- The already fragile supply chains of industrial companies in China were further disturbed by power crunches caused by insufficient hydropower this summer. Especially in Sichuan, where important suppliers of semiconductor and automotive components could not deliver in time.
- There are discussions on whether China could give up its promises of achieving the carbon peak by 2030 and instead ramp up its capacity for coal production and coal power generation to increase energy security.
- However, the latest data issued by the National Energy Administration (NEA) and China Electricity Council (CEC) does not indicate such an adjustment so far.
- Contrarily, China continues to gradually ramp up its renewable energy (RE) generation capacity, mostly in wind power and PV, but also in traditional hydropower. The ratio of RE capacity as of 2022 H1 is 45.9 percent, 1,1 percentage points higher than that at the end of 2021.
- The ratio of RE in total electricity volume is also increasing steadily from 29.7 percent in 2021 to 31.6 percent in the first half of 2022, mostly driven by the volume growth of hydropower (+20.3 percent yoy) and PV (+29.8 percent yoy) and the decrease of coal power (-4.0 percent yoy).
- On the other hand, coal power is still the largest source of electricity generation and China is building up new “clean coal-based” power capacities. Furthermore, China strives to strengthen the resilience of its power system to manage extreme weather events in the future. But thus far this does not amount to a fundamental deviation from China’s decarbonization goal.
- Consequently, decarbonization remains one of the areas where China and other countries can cooperate closely. And foreign companies in the Chinese market can continue to push their corporate decarbonization strategy via their China business.
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.