map 1.1. As stated in 1.1, China operates a communist system whereby the Communist Party of China (CPC) retains immense power over the direction of the economy. In 1978, the 11th Central Committee of the Communist Party of China (CPC) introduced a policy which ‘opened up’ and transformed China’s economy from its traditional socialist structure, heavily influenced by the USSR, to a ‘socialist market economy’. The ending of the Cold War, the economic collapse of the Soviet Bloc and globalization pushed China to experiment with increased economic liberalization as a means to lift its population out of poverty. China’s economy then began to develop rapidly at the during the 1990s through the promotion of more market-based mechanisms. China is now the world’s second largest economy; behind that of the USA. After three decades of a near double-digit annual growth rate, China has lifted over 500 million people out of absolute poverty and more than 268 million people have entered into the urban domain (Yi-chong, 2010). Today, China drives economic growth through export competitiveness and an openness to foreign direct investment (FDI).
Map 1.1. Distribution of the population in China in 2018. Source: World Population Review, 2019.
2.2.1. Macroeconomic Indicators: GDP, Unemployment Rate & Inflation
Rate
To provide a detailed overview of China’s economy, three macroeconomic indicators have been selected to empirically gauge the current state of China’s economy: Gross Domestic Product (GDP) and GDP per capita, unemployment rate and rate of inflation. Macroeconomic indicators are statistics that reflect the economic circumstances of a particular region and can be used to forecast where an economy may be heading. These indicators are very often used by governments to implement policies as they represent the first phase of a new economic cycle.
GDP symbolizes the monetary value of all finished goods and services made within a country over one year. Thus, GDP is used to estimate the size of a country’s economy and its growth rate, year on year. Figure 2.1. shows China’s overall GDP and figure 2.2. shows China’s GDP growth. China’s overall GDP has risen exponentially since 2002 to reach almost $14 trillion (USD) by 2018. Rapid growth of the Chinese economy has continued despite significant obstacles such as the disintegration of the Soviet Union (1989), The Asian Financial Crisis (1997), the SARS epidemic (2003) and the Global Financial Crash (2007). Since 1978-2004 annual growth rates of China’s gross domestic product (GDP) averaged 9.5% each year. This represents the highest levels of GDP growth in the world (Bi, 2005). However, as shown in figure 2.2., China’s GDP growth has witnessed a varied and declining maturity since 2007. GDP per capita is an important economic indicator because it denotes the size of an economy relative to its population. As shown in figure 2.3, China’s GDP per capita in 2018 stood at $9,770.85 (current US$) and has experienced consistent and dramatic growth from 2002-2018. For the same year, 2018, America’s GDP per capita stands at $61,117.05 (current US$) (The World Bank, 2019). As China’s economy continues to grow, it is taking up a larger share of the global economy. However, in comparison, to America’s economy, the average spending power of Chinese citizens is less than their American counterparts. In sum, China’s economy has witnessed fast economic growth, however, this growth is not sustainable if China continues to rely on fossil energy and energy imports. Therefore, increased domestic energy production contributes to ensuring economic growth in China on a self-sufficient basis, long term.
Figure 2.1. China’s GDP (Current $US): 2002-2018.
Source: The World Bank 2019, China’s GDP (Current USD).
Figure 2.2: GDP Growth (annual %): 2002-2018. Source: The World Bank, 2019.
Figure 2.3: China’s GDP per capita (current US$): 2002-2018. Source: The World Bank, 2019.
The second indictor, the unemployment rate represents the amount of people in a country, actively searching for employment but unable to find work. The unemployment rate represents the health of an economy, if more people are employed then demand in an economy goes up, this pushes economic development forward and living standards begin to rise. Figure 2.4 demonstrates the fluctuations of China’s unemployment rate, rising sharply to 4.7% during the 2007-08 financial crash and falling in subsequent years. China’s unemployment rate then osculates to reach 4.42.% in 2019. As a point of reference, the unemployment rate for the European Union (EU) in 2019 stood at 6.3% of the total labour force. The United Kingdom and United States registered a 3.7% unemployment rate for 2019 (OECD, 2019). Therefore, China’s unemployment rate (%) signifies a healthy prosperous economy. However, China’s unemployment rate has also risen slightly since 2002. China’s economic growth has bolstered employment opportunities across the country. An efficient energy security strategy for China must be considerate of the level of unemployment. The development of new energy sources which provide a range of high to low skilled jobs enhances the contribution of a given energy source in terms of energy security and economic growth.
