China’s climate and energy policies present something of a paradox: while expanding clean energy at breakneck speed, China has also been building new coal power plants.
In 2023 alone, 70 gigawatts (GW) of new coal-fired power capacity was constructed in China, up four-fold since 2019 and accounts for 95% of the world’s new coal power construction activity in that year.
This surge of coal capacity raises concerns about China’s carbon dioxide (CO2) emissions and climate goals, as well as the risk of stranded assets down the line.
Coal is being pitched by the Chinese government as the means to guarantee energy security and to meet rapidly-rising peaks in electricity demand, because solar and wind output is variable.
At the same time, China’s electricity sector is seeing major changes in terms of costs, demand patterns, regulation and market operation. Our new study indicates that the traditional economic calculus used to justify new coal capacity may be outdated.
Using a simple, analytical metric for evaluating the most economic way to meet peak demand, we show that a combination of solar plus battery storage may be a more cost-effective option than new coal.
- How has China’s electricity landscape changed?
- How does an alternative metric evaluate the cost?
- What is the most economic way to meet peak demand?
- How can our solution help China with its climate goals?
How has China’s electricity landscape changed?
Over the past decade, the costs of renewables and battery storage have decreased substantially, peak-time residential and commercial demand has surged, and wholesale electricity markets have gained greater traction.
Meanwhile, China also announced “dual carbon” goals of peaking CO2 emissions before 2030 and reaching carbon neutrality by 2060. Given these transformations, building more unabated coal power conflicts with China’s long-term climate commitments and may no longer be the most cost-effective option to meet demand growth. It also diverts much-needed capital from the transition toward a clean power system.
How does an alternative metric evaluate the cost?
Our study introduces an alternative metric for calculating the cost-optimal investments needed to meet rising peak electricity demand.
This metric, “net capacity cost”, is the annualised fixed costs of investment in infrastructure needed to meet peak demand minus electricity market revenues earned by this infrastructure, or its “system value”. In this metric, a negative figure means that instead of a cost, such investments would turn a profit.
To explore this metric in a Chinese context, we use a simple example of a 1,500 megawatt (MW) increase in peak electricity demand and a 6,570 gigawatt hour (GWh) rise in demand across a full year, in a hypothetical province.
We then outline five strategies (cases) for meeting these peak and annual energy demands, ranging from heavy reliance on coal through to a combination of solar and battery storage.
In the different cases, resources are sized based on how much they can reliably contribute to peak supply needs and annual energy needs:
- Case 1: New coal power capacity meets all of the growth in both peak and annual energy demand.
- Case 2: Solar meets 70% and coal meets 30% of annual energy demand growth; solar contributes 525MW to peak supply needs – based on a “capacity credit” to discount solar capacity because it may not generate during peak periods – while coal provides the remaining 975MW.
- Case 3: Solar meets all annual energy demand growth; solar and coal both contribute 750MW to peak supply needs, again discounting solar with a capacity credit.
- Case 4: Solar meets all annual energy demand growth; solar and batteries both contribute 750MW to peak supply needs; batteries provide frequency regulation reserves (backup power for managing minute-to-minute differences between supply and demand).
- Case 5: Solar meets all annual energy demand growth; solar and batteries both contribute 750MW to peak supply needs; batteries provide energy arbitrage (charge when prices or costs are low, discharge when they are high).
For each case, shown in the table below, we calculated the annual net cost for both the individual resource (coal, battery or solar), as well as for the system as a whole for securing one kilowatt (kW) of power generation capacity in yuan per year.
The resource net capacity cost in the top half of the table is the net cost of that resource (i.e., the annualised fixed cost minus annual revenue that resource earns from providing energy and ancillary services, such as frequency regulation). Positive numbers show a net cost to the grid operator in adding or procuring that resource.
The total system net capacity cost, in the second half of the table, is the net cost of meeting peak demand growth with the combination of resources in each case.
The weighting that we used to calculate system net costs is based on the ratio of installed capacity and peak demand growth.
Cost of different combinations of energy sources to meet electricity demand
| Case 1 | Case 2 | Case 3 | Case 4 | Case 5 | |
|---|---|---|---|---|---|
| Resource net capacity cost (yuan per kW per year, per kW of installed capacity) | |||||
| Coal | 424 | 424 | 512 | ||
| Battery | 248 | 781 | |||
| Solar | -128 | -128 | -128 | -128 | |
| System net capacity cost (yuan per kW per year, per kW of capacity used to meet peak demand, after capacity credit) | |||||
| Coal | 471 | 306 | 236 | ||
| Battery | 138 | 434 | |||
| Solar | -223 | -319 | -319 | -319 | |
| Total | 471 | 83 | -83 | -181 | 115 |
Cost of capacity with different combinations of coal, solar and storage for meeting peak demand. Source and credit: Lin and Kahrl (2024)
In order to stress-test this simple analysis, we looked at sensitivities of a variety of prices for different sources.
