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China eyes greener future as investment in renewables booms

China could take the lead in low-carbon energy as it battles deadly smog to calm rising social unrest

Investment in clean-energy technologies that could solve China's chronic air pollution is booming. New wind and solar-power projects are being built faster than predicted, investment in smart-grid technologies is surging, nuclear plants are being switched on and natural gas use is on the rise.

After many years in which action has consistently fallen short of hard talk, Beijing may finally be getting its act together as it starts addressing chronic air pollution. Rising discontent, particularly from middle-class urban residents, who are increasingly taking to Chinese social media and, in some instances, the streets, to voice their anger over the problem, has spurred the government to act.

A state-backed think tank aptly summed up the popular mood in a February report saying pollution was so dire that Beijing had become "barely suitable" for human habitation.

President Xi Jinping has said that pollution is Beijing's most pressing concern and made "ecological civilisation" a central pillar of his flagship economic reforms, unveiled earlier this year. Since then, a flood of new rules and regulations aimed at combating air pollution and reducing carbon emissions have flowed from local, state as well as central government bodies. Among the raft of measures put in place, Beijing has banned the construction of new coal-fired power plants in and around the city, as well as limiting the number of new cars that can take to the road.

Still, Beijing faces a monumental task beating back pollution. The government aims to cut average PM2.5 pollution levels - a measure of fine particulates in the air that are particularly harmful to human health - by more than half from around 65 to 30 by 2030. This will require dramatic action to stem emissions from China's worst polluters: coal, cars, construction and heavy industry.

A report released last summer by Deutsche Bank put forward a series of "big bang" measures it says would allow the government to reach that goal. China is by far the world's largest producer and consumer of coal, but it will have to quickly break its addiction. Coal consumption, according to Deutsche Bank, should peak in 2016, compared to forecasts of the mid-2020s, and should be cut around 25% by 2030. Older plants should be retrofitted and new plants should use the best-available technologies to reduce coal-related emissions by 70%.

Car emissions will have to be cut by 80%. The number of new cars hitting the road, Deutsche Bank says, should be limited to around 250 million by 2030 compared to estimates of 400m, while more of those cars should run on natural gas or electricity. Thousands of kilometres of new subway and rail will need to be built to give people a viable alternative to driving. Solar, wind, nuclear and natural gas's share of the overall energy mix will have to rise from around 13% today to nearly half by 2030.

The measures needed to deal with China's air pollution, then, would mark nothing less than a revolution in how China fuels its economy.

Is it possible?

There are grounds for optimism. The US, UK, Japan, South Korea and other developed economies all saw severe environmental degradation as a result of rapid economic development, only to hit a point where the tradeoff was no longer acceptable. China, some analysts and environmentalists say, may have reached that point. Unlike those previous examples, though, China will rely far more on emerging wind, solar and smart-grid technologies.

Encouragingly, China's clean-energy sector is growing faster than many had thought possible. Through the first 10 months of 2013, zero-carbon sources of energy accounted for 57% of newly installed power-generation capacity in China, a remarkable feat for the sector.

The solar sector in particular is booming and China has become a world leader in solar technology and manufacturing. The country added 12,000 megawatts (MW) of new solar capacity in 2013, more than the government's 10,000 MW target and far more than any country has ever installed in a single year. The government is targeting 14,000 MW of new solar capacity in 2014. Growth is expected to continue to surge. "The 2013 figures show the astonishing scale of the Chinese market, now the sleeping dragon has awoken," said Bloomberg New Energy Finance analyst Jenny Chase.

The expansion has been aided partly by government incentives, but increasingly by lower costs brought on by technology improvements. In 2010, module costs for Chinese solar-panel producers were around $1.10 per watt. By 2013 that had fallen to around $0.50/W, and GTM Research analyst Shyam Mehta estimates costs will continue to fall to around $0.36/W by 2017. That would make solar in China increasingly competitive with domestically produced natural gas.

Wind power capacity is expanding rapidly too. The country added 16,100 MW of new capacity in 2013, increasing total capacity by 21% to 91,000 MW. China accounted for nearly half of all new wind power generation capacity added across the world in 2013. But the country's national power infrastructure has struggled to handle all the new renewables capacity. Some wind and solar farms have yet to be hooked up to the grid. Nevertheless analysts say it is simply a matter of time before the infrastructure catches up.

In 2013, China became the world's largest investor in smart-grid technologies that will help connect increasing levels of new renewable energy into the grid, making the country a more efficient energy user. Because of its size, the structural shift in China's energy sector will be felt around the world.

How fast China can adopt clean energy will perhaps be the single most important factor in combating global climate change. And in the same way China' appetite for oil and coal over the past three decades helped reshape the global energy landscape, so too will its rapidly expanding uptake of renewables change the face of energy over the next 30 years. 

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