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Lots of renewables, EVs, and ... coal.
The Chinese economy is back.
After a year dominated by COVID lockdowns, China earlier this week released economic statistics for the first quarter of 2023, reporting robust GDP growth of 4.5%. Given that China is the world’s number one greenhouse gas emitter — by far — what does this news mean for the climate?
Overall, China’s two long-time growth engines — exports and investment — seem to be moving in different directions while its long-desired third growth pillar — consumption — might finally be solidifying.
There are definitely climate bright spots in the data, but also a lot of coal. Let’s dig in.
Construction has been a major piece of China’s growth — and emissions — for decades. But developers have overbuilt — tens of millions of apartments remain vacant — and some are beginning to default. Local governments rely on revenue from developers to pay their own bills, and households have trillions of dollars tied up in speculative bets on real estate. It’s a deeply convoluted political economy mess that I call “China’s carbon triangle” — carbon because the vast amount of steel and cement that go into these buildings cause huge amounts of emissions. Right-sizing the sector could save up to a gigaton a year of CO2 emissions, equivalent to the combined emissions of Canada and Mexico.
The new quarterly data suggests this might be happening, but a big asterisk is needed. Real estate investment dropped almost 6% this quarter, and housing starts fell even faster — “diving 19.2 percent year on year.”
While this might lead one to expect that steel and cement — the key emissions sources of that construction — would be down as well, the data confounds. The reason here is that state fixed asset investments were up significantly (10%). So, despite the private sector remaining cautious in its investments (only up 0.6%), overall investment ticked up, leading to growth in steel and cement production (6% and 4% this quarter, respectively). Infrastructure, even if underutilized, at least provides more benefits to people than ghostly empty towers of apartments.
While they slipped in January and February, in March exports boomed, growing 14.8% year-on-year. It’s possible that this data point is just a blip – an artifact of last year’s Shanghai lockdown as economists expected exports to fall in March as well — but peering into the sectoral makeup of the export data points to some important emerging trends that seem unlikely to dissipate. Most notable in the positive direction are vehicles, specifically electric vehicles. Electronics — hit by U.S. policies — slumped though.
In the first quarter, China’s total vehicle production was down 5% to 6.26 million. By contrast, electric vehicle production grew 22.5% to 1.63 million, over 25% of the total. That’s compared to total U.S. sales in 2022 of only around 800,000 units. Fewer cars with EVs taking an increasingly bigger slice of the pie is key to decarbonizing the transportation sector. The export of inexpensive EVs (like BYD’s Seagull and the ludicrously cheap Changli) makes electrifying autos and transportation possible at a global scale today rather than in 2035.
It is generally acknowledged by both external observers and Chinese government officials that the country needs to move beyond its export and investment dependence. Household consumption is seen as the necessary growth driver of the future in China, but the transition has been difficult. The recent economic data suggests that perhaps the gears are finally turning in this direction. Retail sales jumped 10.6% in March and 5.8% for the quarter overall. There is again a base year effect given the Shanghai lockdown a year ago, but the high level of activity here is probably enough to keep the government from committing to additional stimulus.
While this is good news for China, it might not be good news for the planet. Contrary to expectations for the world’s biggest trader, most of Chinese emissions actually arise from domestic consumption. Trade-adjusted emissions statistics suggest that around 90% of China’s greenhouse gas emissions come from activities consumed in China.
The climate conversation has, for good reason, become dominated by the mantra electrify everything. With clean energy increasingly cheap, we can maintain or even expand energy consumption without emitting greenhouse gases and perhaps achieve abundance.
China has been a key part of this puzzle. Its massive expansion of wind and especially solar PV production has been critical to price declines in these types of renewables. Beyond production, China leads the world in renewable generating capacity, last year installing 87.4 GW of solar and 37.6 GW of wind.
But Beijing’s electricity news isn’t only green. China simultaneously dominated the world in 2022 in new coal power plants. China’s coal fleet is already the world’s largest at over 1,100 GW. That represents more than half of the world’s coal plants, and it’s adding more than the rest of the world combined.
That being said, what matters more than capacity is generation. How much electricity are these plants and facilities actually generating? In recent years, China’s coal plants haven’t been running at full tilt and are shifting to a role of backing-up renewables. In the first quarter, we see that both wind and solar generation continued their rapid growth: 18% and 12% respectively. Total electricity production is up just 2.4%, with thermal power — which is coal-dominated — increasing just 1.7%.
