For the past decade, China has been the world’s fastest-growing economy, with its ambitions matched only by their willingness to make painful sacrifices to achieve their goals. However, in their drive for both economic growth as well as a future powered by renewable energy, they’re currently facing a dichotomy of ambition.
In order to drive the world’s second-largest economy forward at the pace that China is striving for, a staggering amount of energy is required. Despite massive investments in this area, renewable energy is not yet close to being a viable, nor feasible option to power this growth. This is particularly the case in the current economic climate, where a variety of factors are threatening China’s growth targets.
The current inability to drive growth through renewable energy is not for lack of effort on the part of the Chinese. When it comes to investment in the renewable energy sector, China is head and shoulders ahead of the rest of the world. In 2017 alone, they invested $132 billion into clean energy – this constitutes 40% of total clean energy investment across the globe. Not only are they leading in terms of financial investment into this space, but they’re also well ahead of when it comes to power generation from clean energy sources.
Their total renewable energy capacity has grown at an annual average of 15% over the past 10 years, which is more than double that of the global average according to the International Renewable Energy Agency. Even more impressive is their increases in solar power capacity, which has more than doubled every year since 2008. At that stage, they were producing 113MW of solar energy and by the end of 2017, the figure stood at 130.6GW.
“No country has put itself in a better position to become the world’s renewable energy superpower than China”
This is only one side of the story though. Although China’s renewable energy capacity is dwarfing that of the rest of the world, they’re still heavily reliant on coal to support their energy needs. With 60% – 70% of their current energy requirements being generated through coal, they’re a long way from achieving their renewable energy goals. According to the state-owned China National Petroleum Corporation, China’s coal demand will reach its peak only in 2025 and an estimate by the International Energy Agency has China consuming about half the world’s coal until at least 2023.
This reliance on coal isn’t set to decrease in the near future. With the pressure that the U.S-China trade war has put on the Chinese economy, they have back-tracked on some of their progress towards a coal-free energy spectrum to ensure that they don’t fall short of economic growth targets. In the first half of 2019, 141 million tonnes of new coal production capacity was authorized; contrast this to the 25 million tonnes for the entirety of 2018 and it shows that China isn’t afraid of using coal to stoke the fires of its economy.
This drive back towards coal is a short-term move to counteract short-term market conditions. It will give investors some assurance that the Chinese are willing to make difficult, and unpopular decisions in order to achieve their growth objectives.
The future of energy, however, undoubtedly lies in renewables and it’s here that China is in a dominant position. As a result of its investment in this sector, it now holds the most renewable energy-related patents in the world, with the U.S., Japan, and Europe some distance behind them.
This places investors in the Chinese growth story in a strong position: invested in a country willing to make difficult energy decisions to achieve short-term growth, but still a world-leader in the renewable energy sector, which will doubtlessly power the future.