The construction of spectacular 40 MW solar park onto of a lake formed by collapsed coal mines in Anhui province is a symbol of China’s efforts to develop renewable energy, but also a reminder that the country remains heavily dependent on coal as a power source. This contradiction remains apparent in its investments abroad which are split between fossil fuels and new renewable technology.
China’s Belt and Road project has attracted much attention for its potential to improve infrastructure such as roads and rail and increase “connectivity” across Eurasia, to achieve these aims significant funds are being pumped into the transport sector creating a new network of Chinese backed transit routes that will criss-cross the continent.
The natural partner of infrastructure is power and energy, which are required in abundance to build a modern economy. The Belt and Road includes a large number in construction or planned power production facilities and transmission grids, some estimates place 40 percent of Belt and Road projects in this category.
Many of these are in forward looking renewable energy projects, however many current or projected power plants will use fossil fuels such as coal. China’s energy policy has two heads, in many respects its companies are leading the way in developing innovative renewable energy with huge capacity for production in solar panels, wind turbines and large scale battery production which all reflects the government’s desire to build an “ecological civilisation”. On the other hand Chinese firms are still merrily constructing multiple coal plants across the world, while shutting many older plants at home.
The China Pakistan Economic Corridor is one of the flagships projects in the Belt and Road initiative and the USD 2 billion Thar coal fired power station is one of the key planks of the corridor, one which will help eliminate power shortages in Pakistan and allow it to continue on its current growth trajectory, but of course not one that promotes China’s environmental credentials.
However other projects like the nearly complete 50 MW Dawood wind farm built by Hydrochina International Engineering Co. Ltd and the 900 MW part complete Bahawalpur Quaid-e-Azam Solar Park built by Solar giant Zonergy demonstrate that Chinese firms are also committing to renewable production in Pakistan.
At the other end of the new Silk Road in Eastern Europe China is also involved in building coal plants in Bosnia, these are being built by Dongfang electric and financed by the ubiquitous China Development Bank. The new power station will run on the highly polluting lignite coal which is widely available in the Balkans. The opening of the new plant despite environmental concerns is a sign that the region remains dependent on cheap energy and is also a reminder of the power of the local coal lobby.
Chinese investment in renewables across the Balkans on the other hand has lagged behind. Huayi wind energy has recently set up an office in Belgrade the Serbian capital and plans a series of wind farms in the country. Serbia has already a track record of hosting renewable energy projects, but Chinese backed projects will be a new addition.
China has been a staunch supporter of Iran both politically and commercially, while contact with many international businesses dried up as international sanctions were enforced on Tehran, Chinese firms remained heavily engaged in the country. Chinese firms like Sinopec stepped in when foreign oil and gas companies had to pull out, such as taking over the running of oil and gas fields like Azedegan in the west of the country, which was formerly run by a Japanese firm.
Hydrocarbons remain critical to the Iranian economy but unlike its great rival Saudi Arabia it does not remain dependent on one export and is a relatively diversified economy. Iran is now looking to take advantage of its ample sunlight and plentiful wind resources and focus more on renewable energy capacity. As part of this strategy Shanxi International Energy Group (SIEG) agreed to build several photovoltaic power stations across the country which will produce 600 MW of energy. This should prove just the start of Chinese engagement in the Iranian renewable sector.
Another country synonymous with oil and gas is Central Asian giant Kazakhstan, China has invested heavily in its neighbour’s hydrocarbon sector eager to secure local supplies of energy, the most notorious example being the long delayed and controversial Kashgan field.
Chinese private firm CPEC Energy took a stake in state owned KMG International (KMGI) using funds from the Silk Road investment fund, which will give it an important stake in Kazakh oil and gas distribution.
For now this pattern of importing oil via pipeline will remain the dominant energy nexus between China and Kazakhstan, but things are also changing fast.
However Kazakhstan also has excellent potential for alternative energy sources, the recent dramatic fall in oil prices has forced the government in Astana to rethink its dependency on oil revenues and look to diversify its economy by encouraging new technology and welcoming foreign companies into the country.
This means companies like SANY group are looking to develop wind projects in Kazakhstan a large low density population country with wide open steppes should be ideal for wind power and there is already a track record of success. Renewable energy fits in neatly with the Kazakh Burly Zhol or Bright Path development programme which promises to transform the Kazakh economy. Astana is currently hosting a major conference on sustainable energy which will help cement its place as a regional leader in this sector.
Central Asia as a whole has tripled its sustainable energy use recently installing 500 MW of power in the last two years. Of course this is from a low base and the region remains heavily dependent on oil and gas for power supplies and export revenues.
The Belt and Road is a huge, sprawling and often ill-defined project so contradictions are perhaps to be expected, but as China’s overseas energy ambitions spread it will be worth watching whether renewables take the lead or it will represent a strong new financing source for fossil fuel projects.