Lord Lawson gets his facts wrong

In a speech on climate change to an Italian conference, Nigel Lawson concluded with a fierce attack on the honesty of China’s published policies on climate change. He said that the country has ‘no intention whatever of taking the decarbonisation route’ despite its strong public stance on climate change. China, Lord Lawson continued, ‘firmly intends to remain a carbon-based economy’. He implied that the massive growth in wind turbine installation has happened merely to ‘impress credulous foreigners’. Most of the country’s large number of highly successful solar PV manufacturers ‘are on the brink of bankruptcy’, he said. The purpose of this article is to provide some of the figures to contest Lord Lawson’s assertions.

Does China intend to remain a ‘carbon-based economy’, in Lawson’s words?

Over the last five years, China has consistently pointed to the severe impacts of climate change. This is what a government white paper said in November 2011: ‘Climate change generates many negative effects on China’s economic and social development, posing a major challenge to the country’s sustainable development.’ The government further says that ‘China is one of the countries most vulnerable to the adverse effects of climate change’.

Across the world ‘In recent years, worldwide heat waves, droughts, floods and other extreme climate events have occurred frequently, making the impact of climate change increasingly prominent’. The government’s response has been to introduce some of the most aggressive carbon reduction programmes in the world. It claims ‘remarkable results’ and that the current five year plan ‘established the policy orientation of promoting green and low-carbon development, and expressly set out the objectives and tasks of addressing climate change.’

Can we believe these statements any more than similar claims made by other governments? Or should we follow the Lawson line that China is dishonestly pretending to back renewable energy in order to increase the sales of its PV and wind turbine manufacturers? This question matters enormously: if China continues to expand its economy on the back of increased use of coal, the prospects for an early peak in global emissions are substantially reduced.

China’s share of installations of the major renewable technologies

Chinese companies have aggressively expanded the number and average size of renewable energy projects. Table 1 gives an estimate of the share of total global installations.

Installed capacity at end 2011 (in Gigawatts or GW)

 

World capacity

China capacity

China share

Hydro

970

210

22%

PV

70

3

4%

Wind

238

62

26%

 

In other words, China has over a quarter of the world’s total wind generating capacity. Chinese wind resources are substantial, particularly in the west of the country and huge further expansion is possible. One source suggests a potential of over 2,000 gigawatts. Nevertheless Lawson asserts that the huge number of Chinese turbines is nothing more than a front for the sales efforts of its manufacturers, stating that ‘almost half’ are not actually connected to the electricity grid. This assertion is incorrect. Just over 50 GW of capacity was delivering power in June 2012, or almost 80% of the installed wind turbines. It is certainly true that large amounts of investment are needed to connect wind farms in the west of China to industry and homes in the east. While this is happening wind farms often have to wait for new transmission lines. But no electricity company in the world erects turbines without planning to have them generate revenue from the sale of power.

China has almost a quarter of worldwide hydro-electric power capacity. The massive Three Gorges dam, which finally reached full power this year, is the most important of its plants but is only about 10% of China’s total hydro capacity. Several other huge projects are under construction.

Until last year, most of China’s solar panels were exported. The high feed-in tariffs in Italy and Germany provided a substantial market and helped push the cost of PV down to less than half the figure of even a few years ago. The Chinese government responded by introducing its own PV feed-in tariff and local installations soared in 2011.

New capacity in 2011

China’s investment in renewable technologies in 2011 dwarfed all other countries.

Capacity added in 2011 (Gigawatts or GW)

World growth in 2011 China growth China share of growth
Hydro

25

12

49%

PV

30

2.5

8%

Wind

40

18

44%

 

Of the 40 GW of wind power added worldwide, China’s share was almost half. The figure was about three times that of the USA, the next most important market. A similar share of new hydro capacity was gained. China’s PV installation were smaller, but grew from a very much smaller base. The country completed by far the world’s single largest PV farm in 2011, a park of about 200 MW.

Share of investment captured by renewables

According to the respected industry newsletter Platts Power in Asia, China invested about $53bn in electricity generation and transmission in the first seven months of this year.(1) This was split roughly 50:50 between transmission and new power stations.

Share of electricity capital expenditure

Power generation 51%
Of which, fossil fuel power 14%
Of which, non fossil power 36%
Power distribution (‘the grid’) 49%

 

Similar total amounts were invested in the corresponding months of 2011. The percentage of all expenditure devoted to renewables and nuclear was also about 36% in that year. The share devoted to fossil fuel plants fell from 17% to 14% between 2011 and 2012. The impression conveyed by Lawson that China continues to emphasise investment in fossil fuel sources is wrong: China puts over twice as much money into low carbon technologies as it does into coal and gas power stations.

