China’s Energy, China’s Power: An Interview with China Energy Specialists, Elizabeth Balkan and Chris Brown
The US-China relationship has entered into a new energy era, one where hope clashes with history and future collaboration is threatened by unnecessary competition. While the two nations are taking considerable steps toward the development and implementation of renewable energy technologies, their entangled dependence on coal remains; the US and China now account for nearly half of the world’s carbon emissions. Is a US-China coal “cartel” inevitable? Will bilateral cooperation lead to future opportunities in low-carbon innovations? Or, will self-serving interests steer the US and China down divergent paths? I had the chance to talk with Elizabeth Balkan and Chris Brown, China energy and climate change specialists who posses exceptional knowledge on the future of clean energy, green infrastructure, and the policies that shape this US-China equation. Together, their unique insights are unparalleled. To learn more, read on:
In addition to your energy sector expertise, you both possess a deep knowledge of China as well as fluency in Mandarin. What brought you to China in the first place and how did your experiences abroad shape your professional lives today?
Elizabeth: I studied Mandarin throughout college and wanted to deepen my cultural understanding. For that reason, ever since college I’ve been working in a capacity that involves China. For the first part of my career, I focused on social and environmental compliance in the field, and through that work I became aware firsthand of the environmental situation in China. I was quite alarmed to the point of wanting to address it in my career and combine the US’s strength in innovation with China’s strength in manufacturing capacity.
I had been spending a lot of time in factories and manufacturing facilities, and was mired by the absence of incentives for compliance and scale of China production capacity which, aside from serving Western consumption, wasn’t really doing anything to get China towards a sustainable course of development. That experience prompted me to go back to school to get my Master’s degree, where I focused on environmental economics and sustainable development with an eye towards China and towards finding a way to make environmental technology commercially viable with the use of China’s manufacturing capacity. For me, while I recognize that the on-the-ground issues related to the environment and the situation are extremely important, I find it critical to first work on bigger, more sweeping solutions in order to help people understand what China is capable of doing – installing the hardware before the software, you could say. In the last year, my work has become increasingly shaped by indications from the Central Government as to what they are willing to do in terms of funding, policymaking and national commitments.
Chris: I also studied Chinese in undergrad, as well as studying abroad in Beijing. I then lived in Jilin City for a year and it was there that the Uighur students got me interested in Xinjiang. For the Spring of ‘89, near the end of the semester, most of the Han students were protesting so I ended up bonding with the Uighur ones because they were the ones who showed up for class. Following Jilin I moved to Taiwan, where I worked in Taiwan radio for a few years, mostly in Chinese and on the air. I then came back to the US, where I got my Master’s in Chinese Studies at the University of Washington and had the chance to study Xinjiang policy. I’d wanted to study Uighur, but the closest language they offered was Kyrgyz. That led me to work in naval intelligence for three years, [followed by a position as a Defense Analyst] with the Defense Intelligence Agency (DIA) in D.C. Since I’d been studying Kyrgyz all along, they had me groomed as the Xinjiang expert. That was actually my start into energy- I’d been looking at energy issues for the government and particularly for the Department of Defense from a “threat security” perspective. Basically, it boiled down to “what’s China up to in Central Asia and what are they doing to secure resources?” I was also involved in stability studies with a focus on two questions: 1) what is China doing to internationally secure resources in Africa, Venezuela and Central Asia, and 2) how does that tie into long-term stability in terms of keeping the economy going? But, I wasn’t really interested in looking at energy issues from a security perspective, so I left the government in 2005 to pursue opportunities with China energy projects and look at it in terms of how the US and China cooperate, as opposed to working from the standpoint of seeing China as a threat. I no longer viewed it from a government perspective; it was more about what I could do to facilitate cooperation and bring the two sides together. For me, I’ve been looking more at clean energy over environmental issues, but obviously there’s an overlap.
China is reportedly spending $230 billion in stimulus money on “green infrastructure.” What is this investment targeting, specifically? Could you tell me about some of the projects currently underway?
Chris: 40 percent of China’s stimulus package is going to the green economy. There’s a big push to get a domestic solar market. They started off in March with the Solar Roofs Program and then in late July they announced the Golden Sun project, which is more utility-level. The difference between the two programs is that the “Golden Sun” targets larger utility-scale projects, probably mounted on the ground instead of buildings, and more than 300 kw, and complements the Solar Roofs Program, which as the name implies, is meant for roof top projects not less than 50 kw. The Golden Sun policy explicitly excludes projects which fall under the Solar Roofs Program from benefiting under the Golden Sun program.
China’s government will subsidize 50 percent of projects that focus on- for instance- grid connections. It’s very impressive and aggressive.