With solar prices in China already very low, our sensitivity analysis focused on the price of coal, batteries and other inputs to the analysis.
What is the most economic way to meet peak demand?
Our results indicate that when battery storage provides frequency regulation reserves (case 4), a combination of solar and storage is the most cost-effective option for meeting peak demand growth.
This combination could cost grid operators -181 yuan (about -$25 or -£20) for each kilowatt of capacity added.
In contrast, building new coal capacity to meet peak demand growth (case 1) is the most expensive option, with a net capacity cost of 471 yuan (about $65 or £52) for securing one kilowatt of capacity per year.
Case 3, in which large coal power plants are only used for backup power (little to no generation), may not be politically feasible in China, at least in the near term.
The other two cases (case 2 and case 5) are more comparable, but given that battery prices have fallen by more than 30% since this analysis was performed – to about 1 yuan (about $0.14 or £0.11) per watt-hour (Wh) of capacity – the batteries in case 5 are likely more economically attractive than the coal in case 2.
How can our solution help China with its climate goals?
To navigate this changing landscape, our analysis suggests that a near-term strategy for meeting China’s rising energy demand while also working towards its climate goals involves enabling battery storage participation in electricity markets.
Currently, the Chinese government allows “new energy storage”, including batteries, to participate in the electricity market. However, the detailed regulations are ambiguous and battery participation could be made simpler.
For example, battery storage is not allowed to provide “operational reserves” referring to capacity that is held in reserve to manage unexpected differences between supply and demand. Making battery storage eligible for this would enhance its business case.
Allowing greater market participation for battery storage would foster continued innovation and cost reductions in battery storage systems, while offering valuable operational experience for system operators.
Such a strategy would be consistent with market outcomes and reflects recent electricity market experience in the US and Europe.
It would also help to resolve near-term capacity and energy needs, as batteries and solar generation can typically be built more quickly than coal-fired power plants.
Moreover, it would help to alleviate future conflicts between new coal generation and renewable energy. New coal generation built mainly as a backup for renewable generation will either rarely operate or encroach on operating hours and net income for other existing coal generators, creating new stranded asset risks.
Continued electricity market reforms would also facilitate more efficient investments in renewable generation and electricity storage.
Allowing wholesale electricity prices to be set by the market and allowing renewable generation and electricity storage to participate in wholesale markets can enhance their revenue and profits.
Furthermore, the reforms would encourage the efficient utilisation of electricity storage, which is our key finding. Electricity storage can provide a variety of functions for the electricity system; wholesale prices can help to guide the operation of storage toward those functions that have the highest value at the lowest cost.
The recent directive from China’s national energy administration (NEA) that integrates new types of storage facilities (non-pumped hydro) into grid dispatch operation is a step towards the reforms we outline.
Appropriate compensation mechanisms, such as capacity payments in some provinces, for all the services that such storage facilities provide, may need to be further defined to promote the sustainable development and integration of these storage facilities into the grid.
Finally, additional supply alone is unlikely to be the lowest-cost way to meet growth in electricity demand in China. Improving end-use efficiency and “demand response” can also help to reduce the overall cost of supplying electricity.
As China continues its electricity market reforms, regional market designs linking multiple provinces, as well as and regional approaches to resource adequacy that encourage resource sharing among provinces, could also help to meet China’s rising electricity use and peak demand in the most cost-effective and lowest-carbon way possible.
The post Guest post: Solar plus batteries ‘cheaper than new coal’ for meeting China’s rising demand appeared first on Carbon Brief.
Guest post: Solar plus batteries ‘cheaper than new coal’ for meeting China’s rising demand
Claver Gatete is Executive Secretary of the UN Economic Commission for Africa. Jason Veysey is Energy Modeling Program Director and Senior Scientist at the Stockholm Environment Institute. Lisa Sachs is Director of the Columbia Center on Sustainable Investment at Columbia University.
The case for global energy transition has rarely been clearer. The closure of the Strait of Hormuz earlier this year exposed the cost of unplanned, fossil-dependent systems, while the falling cost of renewables, the rising penetration of electric vehicles, and the growing value of demand flexibility have made the direction of travel obvious. The benefits of a clean, secure, integrated system are no longer in dispute. What remains unclear is how to build it.