Low carbon technologies require much more capital investment per unit of expected annual electricity output. (On other hand they cost much less in annual operating expenses). As a result of its investment China added about 31 GW of new electricity capacity in the first seven months, of which about 18 GW uses fossil fuel. Wind and hydro was about 11 GW. I cannot find an accurate figure for solar PV but it was probably about 2 GW. (For comparison, the total fossil fuel generation capacity of the UK is about 70 GW).

Share of electricity generation held by renewables and nuclear

China’s economy continues to grow at high rates. Electricity demand now grows substantially less fast than GDP as a result of energy efficiency improvements, particularly in industry. Measured power generation rose only 2% between July 2011 and July 2012. In this period, electricity production from fossil fuels actually fell from 337 to 322 terawatt hours. (For reference, total UK electricity use is about 350 Terawatt hours a year).

Coal and gas generation is still almost three quarters of total electricity production. But non-carbon sources produced 26% of Chinese electricity in July 2012, up from 20% a year earlier. This increase was largely due to higher rainfall levels improving hydro production from 68 to 92 terawatt hours. But wind power rose by over 50 % to provide 1.5% of total Chinese electricity.

Lord Lawson threw several insults at the Chinese wind industry. As well as claiming that ‘almost half’ the turbines are not connected, he said that wind would not reach 1.5% of electricity production until 2015. July 2012 proved him wrong.

Lawson also said that PV would only account for 0.1% of Chinese power production in 2020. Precise figures are not easily available but on the basis of the installed capacity of panels, I calculate that his pessimistic figure was also exceeded – and quite comfortably – during July 2012. As PV installations are growing at an extremely rapid rate, 2012 annual production is likely to be at least twice what Nigel Lawson predicted for 2020. Lawson’s prediction was made in August 2012, suggesting that his researchers at the Global Warming Policy Foundation are simply not keeping up with the pace of Chinese investments in clean technology. A couple of days careful research would have shown that his figures for wind and solar do not remotely reflect the current reality.

Future trends

I’ve tried to suggest so far that China is investing extremely heavily in low carbon sources of electricity and that this capital expenditure is beginning to show in the total capacity for power generation and in electricity output.

What about the longer-term future? Nigel Lawson focused his disparaging remarks on the position in 2020. Can we make reasonable estimates of the share held by renewables in eight years’ time? We have to guess at rates of electricity demand growth and forecast how much cash will continue to flow into newer types of electricity generation.

In the case of wind power, a Chinese state research organisation worked with the International Energy Agency to produce a roadmap for 2020. The report suggested a possible total of 200 GW of power, or nearly three times today’s total UK power generation capacity. Hydro will rise from about 210 GW to about 330 GW, an increase of over 50%. I cannot find an official figure for PV, but I think a figure of 70-75 GW is easily possible. Nuclear capacity is forecast by a leading state organisation to rise from about 11 GW to about 70-80 GW.

If overall electricity production rises at 5% a year – very low by the standards of the last decade but in excess of recent figures – the major renewables and nuclear will capture just under 35% of the electricity market by 2020. Biomass will add to this but I cannot find an estimate for this technology at the end of the decade. Wind will contribute over 5%, nuclear 8% and solar PV in excess of 1%. Hydro power will still dominate with about 20%.

July 2012’s electricity production figures were only 2% above a year earlier. If this pattern continued, the major renewables and nuclear would contribute over 43% of supply in 2020. But whatever the pattern of growth in demand, China’s investment in renewables and nuclear may mean that fossil fuel use barely rises in the next decade. This isn’t mistaken charity on China’s part. Though its coal reserves are large, they will only provide about 35 years of power at current rates of consumption. Oil is scarce. Natural gas reserves may be in easier supply but availability will depend on fracking.  As important, the poor air quality in cities caused by coal burning is affecting health. Climate change, almost invisible in the temperate UK, is already severely affecting Chinese western regions.

Lord Lawson seems to be utterly wrong: China is making prodigious efforts to hold down its fossil fuel use in line with its international commitments and its own national self-interest.

(1) Thank you very much to Raj Gurusamy of Platts for providing me a copy of this newsletter.

  1. Mark Lynas’s avatar

    I think there is a typo on the sentence about nuclear projections – presume it should be 70-80GW rather than 7-80?