Elizabeth: There’s been some very good analysis done about how the stimulus money is being used and classified. My sense is that there’s a lot being done and generally speaking, green and non-green funding are creating positive feedback to help leapfrog China’s infrastructure, which is a reflection of the central policy on the circular economy. For instance, you have projects like railways- which could be considered “green” or “not green,” depending on your perspective. It’s not really a renewable energy and doesn’t address transportation-related emissions issues, but at the same time it’s better than building roadways. These kinds of things point to a difficulty in arriving at a [RMB amount] allocated to green projects. The way that some analysts have sliced and diced the numbers gives a false impression. From my perspective, there seems to be promotion in some circles that China is racing ahead of the US, which is spawning a competitive drive in Washington. This is not the message that should be conveyed because the numbers may be bigger than what may be specifically allocated towards “green.” Even if China does exceed these numbers, [these initiatives] shouldn’t be turned into a trade war.
In some ways, the US and China seem to remain divided on the issue of climate change, although both countries are taking significant steps to combat their own environmental problems. China has recently become the top polluter of greenhouse gases, surpassing the United States; the two nations now account for more than 40 percent of the world’s carbon emissions. What are some of the steps that China is taking, and where do you see opportunities for US-China cooperation on the issue? What are some of the challenges?
Chris: Jim Rogers from Duke Energy recently talked about how much they’ve done with carbon capture and sequestration, which holds huge potential for China. I think it gets more difficult with some of the renewables. Having said that, First Solar in Inner Mongolia is involved in this massive utility-level solar project and has brought in its own engineers while incorporating knowledge from the Chinese side.
I’ve been very impressed with how smooth the technological exchange process has been on this First Solar project- so far. But, they’re at the very beginning stages so of course, policy vs. implementation problems could still occur.
Elizabeth: I would characterize the US-China position on climate change not as being at odds, but as perhaps differing in terms of their perception of responsibility. While I think China and the US are equally committed to being responsible and active players in combating climate change, there’s a difference between the United States position on how China should address climate change, and China’s position on what it should do. It’s been repeated many times, but the controversy surrounding historical vs. current emissions and gross vs. per capita emissions remains. Depending on how you read the numbers, China can either look really good or really bad. Also, there’s the debate about whether China is a developed or a developing country. So, I think the challenges and the opportunities stem from that difference in stance. The US seems to believe that China should be doing as much as the US. China has indicated that- at least in this round of negotiations- no cap on emissions will be committed to. Responsibility for some of the funding is another issue that has seen some disagreement. China’s feeling is that the US, as a historically bigger emitter, should fund a lot of the abatement initiatives in China.
Chris: Have you seen differences in policy from administration to administration on the US side?
Elizabeth: Have I seen [those differences]? Yes. I think there’s been a huge change from the administration, but then again you come down to issues like funding and technology transfer and even the current administration doesn’t really seem as yet fully equipped to address those things. US-China alignment, to be activated in a way that’s going to meaningfully bring climate change solutions is going to require a lot of money, cooperation and technology transfer.
Chris: Orville Schell had conveyed that at a [recent Carnegie Panel]. He’d said that, at this level, let’s put aside questions regarding whose responsibility it is historically…. Really, where this is going to hit a wall is in Congress- trying to sell things like technology transfer and financing.
Elizabeth: Right. I think a lot of people in Washington have a hard time understanding why China needs funding when they’re the ones who bailed the US out of the economic crisis. It’s a more complex issue than that, but I can understand why people have a hard time understanding why China’s looking for handouts.
A recent Pacific Northwest National Laboratory study summarized by The New York Times predicts that “China’s vast underground repositories could store more than a century’s worth of carbon emissions from coal-fired power plants and industrial facilities, permitting use of cheap, industrial coal.” Given what we know about China’s coal dependency and the negative effects coal has on the environment, what could this discovery mean in terms of policy dialogue?
Chris: I’m glad you bring up coal. Coal is just an inescapable fact of life in China’s energy future. I think that the green movement in general tends to be too purist, especially when it comes to China. Coal is just not going to go away. Do we focus on cooperation like the Duke Energy deal or do we cooperate on clean ways of burning it or do we make it a pariah?
Elizabeth: There seems to be a dangerous trajectory toward US-China cooperation becoming a coal cartel, which is to say that although the US and China have very different positions and circumstances, one thing that brings them together- while setting them apart from the EU- is their large-scale dependence on coal. The EU has drastically reduced its coal dependence. I worry that this common position will somehow trump the importance of a multilateral agreement aimed at diversifying fuel sources away from coal. The US and China as two main powers do have the ability to derail that process by conveying “we need coal and that’s not going to go away, so the rest of the world better get used to it.”
