BloombergNEF: China can achieve net-zero energy emissions by 2050 while strengthening its energy security
Beijing, May 30, 2023 – China’s transition to a net-zero economy by 2050 represents at least a $37.7 trillion investment opportunity in the country’s energy system, according to the New Energy Outlook: China report, published today by research company BloombergNEF (BNEF). The report details two scenarios for China’s energy system and implications for the country’s energy security.
Successful power sector decarbonization key to unlock China’s energy transition
China is already the world’s largest market for renewables, however it also remains the largest consumer of coal and, as a result, the world’s largest CO2 emitter. BNEF’s analysis finds that maximizing deployment of solar and wind, complemented by targeted additions of energy storage, nuclear and carbon capture and storage (CCS) for thermal power plants, is the cheapest way for China to decarbonize its power supply.
In BNEF’s Net Zero Scenario (NZS), which charts a pathway for China to reach net zero by 2050 while keeping global temperature rise well below 2 degrees Celsius, wind and solar cumulative installations reach over 6,700 gigawatts by 2050, up from 800 gigawatts in 2022. By 2050, China’s NZS requires 352 gigawatts of nuclear power capacity, up from 57 gigawatts in 2022.
China’s annual electricity consumption in BNEF’s Net Zero Scenario exceeds 17,000TWh by 2050, more than double the current level, and 49% higher than the base case, the Economic Transition Scenario. This is driven by economic growth and accelerated electrification in the transport, buildings, and industry sectors. Most of the power generation comes from wind and solar generation, which account for 75% of electricity supplied under NZS in 2050, while nuclear provides 14%, with the rest of demand met primarily by coal power plants equipped with CCS.
China already leads the world in energy transition investment, accounting for $550 billion in spending in 2022, or around half of the global total. To stay on track for net zero by 2050, China will have to triple the rate of investment in the latter half of this decade to an annual average of $1.66 trillion. Post 2030, there will be a gradual decline in the level of investment required, thanks to continued reduction in technology costs.
Increased deployment of renewables coupled with electrification of mobility and industry will strengthen China’s energy security
Under the NZS, China’s coal consumption peaks in 2023, oil consumption peaks in 2024, and gas consumption peaks in 2029. By 2050, oil consumption is 60% below 2022 levels, with the remainder primarily used as feedstock rather than fuel. Gas consumption in 2050 is 73% below 2022 levels. The sharp decline in oil and gas consumption, mainly driven by electrification of road transport and industry, significantly reduces China’s dependence on imports, strengthening its energy security.
Clean hydrogen contributes to decarbonization where direct electrification is not feasible or too costly. Under the NZS, China’s annual hydrogen demand grows from about 25 million metric tons (Mt) in 2021 to 108Mt by 2050. The largest growth driver is the decarbonization of the steel sector. The power sector consumes 5Mt of hydrogen in 2050, primarily for back-up capacity. Hydrogen use in shipping, mostly as derivative fuels such as ammonia and methanol, starts in the late 2030s and reaches annual consumption of 5Mt in 2050.
China needs to improve utilization of mature renewable technologies while accelerating investment in new climate solutions
The electricity grid is a critical component for getting to net zero. China needs to ensure its ongoing electricity market reforms and grid expansion plans can help accelerate renewable deployment and grid integration. China’s current approach to expansion of ultra-high voltage (UHV) lines requires bundling electricity from renewables with electricity from coal power plants. China needs to increase the share of renewables in its electricity supply and actively find ways to reduce emissions from coal. China will also need to provide more support for decarbonization technologies for heavy industry, such as clean hydrogen, CCS and advanced nuclear.
“China already leads the world in manufacturing and deployment of renewables, batteries and electric vehicles” said Nannan Kou, Head of China Research at BNEF. “China now needs to accelerate support for early-stage technologies such as clean hydrogen, CCS and advanced nuclear to ensure these technologies can be commercialized in a timely manner.”
This research forms part of a series of regional and sector reports diving deeper into results from BloombergNEF’s global New Energy Outlook report for Europe, Australia, China, the US, Japan, and India over the coming months. Reports summaries are available at about.bnef.com/new-energy-outlook-series.
Contact
Oktavia Catsaros
BloombergNEF
+1-212-617-9209
ocatsaros@bloomberg.net
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