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To Achieve Blue Skies, China Needs Common-Sense Energy Policies

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As a former air regulator, I’ve come to the conclusion that China must integrate its energy and environmental policymaking in order to meet its ambitious goals in both areas. Although the path to clean air and efficient electricity markets extends beyond any particular Five-Year Plan, Chinese policymakers have several opportunities to begin integrating these solutions now.

I recently joined Noah Lerner at the Beijing Energy Network (BEN) to highlight several of these opportunities (check out the Green Power 2 episode on the Environment China podcast). These recommendations, which integrate energy solutions into environmental policy and vice versa, are summarized below.

Use the Air Pollution Permit System to Promote Efficient Energy Consumption

On July 1, the Ministry of Environmental Protection (MEP) issued nearly 5,000 permits to enterprises in the pulp and paper and thermal power sectors. This significant accomplishment could have helped to achieve China’s energy sector targets—had these permits also required the enterprises to periodically complete energy audits and implement all cost-effective energy savings measures. Instead, this missed opportunity allows these 5,000 enterprises to operate inefficiently and waste energy until the permits are renewed several years from now.

The best time to improve energy consumption through a permit condition is when the permits are first issued or when an enterprise is expanding its facility and applies for a revision to its permit. This is standard practice under the EU Large Combustion Directive and the US Industrial Boiler MACT. As many other sectors are in MEP’s queue for new permits, terms and conditions requiring these enterprises to complete energy audits and implement the results must be included. However, MEP’s framework to guide the development of permits for other industries makes no mention of consuming energy efficiently. Air permits are an essential component of an air quality management system, and can also be used to advance China’s energy objectives. In a future blog post, I will provide additional recommendations on how this could be accomplished.

Adopt an Environmental Performance Standard for Thermal Power Plants

An environmental performance standard (EPS) establishes emission limits (in kg/MWh) for specific pollutants, such as NOX, SO2, CO2, and mercury, that are applied to a fleet of power plants. When applied to China’s retail suppliers that sell electricity to the large end users participating in the new electricity markets being developed, an EPS will enable use of the most efficient generators and contribute to better air quality. As discussed here, the EPS should apply regardless of the age of particular plants or the type of fuel or technology used.

Improve Electricity Dispatch 

China’s fleet of efficient thermal plants and clean resources like hydro, solar, and wind can improve air quality if electricity grid operators dispatch generators based on their economics and emissions profiles. Despite several directives for priority dispatch based on a generator’s emissions, including Article 42 of the revised Air Law, implementation of “green dispatch” is inconsistent.

While the average thermal efficiency of China’s coal plants is 32 to 33 percent, its newest ultrasupercritical plants reach 44 to 47 percent thermal efficiency. This means the newer plants can produce a megawatt-hour of electricity by burning as much as 50 percent less coal, which translates to much lower air pollution and greenhouse gas emissions compared with the average plants. Using the most efficient plants also allows the older, inefficient ones to close—an action consistent with China’s 13th Five-Year Plan energy targets.

Expand Balancing Areas to Cover Multiple Provinces 

China’s balancing areas generally align with provincial borders, which limits the generation and load management resources available to a grid operator on any given day. If the operator can only choose those resources within a small, rigid boundary, additional generation is built in case it is needed during peak periods or when a generator trips off or is down for maintenance. This results in construction of a lot of extra generation that may only be needed for a few hours each year. If a typhoon or earthquake hits the province, shutting down or tripping off local generators, and grid operators are unable to dispatch generation from adjacent provinces in real time, that province temporarily suffers black out.

What if instead, the grid operator could build in the ability to call on generation and load management actions from adjacent provinces? A reserve margin would still be required, of course, in case some generation goes down, but reliability would be managed over a larger area with more diversified loads (i.e., varied in timing and duration). This approach makes more resources available while simultaneously reducing the aggregate need for reserves. A larger balancing area also enables the grid operator to transmit wind and solar generation to many provinces—reducing the high curtailment rates that are being seen throughout northern and northwestern China. For example, Denmark’s experience as part of a large northern European balancing area helped to reduce that country’s wind curtailment rate to 0.2 percent in 2014.

Experience with larger, regional energy balancing areas operating in Europe and the United States suggests that China will benefit greatly by expanding its own balancing areas. China’s reserve margin of 25 percent could be reduced to the 14 to 16 percent level considered adequate in other countries, allowing older, less efficient and more polluting thermal plants to be phased out.

Conclusions

Achieving China’s 2020 (and beyond) energy and environmental goals requires that these disciplines be integrated. For the power sector, system operations must move toward economic dispatch, to encourage utilization of China’s most efficient (and least polluting) thermal plants and renewable energy generators. This can further evolve into an operational system that favors non-polluting resources (“green” dispatch). Energy balancing areas must be expanded to enable more cost-effective, flexible grid operation and to reduce the overcapacity of large thermal generation.

For air quality, city and provincial plans must integrate clean energy policies and facilitate implementation of economic (and eventually green) dispatch. Permits for additional source categories must be part of the solution to clean energy by requiring facilities to complete and implement the results of energy audits. Categories for which permits have already been issued must include energy audit provisions when they are renewed or revised.