China will fail to meet its carbon and energy intensity targets unless it makes dramatic changes to its electricity grid, a groundbreaking new report finds.

The study, two years in the making, finds that China's grid is its "Achilles' heel," said lead author and Energy Transition Research Institute Research Director William Chandler. While newer and in many ways more technologically advanced than the U.S. grid, China's system is nevertheless being built to perpetuate the use of coal and large hydropower projects.

"The most important thing in the world for meeting carbon goals is what China does in its overall energy policy in the next 10 years. And the big hole in meeting those targets is in the electric power system," Chandler said in an exclusive interview with ClimateWire.

"They are in serious danger of losing the battle to meet their carbon and energy-intensity goals," he said. "Without strong new demand-side measures and strong new regulatory policies on the grid itself, they're not going to make it."

The report, "China Power: Benefits and Costs of the 'Strong, Smart Grid,'" draws on models of China's electric power system that a team of researchers built for the analysis, Chandler said. He noted that it was the first ever devised outside China to integrate both power supply and demand as well as economic drivers.

One key finding: China's engineers are developing a grid that is more likely to connect to coal than to renewables.

A $63B failure to communicate?
In the run-up to the 2009 Copenhagen, Denmark, climate change summit, China pledged to lower its carbon intensity 40 to 45 percent below 2005 levels by the end of this decade, while moving to non-fossil fuels for about 15 percent of its energy. It has since spelled out specific short-term targets, like providing 9.5 percent of the country's energy through renewables by 2015.

But unless those mandates are coupled with better planning and a more transparent system, the end result will be expensive and continue to have a big carbon footprint, according to the report.

By comparing the status quo with more aggressive low-carbon scenarios, researchers found that China is on a path to "squander" 400 billion yuan ($63.2 billion) annually by 2020, even as its coal-fired power plants emit "more carbon than the entire U.S. economy."

The Chinese government recently announced that it is building an 800-kilovolt power line to deliver wind and solar energy thousands of miles and that could eventually be the world's largest-capacity transmission line. According to the Transition Energy report, though, the near-exclusive focus on an ultra-high-voltage transmission network as the system's backbone fails to take the electricity consumer's role into account.

"There is little effort to connect grid and distribution communications and control systems to end users," the researchers wrote, warning that the cost and emissions from China's electric power generation could more than triple by 2030.

Regulation trumped by politics
Outside experts agree that China's grid is a serious weakness. Joanna Lewis, an assistant professor of science, technology and international affairs at Georgetown University, said there are "real concerns" about China's ability to meet its emission targets without smart grid improvements.

And Jigar Shah, president of the Coalition for Affordable Solar Energy (CASE) and founder of First Solar -- who along with Lewis spoke at the Woodrow Wilson International Center for Scholars recently -- noted that the United States also still has no real smart grid. The difference, he said, is that policymakers and industry leaders are working on it, while China is not.

"We actually have leading thinkers who know what 'Utility 2.0' looks like," Shah said. "In China, they're really becoming experts in '1.0.' When you talk to them about how they're going to change the entire architecture ... they haven't even begun to say, 'We have a clear understanding of where we want to go.'"

Chandler agreed, saying, "The U.S. really does make the connection with information technology and controls in a much more sophisticated way than the Chinese do." But he also noted that China is held back by politics and political will more than by technical capacity.

In China, Chandler noted that two-thirds of the power is owned by industry, so the State Electricity Regulatory Commission is toothless. The state grid lacks control over pricing but retains strong influence over how rates are structured -- a system resulting in a disproportionate amount of money going to the state grid itself.

'They have the goals and the targets, but ...'
With a marginalized regulatory body, Chandler argued, there is little incentive to invest in best-generation technologies. Meanwhile, he said, "China's provincial leaders' heads are on the chopping block" to meet national carbon targets, but they have scant authority over the utility system.

Price reform, the report authors say, is critical for rapid deployment of efficiency technologies. Calling the existing power pricing system "distorted and chaotic," they say China must turn to consumer-based peak-load technologies of grid management.

Chandler called for mandating more aggressive energy-intensity reductions in industry and building-sector energy-using devices. He also recommended restructuring the economic development incentives to favor services and light manufacturing and regulating carbon emissions to limit the construction of new coal-fired power plants.

Finally, he believes China will need the establishment of a power planning agency charged with overseeing environmental and economic goals as well as power-generating targets. Overall, though, he isn't optimistic about prompt changes.

"They have the goals and the targets, but they don't have the regulatory policies in place," Chandler said. "They acknowledge the problem, but the difficulty is in reforming that state-owned system, and there I haven't seen any real movement towards resolving the reforming of governance."

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC., 202-628-6500