"The Chinese State’s Gradual Retreat from New Energy Industries?"
From Macro Polo:
If there is a silver lining in the COVID-19 shock, it is irrefutably
demonstrating the linkage between human activity and carbon emissions.
As major economies shut down, power consumption plummeted and CO2emissions invariably dropped—some estimates indicate that China alone experienced an 18% reduction in the seven weeks after Chinese New Year (see Figure 1).
China was one of the first to flatten the curve of the pandemic. But
now, as the first major economy to begin recovery, will Beijing be able
to keep bending the emissions curve? That largely hinges on the choices
China makes as part of its recovery and its commitment to transitioning
to a low-carbon economy....
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...So far, China has signaled that it will not launch a massive stimulus
aimed at energy-intensive projects as it did during the global
financial crisis, which will help to check emissions. And even as energy
consumption is all but guaranteed to rise as the economy rebounds,
Beijing is not abandoning its focus on developing new energy industries.
Recessions nonetheless have a way of reordering priorities, and new
energy industries in particular could feel the pinch as they have long
relied on generous state support. What’s more, the dire conditions in
the private sector and the drying up of capital could further dampen enthusiasm for investment.
The prospects of these emerging industries are integral to China’s
shift away from reliance on fossil fuels. Here, we will look at two that
are key to achieving those goals: solar energy and electric vehicles
(EVs). What follows is a preliminary assessment, as a detailed case
study of the EV industry is forthcoming.
New Energy Industries Face New Uncertainties
Even without the pandemic crisis, this year would have marked the
start of a more trying phase for the solar photovoltaic (PV) and EV
industries. Consumer subsidies for EVs were expected to be phased out by
the end of 2020 and the solar PV industry recently shifted toward a
more market-based project bidding system.
In March of this year, the National Energy Administration announced
that solar subsidies would be halved from 2019 to a total of 1.5 billion yuan
(~$212 million), of which 1 billion yuan (~$141 million) will go toward
utility-scale PV projects. These steps are increasingly justified as
solar is becoming competitive with coal-fired power plants, as evidenced
by the fact that some 20%
of new solar capacity added in 2019 was at grid parity or better. The
average price of unsubsidized solar power is $38/Mwh, fast approaching
the $35/Mwh of coal power in China, according to Bloomberg New Energy Finance Wood Mackenzie, for example, predicts that solar would reach parity with coal in about six years (see Figure 2)....
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