Part 5. Is clean energy a paradox? - where is the future?

    

The current state of clean energy development in China can be seen in previous blogs. The Chinese government has been pushing hard for a clean energy deployment and transition to sustainable development, including a major restructuring of the old energy mix, the shutting down of highly polluting companies, investment in the clean energy sector, and a focus on new energy vehicles, which seems very promising. On the other hand, we also see the layers of difficulties that China is encountering on the way to an accelerated transition. Due to the over-reliance on traditional thermal technologies, this transition is considered to be a very painful process as clean energy is still not very efficient at the moment. This blog attempts to analyse the current issues involved and discusses the future of clean energy in China.

1. Material price changes

The Chinese government has heavily subsidised the solar industry and this has quickly made China the world's largest supplier and installer of solar panels. As shown in Figure 1, much capital has been channelled into the PV industry due to the strong support of the Chinese government, which has also led to the rapid development of solar technology in China and the further reduction of the cost of solar power (Yan et al., 2019). The growing popularity of ESG investments has also accelerated the rate at which clean energy companies can access capital, which is also an important factor (Plastun et al., 2020).

Figure 11: the historical levelised cost of electricity (LCOE) from solar power in China

Nevertheless, it is also worth noting the changes in the price of the raw material for the solar cell version, namely silicon metal, in recent years. As shown in Figure 2, the price of silicon metal has risen rapidly during 2021, largely driven by the massive demand for it from the Chinese solar industry and related to lower supply as a result of the epidemic. As the raw material rises, this could be passed on to the final cost of solar power generation and increase it.

Figure 12: Trend of Silicon Price

In contrast, the price of batteries is declining, as can be seen in Figure 3, again due to ongoing market supply and demand factors. The increased demand for lithium due to the expansion of clean energy and new energy vehicles has attracted more suppliers to the market (Fiscor, 2018). Although there are still many technical problems with batteries, such as insufficient energy storage density, they continue to be the main storage device for clean energy.

Figure 13: trends of price and selling about Lithium-ion batteries

Based on the impact of supply and demand on the prices of key materials for solar energy, prices for silicon and lithium may start to fall in the future in response to higher demand from the global shift towards sustainability. This outcome will also be driven by advances in recyclable technologies (Zhao et al., 2019).

2. Government policy

In particular, it is important to understand that the Chinese government has in fact maintained a policy of regulating electricity prices in order to ensure that residents have affordable access to electricity. Unlike other countries, China's grid companies are owned by the state and have a policy of guiding prices and keeping them at a very low level. The non-market operation of electricity prices appears to be problematic, as the increasing demand for electricity with somewhat restricted price increases will lead to a reluctance of suppliers to enter the market, making it difficult to optimise the allocation of resources in the electricity market (Liu et al., 2019). In addition, the rising cost of power generation will also directly lead to pressure on power producers to start maturing (He et al., 2010), for example, with the rapid rise in coal prices in 2021. Perhaps for China, the government needs to marketise its electricity resources in order to escape the dilemma of rising demand for electricity and the transition to sustainable development.

In summary, China's goal of moving towards sustainable development seems to be very strong, although this struggling developing country still has to face many difficulties. Likewise, achieving SDGs7 will be a particular opportunity for China, as clean energy may allow the manufacturing powerhouse to shift away from its dependence on oil and coal and thus into a better energy mix. However, no one knows what the future holds.

Like to know more? Watch the video below:

-Fumian Huang

11, October, 2021

Reference

Fiscor, S. (2018), "The EV Era is Upon Us: Engineering, Geology, Mineralogy, Metallurgy, Chemistry, etc", Engineering and Mining Journal, vol. 219, no. 9, pp. 2.

He, Y.X., Zhang, S.L., Yang, L.Y., Wang, Y.J. & Wang, J. (2010), "Economic analysis of coal price-electricity price adjustment in China based on the CGE model", Energy Policy, vol. 38, no. 11, pp. 6629.

Liu, H., Zhang, Z., Chen, Z. & Dou, D. (2019), "The impact of China's electricity price deregulation on coal and power industries: Two-stage game modeling", Energy Policy, vol. 134, pp. 1.

Plastun, A., Makarenko, I., Yelnikova, Y. & Makarenko, S. (2020), "Environmental, social and governance investment standardization: moving towards sustainable economy", Environmental Economics, vol. 10, no. 1, pp. 12-22.

Yan, J., Yang, Y., Elia Campana, P. & He, J. (2019). City-level analysis of subsidy-free solar photovoltaic electricity price, profits and grid parity in China. Nature Energy, 4, 709-717.

Zhao, S., Li, G., He, W., Huang, J. & Zhu, H. (2019), "Recovery methods and regulation status of waste lithium-ion batteries in China: A mini review", Waste Management & Research, vol. 37, no. 11, pp. 1142-1152.