By Colleen Howe
BEIJING (Reuters) – China and the U.S. have agreed to back a global target to triple global renewable energy capacity by 2030, the two superpowers said in a statement on Wednesday, two weeks before nearly 200 countries meet for the COP28 climate conference.
The two agreed to “accelerate the substitution for coal, oil and gas generation”, but did not mention phasing out fossil fuels, a goal that China has described as “unrealistic”.
China is the world’s largest coal user, but also the biggest producer of renewable energy.
Here are some details to put it in perspective:
HOW BIG IS RENEWABLE POWER IN CHINA?
China has been the world’s largest and fastest-growing producer of renewable power for more than a decade, and its lead has widened with an acceleration of solar and wind power capacity in recent years.
The country will build as much new solar capacity this year as the total installed capacity in the U.S., according to the Centre for Research on Energy and Clean Air.
Fossil fuels now make up less than half of China’s total installed capacity for power generation.
In 2020, China committed to have 1,200 GW of renewables capacity by 2030, but is on track to meet that goal five years early.
China could have as much as 1,000 GW of solar power alone by the end of 2026, analysts say, out of 11,000 GW needed globally to meet Paris Agreement targets by 2030.
WHY IS CHINA’S RENEWABLE SECTOR GROWING SO FAST?
China’s 2020 announcement that it would become carbon neutral by 2060 provided a powerful political signal favoring renewable investments.
Macroeconomic factors also played a role.
A clampdown on excessive real estate lending since 2020 coincided with pandemic-era stimulus measures that helped drive more investment into renewables manufacturing, said Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air (CREA).
Manufacturing lending has continued to surge this year, particularly in the green and high-tech sectors.
HOW MUCH OF CHINA’S ENERGY IS RENEWABLE?
Despite China’s global lead in renewables, it still generates around 70% of its electricity from fossil fuels, mostly coal, with thermal plants operating many more hours than renewable ones, according to official data.
By comparison, the U.S. – the world’s second-largest energy consumer – produced about 60% of its electricity from fossil fuels in 2022.
Utility-scale solar has been concentrated in western China, where abundant space and cheap power have spurred development of massive clean energy bases.
Actual renewable energy use lags behind the vast potential of China’s solar and wind plants due in part to technical challenges involved in sending power across long distances to eastern population centers.
There have also been issues, as elsewhere, in integrating variable renewable power while managing supply and demand.
HOW IMPORTANT IS CHINA AS A RENEWABLES MANUFACTURER?
China is also the world’s top supplier of renewable energy technologies, and will have more than 80% of the world’s solar manufacturing capacity through 2026, according to forecasts from consultancy Wood Mackenzie.
The country dominates the solar panel supply chain from end to end, exceeding 80% of manufacturing capacity in every stage, according to Rystad Energy. It can make 1,000 GW of solar modules each year, more than twice global demand.
Its massive production is driving solar component prices to all-time lows, according to price reporting agency OPIS.
While falling prices will accelerate the energy transition, analysts say, the U.S. and other countries trying to expand domestic production worry their manufacturers won’t be able to compete.
China’s boom in renewable component building could lead to “a huge price war” and industry consolidation in the next few years, said Alex Whitworth, vice president of power and renewables research at Wood Mackenzie.
But renewable momentum will continue, he said.
This week, the Helsinki-based CREA said China’s greenhouse emissions could start going into “structural decline” as early as next year.
Power generation from fossil fuels will start to fall as record renewable installations coincide with a rebound in hydropower generation and a moderate economic recovery that has not relied on infrastructure investment, it said.
A tightening of the emissions trading system could boost renewable utilisation rates. So could planned power sector reforms, although capacity payments to coal generators are complicating the equation.
(Reporting by Colleen Howe)