    I think this is very much a glass half full/empty thing. The issue here is: how far are renewables and nuclear going to decarbonise the Chinese power sector in years to come? As you say yourself, China added 18GW of new fossil fuel capacity in 2012 (so far), rather more than the 13GW of renewables (including large hydro). So they’re still carbonising more than decarbonising – as Lord Lawson says. So long as the annual additional increment of non-fossil capacity continues to be outpaced by the added fossil, this cannot be good news, however large the wind etc numbers may seem to be out of context.

    You also say that PV numbers are already “at least twice” the 0.1% that Lawson predicts for 2020. So China is already at 0.2% PV? How much might that grow to by 2020, and how far will this offset coal? The fact remains that the majority of the decarbonising job will be done by large hydro, with nuclear following and wind a distant third. I doubt solar will have a significant impact for decades to come, given the sheer speed of growth. This isn’t all bad news for the climate, but nor is it the story that greens like to trumpet about China kicking the fossil fuel habit to turn itself into a larger version of Germany.

  2. Roddy Campbell’s avatar

    thanks for interesting article.

    ‘China, Lord Lawson continued, ‘firmly intends to remain a carbon-based economy’.

    Isn’t that what your article also shows? You have 65%+ electricity from fossils in 2020 – Wikipedia http://en.wikipedia.org/wiki/Electricity_sector_in_the_People%27s_Republic_of_China has ‘…China’s installed capacity of coal-fired power generating units will remain at more than 70 percent.’ [in 2020].

    They may up the gas part if they can crack shale, and that may either substitute for coal or be additional, probably both.

    You say fossils at the moment do just under 75%, and forecast that will come down to 65%+, Wikipedia expect it to be 70%+, either way I’d say that’s remaining carbon-based?

    The swing factors are nuclear, where there is near-zero or zero new build in USA and EU so far, largely because of environmental objections (as well as cost), which the Chinese have fewer concerns with, and hydro, where they have the resources and we don’t, and even if we did nothing material new would get built because of … environmental objections.

    So I’d come down with Lawson on the end result. And if the Chinese couldn’t do nuclear or hydro, as we can’t for environmental objections, they’d be doing a whole lot worse, and would stay up at the 75%+ mark?

  3. Roddy Campbell’s avatar

    Mark – ‘nor is it the story that greens like to trumpet about China kicking the fossil fuel habit to turn itself into a larger version of Germany.’

    It’s not clear to me where even Germany will be in 5 years time, having eschewed not only nuclear extensions but existing nuclear – it’s complicated with interconnect to French nuclear and Danish wind and German solar I know, but the bulk of what they’re commissioning now, having more or less finished with new solar, is coal and gas, largely coal?

    It still strikes me, as I say above, that any material low carbon difference between China and EU/USA will be that they can build what we can’t – nuclear and hydro. Both, as you know better than anyone, face huge democratic opposition here.

    I’m a little baffled as to why ‘greens like to trumpet’ China as an example, as hydro and nuclear are (generally) strongly opposed here by the same greens. Seems to me they follow Pielke Jr’s Iron Law as much as anyone, growth is more important than CO2, and local environmental decisions come next. At least the Indians are straightforward about it.

  4. Chris Goodall’s avatar

    Hello Mark,

    Thanks for spotting the typo. Now corrected.

    You’re right, I think, to point out that the huge Chinese investments into renewables and nuclear are not running at a fast enough rate to cut emissions. This shows how difficult decarbonisation is: $600 bn of capital expenditure on power generation and transmission a year, mostly on renewables, still leaves coal as the largest source of power in 2020. But on current trends China will be generating a smaller fraction of its electricity from fossil fuels in 2020 than Britain. I’d differ from Roddy and say that Lawson’s thesis that the Chinese are simply trying to trick the West into buying their PV panels and turbines is not a reasonable interpretation of the country’s policies. The rate of renewables growth in China is unprecedented in scale anywhere in the world.

    My calculations suggest that PV will probably be responsible for 1-1.5% of Chinese power production in 2020. These numbers are very rough and should the Chinese decide that solar is cost-competitive with coal I’m sure that 5% is possible. However big hydro will be far more important.

    Chris

  5. Mark Lynas’s avatar

    … and I’d agree with you that Lawson’s suggestion of Chinese trickery is absurd. China is desperate to do anything that might clear its air and reduce the dependence on coal, and if that helps develop overseas markets for renewables, so much the better.

    But the comparison with Britain isn’t quite fair: the UK burns a lot more gas, so its carbon intensity per unit of electricity will still be far below China even out to 2020, when we can expect more wind (and hopefully nuclear) on the UK grid also.

