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Recent net-zero carbon pledges by China, Japan and South Korea
should not be viewed as a green wave until these countries are able
to wean themselves off coal and oil, analysts told IHS Markit.
China, Japan and South Korea satisfy at least half of their
energy demands through coal, which is responsible for most of their
greenhouse gas emissions.
Achieving net-zero carbon levels at least by 2050 (in line with
the 2015 Paris Accord on climate change) means reducing carbon
dioxide emissions as low as possible, while balancing any remaining
emissions with an equivalent amount of carbon removal, Kelly Levin,
senior associate with the World Resources Institute's global
climate program, said in an interview with IHS Markit.
Analysts, though lauding the net-zero carbon pledges, question
how these countries plan to meet their goals given their reliance
on fossil fuels. They argue that if South Korea, China and Japan
are serious about meeting their pledges then they have to stop
financing coal-fired power plant construction within their own
borders and across Asia.
"I applaud these goals, but I want to see an implementable plan
for the next 10-15 years for reducing carbon emissions. I have not
seen that yet," said Henry Lee, director of the Harvard Kennedy
School of Government's Environment and Natural Resources
Program.
China, Japan and South Korea are expected to publish plans in
2021 spelling out the measures they will be taking in the next
decade or so to boost the share of renewables and limit dependence
on coal-fired and nuclear generation.
Decarbonizing the economy
To meet net-zero carbon goals, the countries have to
aggressively decarbonize their power and industrial sectors of coal
and oil, and their transportation sector of gasoline and diesel,
said Steven Knell, IHS Markit research and analysis director, who
specializes in low carbon-transitions.
It also means improving the energy efficiency of industries,
modernizing the grid, expanding renewables generation and investing
in hydrogen and carbon capture technologies, he said.
Despite its net zero carbon pledge, China is still heavily
involved in overseas financing of coal-fired generation across
South Asia, Southeast Asia and Africa.
Between 2000 and 2017, China invested $115 billion in an
estimated 462 power plant projects. Nearly half of that financing
was geared toward expanding and building coal-fired generation,
according to a recent
study by Princeton University's Center for Policy Research on
Energy and the Environment.
Japan in July announced it would tighten rules for overseas
financing of coal-fired capacity, but stopped short of banning such
support. Across the South China Sea, state-run Korea Electric Power
Corp. in late October agreed to stop financing coal-fired power
plants and to convert those plants already in the pipeline to LNG,
including the 630-MW Thabametsi plant in South Africa and the
1,000-MW Sual 2 project in the Philippines.
Moving ahead on coal build
Despite their net-zero carbon pledges, all three nations are
pushing ahead with new coal-fired power plant construction.
To Melissa Brown, energy finance studies director for the
nonprofit Institute for Energy Economics and Financial Analysis,
all signs point to the end of the fossil fuel generation. But she
said, Japan, South Korea and China are indulging in their one last
fossil fuel binge "before they get ready to drink a toast to their
sobriety."
By the end of 2020, China is expected to be building 87.86 GW,
while Japan and South Korea are each adding about 5.73 GW out of a
total of 191 GW of new coal-fired generation in the Asia Pacific
region, according to the IHS Markit's Asia Pacific power pipeline
tracker for the third quarter of 2020.
Together, the three will be responsible for bringing about 52%
of new coal-fired capacity online in the Asia Pacific region in
2020.
China's 'Herculean task'
IHS Markit's own analysts believe China faces "a Herculean task"
of decarbonizing its economy even as the country's appetite for
energy continues to grow.
"It is an unrealistic goal, but not impossible" for China, Knell
added.
As the world's largest emitter of greenhouse gases, China's
commitment will require it to pull out all the stops to reduce its
coal appetite, which as of 2019 stood at 3.3 billion metric
tons.
Currently, IHS Markit data reports 60% of coal consumed in China
is used to generate electricity and about 22% is used to meet
direct industrial demand for steam and heat.
China emitted an estimated 10 billion mt of carbon emissions in
2019, twice as much as the second-largest emitter, the United
States. Coal, which dominates energy use in the power generation
and industrial sectors, accounts for 64% of China's current carbon
emissions, with the transportation sector, which is dominated by
oil products, representing another 12%.
And China has committed to capping its coal-fired capacity at
1,100 GW by 2020. However, Ranping Song, WRI's developing country
climate action manager, points to China's continued addition of new
coal-fired capacity as evidence of the country's reluctance to let
go of coal.
Xizhou Zhou, who leads IHS Markit's global power and renewables
practice, is of the view that China's coal consumption is
plateauing.
In a 4 November opinion article, Zhou argued that the addition
of new coal-fired capacity, which is equipped with state-of-the-art
pollution controls, has been more than offset by retirements of 119
GW of mostly old and inefficient coal-fired power plants during the
past decade.
Although the new coal-fired capacity in many instances is
replacing the older plants, Zhou said the newbuild also is being
installed to match the intermittent wind and solar loads.