Figure 2.4. China’s Unemployment rate (% of total labour force) 2002-2019. Source: The World Bank, 2019.
The third variable, the inflation rate is the rate at which prices increase over time. Inflation offers numerous benefits: in the vein of Keynesian economics, moderate inflation boosts consumer demand and consumption therefore driving economic growth. Moderate inflation is good for an economy, however, too much inflation can also be harmful by diminishing consumer confidence and spending thus reducing aggregate demand. In relation to the clean energy sector, a dose of inflation can keep oil and electricity prices on the rise, while eating away quickly at the debt burden of renewable energy project developers (Liebreich, 2009). Inflation is important as it prevents deflation1. As shown in figure 2.5, China’s inflation rate has fluctuated quite a lot in the past 20 years. China moves from deflation2 in 2002 to nearly 6% inflation in 2008. Fan (2003) and Feyzioglu (2004) (as cited in Kojima Nakamura & Ohyama, 2005, p. 10) attribute China’s deflation in 2001-2002 to improvements in economic efficiency and a rise in factor productivity. This can be attributed to the reform of China’s power industry in 2002 that effectively ended the monopoly of the State Power Corporation (SPC), elaborated on in section 3.3.2. Therefore, in 2002, a positive supply shock, reflecting the improvement in overall economic efficiency, drove the inflation rate below zero (Kojima
et al., 2005). However, inflation rose in light of economic depression in 2003 as all countries felt the impact of the Iraq war (2003) and the consequential peak of oil prices (Mortazavi, Maleki & Yousefi, 2019). Deflation in China also occurred in 2009 as a consequence of the global financial crash due to decreased demand on an international scale but has normalized since then.
Figure 2.5: Chinas inflation (Annual %) 2002-2019. Source: The World Bank, 2019.
2.3. China’s Energy Portfolio
The second section of this chapter outlines China’s current energy portfolio inclusive of energy production and consumption and energy trade. An empirical focus on the energy activities and characteristics of the PRC is the most effective way to analyse how China plans to transition its energy portfolio towards more clean energy sources and why. China’s economy and energy portfolio are paired within this chapter because the economy, energy and the environment are inextricably linked. Energy security, defined as a stable flow of energy supply at reasonable prices, is a prerequisite for economic growth. The production and consumption of fossil-based energy emits harmful GHG’s such as carbon dioxide (CO2), sulphur oxide (SOx), and nitrogen oxide (NOx) that damage the environment. Clean energy transition in the PRC has climbed steadily to the top of the government’s agenda due to international concern for environmental
protection and China’s need for energy security. To begin, an outline of China’s current energy situation is provided.
2.3.1 Production and Consumption of Fossil-Fuels in China
Overall
China’s rapid state-led industrialization has caused the overall demand for energy to rise dramatically, shaping both domestic and international conditions. Between 1978 and 2014 energy consumption in China increased at an annual rate of 5.58%, reaching 4.26 billion tce (tons of coal equivalent) in 2014. By the end of 2014, China accounted for 23% of global energy consumption, and 61% of net energy consumption growth. On the eve of the 1978 reform and opening up, China was the fourth largest energy producer in the world after the USA, Saudi Arabia, and the Soviet Union. As of 2016, China’s energy mix was 75% coal, 17.5% oil, 5.5% hydropower and 2% natural gas (Median, 2016). The total energy production in China between 1978 and 2014 increased from 627.7 million tce to 3.6 billion; an annual increase rate of 4.83% (Zhang et al., 2017). Figure 2.6 shows China’s total primary energy supply (TPES)3 by source from 1990 to 2017. The graph shows that coal has been and continues to be the dominant energy source in China’s energy mix. In 2017, coal was followed by oil, natural gas, nuclear hydro, wind and solar and biofuels. Figure 2.7 shows the final primary energy consumption (TPEC) 4 in China for 2018. Coal claims over half of final energy consumption in China and clean energy sources are concentrated within less than a quarter of final energy consumption. Nuclear and wind energy make up a small proportion of China’s overall energy mix constituting 2% and 2.5% of TPEC respectively. However, they represent 13.69% and 17.12% of China’s clean energy mix. Although China has become a global figure within renewable energy and a well-known producer of nuclear energy, a transition to a clean energy economy is a long-term goal. Therefore, fossil fuels retain dominating role in China’s energy mix and will receive continual investment from the Chinese state in order to satisfy current energy demand. The popularity of coal, the cheapest energy source, in China’s energy mix highlights how cost is a major motivator. As explained, economic growth is central to China’s development, therefore, provincial governments and businesses in China will choose
3 TPES Primary energy supply is defined as energy production plus energy imports and minus energy exports.
coal over cleaner, more expensive, energy sources due to reduced costs. This gives an indication that the economic factors are prioritized in the utilization of energy sources in China.
