Sun, wind and water are Chinese best friends

The International Energy Agency (IEA) predicts that China will produce one-third of the world's electricity next year. China's ever expanding power grid is driving growth in its manufacturing industry, which in turn affects the economies of its trading partners such as the USA, Europe, and Japan. Furthermore, the cost of manufacturing tens of thousands of products in China is determined by the price of electricity. This means that the inflation rate of not only the yuan, but also other currencies such as the euro, dollar, and yen is affected.
Coal is currently the primary source of electrical generation in China, accounting for two-thirds of the country's kilowatt production. However, the Chinese leadership stands out from many developed countries' leaders by looking beyond the next 20-30 years. China faces a massive energy shortage beyond this horizon. Based on the BP Energy Outlook, coal deposits are projected to last for only another 35-40 years at current production rates.
However, the quality of the coal is expected to deteriorate each year, leading to increased production costs. This is due to the fact that the most easily accessible deposits have already been mined over the past two decades. Importing the required 4 billion tons to China is not feasible, either physically or economically. The country lacks the necessary infrastructure, and importing coal would make Chinese industry uncompetitive. Japan's experience confirms this, as attempts to abandon nuclear power plants were unsuccessful, and the country is now urgently returning nuclear power units to operation.

China is implementing large-scale energy transformation programs to address the energy gap. One of the most significant initiatives is the electromobilization of the country. China currently accounts for every second electric car sold globally, with a domestic market share of one-third. This effort has yielded positive results, with the vehicle fleet in China growing from 240 million in 2013 to 400 million over the past decade. However, the consumption of gasoline and diesel has remained relatively stable.

Another significant area of development is coal chemistry. Recently, an industrial plant capable of producing 600,000 tons of ethanol per year from low-grade coal was launched in China. The goal is to increase coal ethanol production to 4 million tons per year. It appears that the Chinese have managed to reduce the cost of coal ethanol to below food grade prices by using inexpensive catalysts. Ethanol is already actively used as a biofuel component in the USA and Europe. Scaling up this technology in the next decade could significantly reduce the demand for imported oil from Chinese refineries.
However, China's primary focus for energy development is to decrease the reliance on coal for electricity generation. Three significant trends can be identified in this regard.

Firstly, there is a strong emphasis on renewable energy sources. According to the IEA's baseline scenario, China aims to construct over 2,000 GW of installed renewable energy capacity within the next five years. To put the scale into perspective, the installed capacity of the entire Russian energy system is approximately 250 GW, while that of the US energy system is less than 500 GW. China's energy sector, on the other hand, currently has a capacity of about 2,400 GW. Additionally, China has an ambitious nuclear program, with plans to build 250 GW of nuclear power plants in the coming years, in addition to the 50.8 GW already built. The constructed nuclear power plants will have a greater capacity than the entire nuclear power industry in the United States.

Balancing this colossus is the most challenging aspect. Electricity demand varies throughout the day and year, and the current fleet of nuclear power plants is poorly equipped to handle this variability, especially with 2 TW of variable wind and solar power. However, China has a solution to this issue. Currently, one-third of all pumped storage power plants (PSPPs) worldwide are located in China, and the country boasts more than 50 GW of pumped accumulators, a capacity not found in any other country. Additionally, there are another 279 GW of pumped storage power plant capacity in varying degrees of readiness within the country.

While the EU and the United States are simplifying their energy systems during the energy transition by abandoning complex and operationally costly energy sources, China is taking a different approach. China is adding new elements to its already gigantic energy system, including nuclear power plants, wind farms, and expensive pumped storage power plants. Unlike developed countries, China has the necessary resources and opportunities to implement its ambitious program within the next decade.