Sunday, December 9, 2012

China -- The Green Giant

As the U.S. struggles, along with most of the western world, to recover from a deep recession, and concerns about climate change and with carbon footprints ever in the background of scientific and political discussions, and lots of distractions in the middle East, let me turn to the far East.

I don’t know if you’re a global warming skeptic, although the evidence of warming is pretty convincing. Just the examples of glaciers shrinking all over the globe should be enough to convince 90% of the population. Perhaps you suspect it is a natural phenomenon and not man made — which flies in the face of basic chemistry and the fact that CO2 is a greenhouse gas. The facts reported by NOAA are that the CO2 concentration in the atmosphere has grown at a rate from 1 to 3 parts per million each of the last 30 years and is now nearing 400 ppm. That is a growth of over 20% in a gas that we know traps heat in the atmosphere. Current projections have it growing at an even faster rate due to increased emissions from newly developing countries such as India and particularly China.

(For a close look at the Carbon Footprint and to ponder CO2 emissions by country and per capita, visit this University of Denver web site.)

Here is a chart from NOAA showing the steady increase in CO2 for the last 50+ years. You can see that the average is increasing and that the rate of increase is increasing too. I suppose one could argue about the sources of CO2 and whether they are all due to human activity. For example, some blame cow flatulence. But then why are there so many cows? I think the evidence is pretty clear, both that the earth is warming up, and that CO2 must have something to do with that. Beyond that are issues with fossil fuels of pollution and an increasing demand with a limited supply causing the cost of oil and gas to increase. These are simple facts which seem to me to be hard to ignore.

The National Oceanic and Atmospheric Administration (NOAA) is a federal agency focused on the condition of the oceans and the atmosphere. They are headquartered in Boulder, Colorado.

To glimpse the future — both the positive and the negative, let’s visit China’s capital, Beijing. Beijing is famous for its landmarks — the Forbidden City, Tiananmen Square, the Great Hall of the People — and notorious for its air quality. On Jan. 26, the U.S. Embassy in the Chinese capital reported the avearge daily air quality index was in the red zone. That’s face-mask conditions for the average motorist and bicyclist. The sad truth is that Beijing is in the red zone far too often.

The city’s pollution problem is largely self-inflicted, a result of China’s reliance on coal to power the country’s booming economy. The 70 percent of China’s power — 85 quadrillion BTUs a year — comes from coal. By 2035, the country’s consumption of coal is expected to rise in absolute terms to about 112 quadrillion BTUs. The consolation for Beijing’s residents is that China is starting to invest in cleaner, more efficient coal-fired plants.

The emissions from coal are nasty and include nitrogen dioxide, sulfur dioxide, and carbon dioxide. SO2 and CO2 are greenhouse gases. Since 2008, China has held the unenviable distinction of being the world’s top CO2-emitting nation, according to the Paris-based International Energy Agency. At 6.5 billion metric tons of CO2 a year, China’s output beats that of the former leader, the United States, by about 1 billion metric tons and amounts to about 22 percent of the world’s total CO2 emissions.

So things are not good for China: replacing the U.S. as the number one green house gas emitter and suffering from the poor air caused by coal fired power plants. As we say in engineering, "these aren't problems, they are opportunities." And China recognizes the scope of the opportunities, perhaps much better than the U.S.

There’s a consensus among analysts that China is on its way to becoming a dominant player in the global clean energy business. In the past few years, the country has outspent other nations on renewable energy technology and infrastructure, including wind, solar, electric vehicles, and the batteries that power them. Hydroelectric and nuclear power also figure prominently in the country’s energy plans.

Based on government and industry publications and actions — including China’s 12th Five Year Plan, which sets the national governmental agenda for 2011-2015 — the country’s renewable energy sector is poised for strong growth, both domestically and overseas, over the next few years.

Ernst & Young, the global accounting firm, calls China the “clear leader” in the renewable space, ranking the country first in its “Renewable Energy Country Attractiveness Index” report, published in November. The previous leader, holding the title for three and a half years, was the United States; it now is five points behind China.