Replacing coal capacity
While reducing coal consumption in power generation and
industrial processes is key to achieving carbon neutrality, the
real difficulty lies in whether China can replace the sheer mass of
coal capacity that will be retired after the 30- to 40-year
lifespans of the plants are reached.
IHS Markit estimates that by the end of 2045 China could retire
as much as 660 GW, "which is enough to power the European Union
today."
In practical terms, this means China needs to find zero-carbon
sources, such as hydrogen and renewables, to meet energy demand in
the next decade.
Analysts point out that more than one-third of the world's wind
and solar projects currently operating are in China, but critics
note that China also has the most coal-fired capacity installed at
1,005 GW, which is five times more than the U.S. and India.
China not only has taken the global lead in making the most wind
turbines and solar modules, but also has managed to make them
cost-effective.
"For Chinese companies, entering the renewable energy industry
is smart economics: demand for wind turbines, solar panels, and
batteries is rising worldwide, and they want to be the ones to meet
it," according to an IHS Markit report.
The bottom line is "If China is serious, it has to reform its
electric sector," in particular by modernizing its grid, Lee
said.
Currently the electricity system is heavily weighted toward grid
companies in the north and south of China that favor coal-fired
generation, and until very recently resisted hooking up renewables,
he added.
Lee said China is still relying on regulations dating back to
the 1990s that favored fossil fuel generation.
Still other analysts say Beijing can achieve this by making
industrial processes more energy efficient, using more low-carbon
emitting natural gas in the next decade, pushing more stringent
standards for renewables, and investing in renewables other than
wind and solar.
IEEFA's Brown said China also has to drastically restructure its
energy economy so that all parts of the country can benefit equally
from the push toward a clean energy economy. The majority of
China's coal mines and related jobs are concentrated in the north
and northeast, while the bulk of renewables activity has been in
the south.
Coal, nuclear powerremain a problem for
Japan
Japan, the world's fifth-largest emitter of greenhouse gases at
1.2 billion mt in 2019, also needs an updated long-term energy plan
to reach its net-zero goals. IHS Markit analysts, however, doubt
the country will even reach the targets set in 2015 to limit power
sector's carbon emissions by 2030.
The 2015 plan limited nuclear energy to 20-22% of power
generation by 2030, coal to 26%, LNG to 27% and oil to 3%, while
growing renewables' share to 22-24%.
IHS Markit analysts say Japan won't meet its nuclear target
because of strong public opposition, and its plan to shutter most
of its existing coal-fired fleet has no timeline and hinges upon
the impact the closures would have on regional demand and power
costs.
Japan would have to restart 27 of its 58 nuclear plants to
maintain the segment's share at 20%, but that seems doubtful given
only nine have managed to restart so far following the Fukushima
disaster in 2011.
Looking ahead though, IHS Markit analysts estimate nuclear's
generation share in Japan will drop to 14% in 2030 and renewables,
mostly solar and wind, would fill the gap without any corresponding
increase in coal, gas or oil's slice of the pie.
Boosting renewables not enough for South
Korea
South Korea also faces a problem in meeting its net-zero pledge
by mid-century because of its heavy reliance on coal-fired
generation.
About 41% of South Korea's 679 million mt of 2019 GHG emissions
came from the power sector, notably coal-fired generation,
according to IHS Markit research.
"The net-zero target is certainly a challenging one given South
Korea's high reliance on coal, which accounted for 40% of total
electricity in 2019," Vince Heo, associate director in IHS Markit's
Global Power, Energy and Futures team in Seoul, who authored the
research.
While the country's most recent draft energy plan envisages the
shuttering of 10 coal-fired plants by 2022 and another 20 by 2034,
South Korea also has about eight coal-fired plants under
construction with a combined capacity of 7.5 GW, which are all due
to come online before 2025.
Unless the government intervenes, Heo said these new plants,
though they are equipped with state-of-the-art pollution controls,
will still be operational beyond 2050.
A bill awaiting action in South Korea's parliament would
compensate companies for withdrawing their proposals to build
coal-fired plants, but Heo is skeptical whether this bill is likely
to move given the burden it would place on an already strained
federal budget.
South Korea's ninth and most recent draft energy plan seeks to
boost renewables' share of installed capacity, mainly through wind
and solar additions, to 33.7% in 2030 from 13% in 2019. This
increase in renewables is in line with President Moon Jae-In's
recent net-zero carbon pledge and a campaign promise to wean the
country off its fossil fuel addiction. Moon, however, has been
unsuccessful in canceling plans already in place to build
coal-fired capacity.
IHS Markit's third quarter 2020 power pipeline tracker for the
Asia Pacific region shows that Japan and South Korea are expected
to add more offshore wind plants this year.
Japan and South Korea hold over 40% of the share of clean energy
in the pipeline for 2020 under IHS Markit's Clean Power Index,
which is calculated as a ratio of new clean power capacity over
total pipeline capacity.
Posted 15 December 2020 by Amena Saiyid, Senior Climate and Energy Research Analyst