Energy efficiency and growth, the Chinese way

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

The Chinese are planning to use less energy per capita up to 2020 than EU citizens, writes Fiona Hall. [Shutterstock]

For years, Beijing has pursued an energy intensity target relative to GDP, allowing China to continue growing at breakneck pace. No longer. Just like the EU, China has now put a cap on energy use by 2020. And it is more ambitious than Europe’s own target, writes Fiona Hall.

Fiona Hall is a former MEP and a board member of the energy efficiency NGO eceee. In September 2017 she took part in a two-day EU-China energy policy dialogue in Beijing.

As European politicians debate how ambitious the new EU Energy Efficiency Directive should be, a few diehards remain unconvinced, despite the ample evidence that higher efficiency equates to higher growth and that saving energy is five times cheaper than producing it.

Real men build power stations, they believe – and countries with real growth, such as China, pursue an energy intensity target (relative to GDP) rather than an absolute energy cap.

Wrong! China in its 13th Five Year Plan (2016 – 2020) has put in place a ‘double-control implementation scheme on total energy consumption and energy intensity’. Against a planned GDP growth rate of 6.5% a year, not only must energy consumption decline by 15% per unit of GDP, but  total energy consumption must not exceed 5 billion metric tons of coal equivalent (tce) – 800 million tce less than the total energy consumed in the previous five-year period.

So, just like the EU, China has now put a number on the amount of energy to be used by 2020. How do the figures compare? 5 billion tce is equivalent to 3500 megatonnes of oil equivalent (mtoe), so roughly two and a half times the EU 2020 target of 1474 mtoe. Given that the EU has a population of 512 million and China a population of 1,379 billion, the Chinese are planning to use less energy per capita  up to 2020 than EU citizens. Startling news for the ‘real growth’ brigade.

What reasons does China give for putting in place this ‘double control’ on both energy intensity and energy use? There are reasons that sound rather familiar to European ears. Climate change is part of the story, but the top lines are energy security and competitiveness. Energy efficiency is seen as a resource that  supports stable and rapid economic growth.

Industrial consumers in China pay more for their energy than in Europe. Contrary to the practice in some EU Member States, China protects household consumers with a regulated tariff and puts all the burden of energy costs onto industry. As a result, industrial energy savings delivered through energy management contracts play a major role in delivering the energy efficiency target. Minimum standards for energy-using products and equipment have been highly effective too, as in Europe.

Nevertheless, some potential for energy efficiency remains largely untapped in China. A nearly-zero-energy building standard exists but is being implemented to 2020 through 10 million m2 of pilot projects rather than as the norm for new construction. For 2030, the goal is for 30% of new and renovated buildings to be nZEB, with 30% of the residual energy demand coming from renewables.

As for China’s power system, it remains rigidly regulated and scheduled, leading to inefficient dispatching and grid use: up to 25% of renewables production finds itself curtailed. Moves to a more efficient, market-based approach are still tentative – in the words of the Director of Institutional Reform in China’s National Energy Administration (NEA), “we try to cross the river by touching the stones”.

Yet even with an over-supply rather than an under-supply of power, energy efficiency remains a guiding principle for China. It is “the first energy”, says the NEA, essential for both global competitiveness and the fulfillment of climate pledges.

As EU legislators set the EU’s energy efficiency targets for 2030, we must hope that they too understand that global economic leadership and energy efficiency go hand-in-hand.

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