China’s emergence as the champion of green energy has taken the world by storm. Hardly a day goes by without some new revelation – China as the world’s largest builder of wind turbines; the largest producer of solar photovoltaic cells; the most advanced proponent of smart grids and the upgrading of present grids; the largest market for energy efficiency.
And at the same time, China is the world’s largest consumer of coal; the largest emitter of carbon dioxide and other greenhouse gases; and home to the world’s most polluted cities.
Which is in fact the 'real China'? A lot hangs on how we answer this question.
For Australia, there is the issue of the future for coal exports to China. If China’s green revolution is really going to overtake its black revolution, then there is not much future for the vast coal deposits like the Galilee in Queensland that are being opened up for exports to China.
And for the world as a whole, there is the issue of intensification of conflict over access to dwindling fossil fuels, and the species-extinction dangers of global warming. What China does is central to whether this issue will be resolved favourably or not.
The China story really begins in the year 2001, just over a decade ago, when the modernised Chinese economy entered the World Trade Organisation. The result was a vast and sudden increase in China’s manufacturing activities, as it became the “workshop of the world”. And as it did so, it ramped up its energy system at a furious rate.
The first and most accessible source of power was coal – and China reversed the long-standing global decline in coal production and consumption virtually overnight. Its rising dependence on coal, for industrial uses and particularly for power generation after 2001, is undeniable – as shown in Figure 1.
Figure 1: Chinese thermal power generation and rising coal consumption up to 2013
Source: John Mathews and Hao Tan (2013; 2014)
This chart shows the clear inflection point in 2001 when China’s manufacturing activity stepped up, and its consumption of coal began a steep rise. Australia has been a principal beneficiary of this rise, supplying much of this coal to China.
But the chart also shows that coal consumption is apparently 'capped' at a little over 3.5 billion tonnes per year. This signals a shift on the part of China’s leadership, under duress because of the shocking pollution of air and water and the black smog created by coal burning, indicating action to rein in the rising coal consumption levels.
So there seems to be another inflection point, when China’s already serious promotion of renewables is about to be ramped up even more strenuously – to deal with the shocking problems created by this decade-long dependence on coal.
China’s backing of wind power, for example, has seen the country add 80 GW of capacity over the past eight years, taking it to world leadership, and generating a total of 140 TWh of clean electricity as a result – as shown in Figure 2.
Figure 2: Chinese build-up of wind power up to 2013
Source: Mathews and Tan (2013; 2014)
China’s goal is, on good authority, now to reach 300 GW by 2020 – making the country by far the world’s largest practitioner of this clean power source. As the capacity factor for wind power rises (with the most recent Salkhit 50 MW wind farm in Mongolia reaching a capacity factor of 40 per cent) this would translate into just over 1000 TWh of electricity, or fully a fifth of China’s current requirements.
This energy revolution is part of China’s wider shift as it industrialises at breakneck speed. China is staging a 'Great Convergence' – a transformation that will reverse the past two centuries of the Great Divergence, which separated China (as well as the other BICs, Brazil and India) from the West. In the process, these countries are now lifting billions of people out of poverty.
But in this great transformation, there is a significant problem to contend with: The model of fossil-fuelled industrial capitalism that served the West so well – and which has been held out as a model for the BICs – will simply not “scale” to meet the aspirations of so many billions of people.
China, India and Brazil can have no confidence in a model that binds them to fossil fuel dependence indefinitely, even as the oil and coal supplies peak and then decline, and carbon emissions cumulate.
All of this boils down to a straightforward, yet widely inconvenient insight: A new model of industrial capitalism has to be developed. More inconvenient yet (especially from a US perspective) is that it is being developed – by China. It is China that is busily forging new institutional arrangements and new strategies of industrialisation.
*This is the first part of a four-part series. Part two discusses China's new strategies of industrialisation.
John A. Mathews is professor of strategic management at the Macquarie Graduate School of Management, Macquarie University, Sydney.