Figure 2.6: Total Primary Energy Supply by source, People's Republic of China, 1990-2017. Source: IEA, 2019,
Figure 2.7: Total primary energy consumption (%) by Source in China (2018) Source: Authors compilation [data extracted from BP Statistical Review, 2019b, 2].
Coal
In terms of coal production and consumption, China is the clear leader. By the end of 2018, China had claimed a 46.7% share of the world’s total coal production and a 50.5% share of the world’s total coal consumption (BP, 2019a). Currently, most of mainland China's electricity is produced from fossil fuels with coal making up 69% of electricity production in 2019 (World Nuclear Association, 2020). Although coal is the most polluting fossil energy source, China continues to invest in the construction of coal-fired power plants. “In 2018 China added 120GW of new power capacity and non-fossil energy resources took up 73% of this newly added capacity” (DENA, 2020 p. 4). In terms supply and demand of coal, China has inadequate resources to meet levels of consumption, especially long term. However, China’s coal consumption has been declining in recent years. From 2001-2008 China’s coal consumption growth rate dropped to 10.8%, and from 2009 to 2012 it dropped to 4.4%. From 2012 to 2014 coal consumption experienced a negative growth rate of -1.85% (Hu, 2016). Coal consumption in China is lowering, however, China’s infrastructure is built to accommodate fossil-based energy, coal is cheap and abundant in China. Neither wind energy nor nuclear energy, or any other fossil energy source, has become cost-competitive with coal in China therefore coal continues to dominate the energy mix.
Oil and Gas
In 2018, oil demand grew by an above-average 1.4 million barrels per day (b/d). China accounted for 680,000 b/d of global oil consumption in 2018. In absolute terms, the growth in oil demand is dominated by the developing world, China and India. China and India accounted for almost two thirds of the global increase in oil demand for 2018 (BP, 2019a). In recent years, China has also developed its natural gas production to meet growing energy demand. Natural gas is fossil energy but it contains a lesser amount of CO2 than coal or oil. China, the world’s largest energy consumer, was the sixth-largest gas producer in 2016. China has large natural gas reserves; however, many remain unexplored due to geological or technological difficulties (Reuters, 2018). Data published by BP (2019a) shows that China’s natural gas consumption (in billion cubic meters [BCM]) accounted for a 7.4% share of energy consumption in 2018 yet it’s natural gas production (BCM) stood at 4.2%. Therefore, China remains heavily reliant on imports of natural gas.
2.3.2. China’s Energy Trade
As outlined, “China is increasingly reliant on imports of oil and gas: imports accounted for 70.9% of oil consumption and 45.3% of gas consumption in 2018” (DENA, 2020, p. 4). China achieved self-sufficiency in oil in the mid-1960s and became a major oil-exporter in 1980s. After peaking at 36.3 million tons of oil equivalents (Mtoe) in 1985, China registered as a net oil importer by 1993. By 1997 China became a net importer of primary energy (Zhidong, 2009). China is heavily reliant on energy imports. China’s growing energy demand and limited natural resource endowments makes the country heavily import dependent for coal, oil and gas. China’s energy situation places great pressure on the government to address its energy dependency situation. Figure 2.8. displays Chinas total energy imports in 2017, totalling $333 billion (OEC, 2019). China’s biggest energy import in 2017 was crude petroleum, making up 43% of energy imports and totalling $145 billion (current US$). The top countries exporting crude petroleum to China were Russia (14%) Saudi Arabia (13%), Angola (12%), Iraq (8.6%) (OEC, 2019). Chinas limited natural reserves make the country dependent on resource-rich rentier states for energy, namely the Middle East and Russia. This relationship makes China’s energy security susceptible to the stability of other regions, diplomatic relations and trade tensions. “Besides climate benefits, there are other strategic values associated with [the expansion of renewable energy]. Geopolitically, China relies heavily on energy imports and locally produced energy resources such as wind and solar would enhance China’s energy security and independence” (Shen & Xie, 2018, p. 411).
