Electricity Supply Security and Decarbonisation for China

Can China decarbonise its economy and if yes what will be the cost for its energy supply security?

We argue that continuous fuel mix shifting towards renewable energy will allow the Chinese electricity sector to improve its supply security while reducing its GHG emissions.

The Chinese economy is very carbon intensive. Substantial improvements in this front brought China from the worst end of the list of countries ranked by carbon intensity, closer to the middle. While the detailed determinants of the Chinese carbon intensity require further investigation it can be said that it is primarily owned to its largely manufacturing driven economy (services can generally be less emissions intensive) and the fact that China uses a highly carbon intensive fuel mix.

Carbon intensity is prevalent in the Chinese electricity sector where the fuel mix is moving from a simple 62% coal; 21% hydro; 17% oil in 1972 (see Figure 1) to a predicted 73% coal; 14% hydro; 7% nuclear; 3% wind; and about 0.5 for solar and biofuels respectively in 2020. (see Figure 2)

Figure 1: Electricity Fuel Mix in China (1972)

As it becomes obvious the role of coal has grown substantially to support China's economic growth. and no despite the record breaking investment in renewable energy, coal will remain the dominant fuel in China until 2020 and beyond.

Similar to several developed countries (USA, UK, Australia, Germany) China has relied on its indigenous coal reserves to fuel its economy. 

Figure 2: Electricity Fuel Mix in China (2020)

This approach reflected a supply security paradigm that focused on control of national resources against imports. While mature economies were forced to abandon this paradigm because of national resource depletion, costs, environmental concerns etc China is just about reaching that point. 

Figure 3: Import Dependence of Chinese Electricity Sector

Inevitably that leads to the current energy security paradigm, that of diversity. As it has been previously pointed out the Chinese persistence on coal is not only harmful for China emissions record but also for its own electricity supply security. We found that coal does not any more support independence of fuel imports since it is partly an imported resource.





China's efforts to reform its coal sector, mainly via shutting down small, inefficient and dangerous coal mines, needs to go further in reducing the impact of the coal pathway dependency.

Figure 4: Shannon Wiener Index (SWI) for Electricity Sector 

Since coal imports are rising (partly driven by record-low international coal prices as the rest of the world moves away from coal) then coal increases electricity sector import dependence (see Figure 3) and at the same time keeps its diversity very low (see Figures 4 and 5). Both HHI and SWI show that the diversity of the Chinese electricity sector is very low. Despite the absence of any absolute thresholds SWI is generally considered to be good when it is near 2 and HHI when it is near 2000. 

Figure 5: Herfindahl-Hirschman Index (HHI) for Electricity Sector 

We argue that China should reduce its dependence on coal and increase the presence of other resources in its fuel mix. All fossil fuels and nuclear energy are partially imported in China and while they will improve diversity they will also increase import dependence. However, if China substitutes coal with renewable energy sources then it will benefit both its independence (since renewable energy sources are predominantly indigenous) and its resource diversity.

This article is based on research conducted by Keagan Rubel and Konstantinos Chalvatzis and has been published at the Journal of Technological Forecasting and Social Change. The authors are grateful to the anonymous reviewers and the journal's editors for their constructive and helpful comments.

Carbon reporting became mandatory!

The UK Government has regulated for carbon (ore more precisely - carbon dioxide - CO2, methane -CH4, nitrous oxide - N2O), hydrofluorocarbons - HFCs, perfluorocarbons -PFCs and sulphur hexafluoride - SF6) reporting to become mandatory since the beginning of October 2013. The legislation was introduced as part of the Companies Act 2006 (Strategic and Directors Report) Regulations and requires companies to include in their Directors' report carbon disclosures for the financial years ending on or after 30 September 2013. The legislation affects all UK quoted companies which essentially includes all UK incorporated companies whose equity share capital is listed on the Main Market of the London Stock Exchange UK or in an EEA State, or admitted to trading on the New York Stock Exchange or Nasdaq. 

Relevant guidance has been published under the broader "Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance" scheme. The current guidance allows a lot of freedom with regards to the format and layout that the reporting should take place. Therefore companies that are already using the Greenhouse Gas Protocol Corporate Standard  or even ISO 14064-1 will not be surprised by the requirements. However, it is expected that the reporting framework will be reviewed by 2015 and 2016 with the intent to enhance its scope. 

This development can be criticised widely; lack of mandatory and comparable reporting framework; lack of commitment or even strategic reference to reducing emissions rather than just merely reporting them and the list can go on.  But the fact is that this initiative puts the UK in the lead of climate change action in the world since this is the first and only scheme currently operational in the world. The consequences of this regulation will not be limited in the UK. Quite clearly the scheme involves companies with a strong presence in international stock exchanges and their reporting in one region (UK or even the EU or EEA) will not leave unaffected their activities in the rest of the world. 

Some may even argue that the majority of companies affected were already reporting their greenhouse gas emissions. But, Delloit's "UK Carbon Reporting Survey - Lip service or leadership?" shows that this is only partially true. Indeed a very large number of companies choose to report on their emissions but  only a fraction of them does so in a transparent, accurate and complete way. Very rarely companies provide details about their emissions calculation methodologies or have their reporting verified by external auditors.

Nothing can be improved if it's not measured. The Government has made a first step in the right direction and it looks like more developments will follow.