However, the quarterly data masks some interesting patterns in the monthly data. One difficulty with intermittent renewables is, of course, that the sun doesn’t always shine and, in this case the wind doesn’t always blow. And in China, the wind was blowing in January and February much more than it was in March. Wind generation grew in January and February by around 30% but then was flat in March.
More troubling news is in the March data. Last year, China faced droughts so severe that people could walk across the Yangtze. The lack of water meant that the dams which provide so much clean hydropower to the Chinese grid became inoperable, leading to power failures and ramped up coal generation. Unfortunately, we’re already seeing similar dynamics taking place. A major drought in southwest China led to hydropower dropping over 15% in March and more coal was burnt to make up the gap.
All in all it’s a mixed bag: Lots of electric vehicles, lots of renewables, but also lots of cement and lots of coal.
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A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.
Long Islanders, meanwhile, are showing up in support of offshore wind, and more in this week’s edition of The Fight.
Local renewables restrictions are on the rise in the Hawkeye State – and it might have something to do with carbon pipelines.
Iowa’s known as a renewables growth area, producing more wind energy than any other state and offering ample acreage for utility-scale solar development. This has happened despite the fact that Iowa, like Ohio, is home to many large agricultural facilities – a trait that has often fomented conflict over specific projects. Iowa has defied this logic in part because the state was very early to renewables, enacting a state portfolio standard in 1983, signed into law by a Republican governor.
But something else is now on the rise: Counties are passing anti-renewables moratoria and ordinances restricting solar and wind energy development. We analyzed Heatmap Pro data on local laws and found a rise in local restrictions starting in 2021, leading to nearly 20 of the state’s 99 counties – about one fifth – having some form of restrictive ordinance on solar, wind or battery storage.
What is sparking this hostility? Some of it might be counties following the partisan trend, as renewable energy has struggled in hyper-conservative spots in the U.S. But it may also have to do with an outsized focus on land use rights and energy development that emerged from the conflict over carbon pipelines, which has intensified opposition to any usage of eminent domain for energy development.
The central node of this tension is the Summit Carbon Solutions CO2 pipeline. As we explained in a previous edition of The Fight, the carbon transportation network would cross five states, and has galvanized rural opposition against it. Last November, I predicted the Summit pipeline would have an easier time under Trump because of his circle’s support for oil and gas, as well as the placement of former North Dakota Governor Doug Burgum as interior secretary, as Burgum was a major Summit supporter.
Admittedly, this prediction has turned out to be incorrect – but it had nothing to do with Trump. Instead, Summit is now stalled because grassroots opposition to the pipeline quickly mobilized to pressure regulators in states the pipeline is proposed to traverse. They’re aiming to deny the company permits and lobbying state legislatures to pass bills banning the use of eminent domain for carbon pipelines. One of those states is South Dakota, where the governor last month signed an eminent domain ban for CO2 pipelines. On Thursday, South Dakota regulators denied key permits for the pipeline for the third time in a row.
Another place where the Summit opposition is working furiously: Iowa, where opposition to the CO2 pipeline network is so intense that it became an issue in the 2020 presidential primary. Regulators in the state have been more willing to greenlight permits for the project, but grassroots activists have pressured many counties into some form of opposition.
The same counties with CO2 pipeline moratoria have enacted bans or land use restrictions on developing various forms of renewables, too. Like Kossuth County, which passed a resolution decrying the use of eminent domain to construct the Summit pipeline – and then three months later enacted a moratorium on utility-scale solar.
I asked Jessica Manzour, a conservation program associate with Sierra Club fighting the Summit pipeline, about this phenomenon earlier this week. She told me that some counties are opposing CO2 pipelines and then suddenly tacking on or pivoting to renewables next. In other cases, counties with a burgeoning opposition to renewables take up the pipeline cause, too. In either case, this general frustration with energy companies developing large plots of land is kicking up dust in places that previously may have had a much lower opposition risk.
“We painted a roadmap with this Summit fight,” said Jess Manzour, a campaigner with Sierra Club involved in organizing opposition to the pipeline at the grassroots level, who said zealous anti-renewables activists and officials are in some cases lumping these items together under a broad umbrella. ”I don’t know if it’s the people pushing for these ordinances, rather than people taking advantage of the situation.”