If all of China’s dirty coal-fired plants were shut down and cleaner coal-fired power plants were brought online, I do think the negative effects of coal would be mitigated. I will say that many inefficient power plants have been shut down, but being familiar with this on-the-ground situation in China, it’s still not enough. China’s energy demand and the anticipated rate of energy growth over the next twenty to thirty years leads me to suspect that it will be impossible to shut down enough of those small power plants and bring online cleaner ones which will make enough impact. There’s a reluctance to shut them down, given the growing energy demand in the cities.
Chris: I guess I’m coming from a late 80s, early 90s perspective. I agree that there needs to be pressure on the coal issue. That excuse of “well, it’s not going to go away” is sloppy and lazy. However, I am looking at China’s cleaning up its coal industry as a glass half full rather than half empty. They are doing a better job than I would have expected, shutting down smaller inefficient plants and replacing them with larger, cleaner and more efficient ones. It is not a one-to-one replacement and there is a net gain in coal capacity but the result is that China’s coal plants have increased their thermal efficiency by 5.6% over the past three years.
Elizabeth: I’d like to add something on the findings of an MIT study, which was really interesting. They went to 85 power plants with a total of 299 generating units, almost 80% of which were outfitted with “clean coal” SO2 scrubbers, and they found that, in many of these facilities, a lot of the environmental technologies that had been added were not being used because they are expensive to use, and sub-grade coal was being used in a lot of these advanced facilities. You can have the most advanced equipment, but if you don’t have the proper operations and if you don’t have proper enforcement and monitoring to ensure that, then you won’t have clean power plants. It’s more than just shutting down the dirty coal plants and building clean ones. In the US, we have these automatic reports sent to the EPA but in China, there’s nothing like that.
What are some of the opportunities in clean energy and green building for entrepreneurs standing on the US-China bridge?
Chris: Solar is fresh in my mind; there’s so much opportunity for China to develop that market. I’m amazed at the access they’re giving for solar and I’ll use that as just one example. Investing in First Solar and being involved with First Solar and Suntech, being involved with solar expansion and utility-level projects in China. At the same time, China’s solar companies are being very aggressive about going overseas- [expanding] into Pakistan and setting up PV cell plants here in the US.
Elizabeth: I think a lot of the opportunities will depend on emerging legislation from Washington as well as outcomes from Copenhagen. Chris and I attended a conference on China-US clean energy economy. They made it sound like, in two weeks time, there would be a robust carbon trading market within China, which is something that holds a lot of opportunities for entrepreneurs, both in financial and non-financial areas. But, the prospect for the development of those markets and the speed at which those markets will develop is still uncertain. Apart from policy and legislation, there needs to be some key transformation in China’s market behaviors to really make China’s climate-related business opportunities blossom. I think, within a year’s time, we’ll know with greater certainty what types of opportunities will come online. You can see just by China’s market transformation over the past twenty years that it will happen, and it will happen quickly.
Chris: I’d watch state and provincial level activities. Qinghai has been very aggressive in putting money into [clean energy]. Jiangsu likes to think of itself as the “California of China”. Not only has the provincial government been aggressive in promoting solar within Jiangsu but they have been very active creating relationships with US state governments, California in particular. There have been several Jiangsu-California conference and workshops over the last year including a Jiangsu-California Clean Tech Exchange workshop in May. I also find it interesting how the Jiangsu government has been working with the American Council on Renewable Energy (ACORE) as their liaison between them and the US DOE and California state government. The military is also funding new energy projects.
Elizabeth: The bottom line in China is often different than the US. Return on investment and cost benefit analysis dictates how money gets spent in the US, whether private or public sector. In China, the calculation is often different. One instance that I’ve seen: a Chinese municipality wanted to adopt an emerging technology for treatment of waste. Within the financial world, that was considered unproven, unviable and not a sound investment. But, the municipality said “we’re not looking at this from purely economic terms. We’re looking at it from a social perspective.” That’s something that is unique in China and will lead to significant opportunities.
What’s next for you?
Elizabeth: I’d like to continue on the same trajectory, consulting independently on issues related to China’s environmental actions and opportunities for alignment between the US and China to develop and deploy cleaner energy.
Chris: Much the same- continuing with renewables, specifically. I’ve really enjoyed working with companies trying to bridge the two sides and forge cooperation.
Elizabeth Balkan is an independent consultant currently based in New York City who specializes in energy efficiency and climate issues. To learn more about Elizabeth, be sure to check out her website, New Energy and Environment Digest (新能源与环保参考) at www.needigest.com and her Linkedin profile. You can also follow her on Twitter @needigest. Chris Brown is a China energy consultant also based in New York City and currently serves as a liaison, translator and research manager for Chinese and Japanese companies who are expanding into the North American solar energy market. Visit his Linkedin profile and blog, solarsite, to learn more. You can also follow Chris on Twitter @chrisrbrown.