Similarly, a recent Pew Charitable Trusts report calls China the “world’s clean energy powerhouse.” The country spent $34.6 billion in the renewable energy sector in 2009, according to Pew; that’s nearly twice the U.S. figure of $18.6 billion. Granted, the United States was in the midst of the Great Recession that year. But even as its economy recovers, many pundits say, it’s unlikely the country will regain the lead, given the rhetoric coming out of Washington following the midterm elections.

(EU-27: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.)

Built-asset consultancy EC Harris of London estimates that China invested $120 billion to $160 billion in renewable energy between 2007 and 2010. The consultancy ranks China’s clean energy investment climate fourth, behind Germany, France, and the United States. The investment factors considered include energy policy, incentives, subsidies, purchasing quotas, and tax breaks.

Today, China generates less than 8 percent of its total energy from wind, solar, nuclear, and hydroelectric power, but the nation’s goal is to double nonfossil-fuel-based energy production to 15 percent by 2020, according to the U.S. Energy Information Administration. Coal’s share of the pie is expected to decline to 62 percent by 2035.

Hydroelectric power generation in China will increase significantly as the Three Gorges Dam comes online. When completed this year, the dam will be the largest hydroelectric power plant in the world, with capacity of 22.5 gigawatts. Dams, of course, have their own environmental implications, and the Three Gorges project has stirred controversy at home and abroad. But renewable energy sources, notably wind and solar, are also expected to see dramatic growth in China over the next 10 years.

China is serious about wind power. At the end of 2010, its installed wind capacity was estimated at 40 gigawatts, making it the largest wind market in the world; by 2020, its total wind capacity is expected to reach 300 gigawatts. The country is home to approximately 80 tier-one wind-turbo generator manufacturers, which collectively provide 70 percent of the domestic market’s needs.

In China’s solar industry, the biggest challenge to growth is steady and substantial access to capital, subsidies, and other incentives. Chinese solar companies have benefited from government support, but further investment is needed to ensure the domestic solar market takes off.

State-run China Development Bank Corp. last year agreed to lend $17 billion in total to three Chinese solar companies. These three companies are among the largest solar companies in the world and are in the top 10 of a global list.

In December, it was reported that four Chinese government agencies had given the domestic solar photovoltaic industry a shot in the arm by announcing further support to spur development and scale production in a bid to bring unit costs down. The strategy includes funding for 13 development projects around the country that were announced in 2009 and 2010.

China may not have been a player in the mid- to high-end fossil-fuel vehicle era, but it doesn’t intend to miss out on the emerging market for new-energy vehicles.

The country has set a coordinated national plan to encourage development. It has committed to investment in component and battery technology, and its domestic automotive industry is rolling out all-electric and hybrid vehicles both domestically and internationally.

Extensive electric vehicle (EV) charging infrastructure is being installed in a number of regions. Battery technology will be key to the success of China’s EV industry. The country is becoming an important supplier of lithium-ion batteries, and many companies are forming partnerships with European, North American, and other Asian automakers that have intellectual property and more experience in making EV components and vehicles. And, lest we forget, China has 95% of the world supply of rare earths, an essential ingredient in batteries and other electronic devices such as wind powered generators.

China began this race far back in the pack, but they are sprinting to take the lead. They have a long way to go, and the fact that they are the number one in carbon production and suffer from terrible air pollution means they have a lot of catching up to do. But they are investing in the future, recognizing that green energy is both good for the planet and good for business. Will the U.S. recognize this green giant in time to wake up and compete, or will we be left behind? China has a plan and they are investing in that plan. The sleeping giant is awake.

So, what are we to conclude? Imagine you are a football team preparing for the big game. At risk is the championship, your season, and even the future of your team and program. The scouting report is in on the other team. Ignore this at your peril. As the world awakens to the dangers of climate change, China is investing in the technologies that will position it as the global leader in the efforts to reduce reliance on fossil-fuels.

Imagine again that you are General Motors or Chrysler twenty years ago. Would you be as far sighted as Toyota and invest in hybrid automobiles, or would you assume the future belongs to large trucks and minivans.

Those that do not learn from history are doomed to repeat it. The time is now for the U.S. to wake up to the challenge of China in green energy. We need more than slogans. We need to follow the example of Sputnik and focus our population, our energies, our schools, our government, and our investments on the challenge. The other team is busy working out with a new play book. I’ve given you the scouting report. What will we do with it? “Put me in coach!”

Originally written on February 7, 2011.

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