  6. Mark Lynas’s avatar

    Oh, and can you share your calculations for solar PV, and the source? My observation on this is – it’s a big number (15-20GW), but a small proportion (1.5%). Greens will cite the former, Lawson the latter. They are both half right, but also half wrong.

  7. Roddy Campbell’s avatar

    Ignoring conspiracy words like trickery, or political exaggeration like Lawson’s …

    A view from the City, where I spent a part of last five years looking at solar – the growth in Chinese manufacturing of pv solar kit (see companies like ReneSola) whether wafers or modules was private sector and driven ‘entirely’ by exports. Germany drove the world market, for 4 or 5 years it was 50% of consumption, which would always fall for one or both of two reasons – they cut FiTs (or capped solar overall) or others introduced them. In fact the first happened and the second didn’t, so demand ceased to rise (I bet it fell but haven’t looked for over a year, it was also inflated by German installation trying to beat the FiT door closing) and in typical capitalist overshoot style production capacity of solar (which had continued to rise, mostly in China because of lower costs and environmental standards) then significantly exceeded demand.

    In the middle of this, Chinese installations started to pick up. China is a bit of a mystery to me, but statist decisions to install solar could have been local GDP targets (CapEx counts as GDP), need to support local industry, ie the module makers, genuine wish for a bit of green (although solar impact on either air or co2 we know is trivial unless you really throw serious money at it like Germany).

    It’s not trickery, but I wonder if any of the decision was to support an industry that was beginning to face an export brick wall. In any event all quoted solar companies whether Chinese or German have fallen off a cliff – as an aside, this resulted in them all selling modules at anything at or above cash cost, way below real cost, which made it look to an outsider as if solar was getting far more competitive than it really was, just saying.

    Chris, re ‘I’d differ from Roddy’ re trickery – I never said that! To me that was a silly part of Lawson’s speech, the key part was that China is NOT going ‘green’ at any interesting rate, and shouldn’t be held up as a paragon of virtue on that front – it intends to, and will, remain fossil based, and to a percentage I’d expect to fall less than you as they exploit shale, assuming public estimates of their shale reserves are vaguely correct, and a proportion that will only fall at all materially (if at all) due to hydro and nuclear, see above.

    Nuclear is the big CO2 swing factor over the next decade, they had huge lists of planned and permitted power stations, I don’t know how many are actually being built, again I haven’t looked for 18 months or so at the uranium demand research I used to get, which listed nuclear coming on stream. They’re a lot easier to build than hydro, and you build them where you want them.

    I’d be very very surprised if China’s renewables, ex hydro, contributed anything interesting to their generation in 2020, whether as standalone figure or in comparison to UK or EU.

  8. Chris Goodall’s avatar

    Roddy,

    Many apologies if I misstated your position on Lord Lawson’s speech. Sorry – sloppy on my part.

    Forecasts I have seen suggest only 70% of PV production will be exported this year, down from 95% last year. The state media say this is partly because PV is now much less costly, and the local FITs are certainly quite low. State news media also say that a lot of individual cities have strongly encouraged PV installations. And that a lot of manufacturers are now establishing their own PV farms as a way of using their own production. But as I said to Mark Lynas, I can’t easily see this producing more than 1.5% of Chinese electricity by 2020.

    State institutions have rolled back nuclear expectations from about 90 GW in 2020 to ’70-80′ GW. I’m no expert, but I suspect that many of these Westinghouse and Areva parts are now actually being built.(That’s certainly what is said in the press). Wind in the west is now pretty competitive with coal before taking grid costs into account. My reading of the official statements (as before, not to be taken as particularly well informed) is that the desire to stabilise coal use is likely to mean that the E-W grid HVDC connections will continue to be built and wind will grow in importance. Others may be better informed than me??

    Chris

  9. TheTracker’s avatar

    “This isn’t all bad news for the climate, but nor is it the story that greens like to trumpet about China kicking the fossil fuel habit to turn itself into a larger version of Germany.”

    I have never, ever heard that story, despite hanging out around what would seem to be the right campfires.

    The story I here is more the one Lawson is telling: China (& India, usually;they get lumped together) love unchecked economic growth and will never do anything to reduce CO2 emissions or other pollution (only the deluded, decadent West cares about such things, they imply).

    Because China and India will never, ever, now or in the future, cut CO2 emissions (the storyteller always seems to be gifted with the amazing ability to perfectly prognosticate the political and social choices of all yellow people for the next hundred years), it is pointless for the rest of us to try.

    That is the story I hear.

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