Countries around the world have called for faster renewable energy deployment and alternative energy arrangements. A secure, affordable, resilient, decarbonised system requires specific investments in specific places in a specific sequence, optimised across sectors and borders. But very few governments have the analytical foundation to translate those imperatives into investment.
The two instruments that are supposed to determine investment priorities for decarbonisation – Nationally Determined Contributions (NDCs) and country platforms – cannot answer the most basic question facing any country undertaking an energy transition: what should the energy system look like?
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To close this gap, every country needs a bankable, economy-wide optimisation model for its energy system. A model is not a plan, but it can help answer the critical question of what the future energy system should look like. It shows how optimal scenarios vary as assumptions and policies are adjusted, calculates investment requirements and sequencing, and quantifies how system costs are affected by assumptions, policies, and exogenous variables like trade policy and financing terms.
Tool for efficient investment
Optimisation is a simplified way of simulating an energy system, but it can be an extremely powerful tool for moving energy planning from reactive (how do we manage the disparate actions in the energy system?) to intentional (what energy system underpins our national objectives?). A model can show how optimal scenarios vary as assumptions and policies are adjusted, and how investment requirements are quantified and sequenced.
Optimisation models can treat the energy system and the sectors it serves as an integrated whole, optimising across sectors and projects in ways that can be mutually reinforcing. If considered independently, growth in industrial demand, transport electrification, and digital infrastructure can add stress to the energy system. But an optimised plan can arrange these and other changes in an efficient, synergistic way.
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New load can be added where low-cost power is available; industrial customers can ensure the viability of investments in energy supply; electric vehicle charging policy can smooth load curves and reduce costs for all consumers.
Additionally, optimisation modeling can also change the financeability of investments. Taken alone, each project faces uncertainty about the rest of the system, which raises the cost of capital and causes projects to stall or unwind after contracts are signed. A coherent, optimised plan makes visible the coordination that private capital would otherwise have to bet on: identified offtake, sequenced and committed transmission, contracted power supply, and so on.
What COP31 and COP32 should do
The upcoming COPs in Turkey and Ethiopia can shift the center of gravity of international climate cooperation from fragmented commitments to planning. Three moves are urgently needed.
First, optimised, economy-wide, long-term energy system planning must be the foundation on which any meaningful NDC, country platform, or finance commitment rests. NDCs are typically drafted by environment or single-line ministries, with limited cross-sectoral input from ministries of energy, finance, and planning. They contain targets, derived from sectoral strategies or national commitments, not from an analytically grounded picture of what the energy system should look like and what investments would make it work. Country platforms are generally a portfolio of investments assembled from existing project pipelines, rather than derived from a system-level analysis of what an optimised, decarbonised energy system would require.
Second, recognise regions as a key planning unit. Modern integrated energy systems are inherently regional. Renewable endowments are unevenly distributed; balancing variable supply across borders lowers aggregate cost, reduces redundant backup capacity, and unlocks economies of scale no individual nation can achieve. Many energy investments in Southeast Asia, East Africa, Southern Africa and Central Asia may only be financeable in a regional context. Assessing domestic infrastructure without regional optimisation perpetuates the perception that decarbonisation is more expensive than it is.
COP31 leaders unveil global targets, with spotlight on electrification
Third, finance the planning capacity. A coordinated commitment by multilateral development banks, bilateral donors, and philanthropic partners to help every region and its constituent countries develop and maintain their own modelling capability, with open-source tools and regional analytical hubs, would close the most consequential gap in the current architecture. The cost is small relative to current spending on country platforms, failed project preparation, and misallocated infrastructure investment.
This includes supporting regional institutions such as the ASEAN Centre for Energy, the African Energy Commission, regional power pools, and the Latin American and Caribbean Energy Organization to determine what optimised regional systems require. Country-by-country pledging, repeated at every COP, will not deliver what meaningfully integrated systems can.
The 2026 energy crisis made the cost of unplanned, fossil-dependent systems newly visible. That window of clarity will close. The international community should seize the moment to build the planning foundation that has been missing for thirty years, rather than commissioning another round of NDCs or pledges, striving for outcomes neither was designed to deliver.
The post Every country needs a model to help optimise its energy transition appeared first on Climate Home News.
Every country needs a model to help optimise its energy transition
The world is currently experiencing what is expected to become the strongest El Niño on record – dubbed a “super El Niño” by many.
El Niño is the warm phase of a recurring climate pattern in the tropical Pacific that releases heat from the ocean into the atmosphere.
This temporarily raises global temperatures and reshapes rainfall and extreme weather around the world – impacting the lives of billions of people.
The current El Niño event began in June and is expected to last into 2027.
El Niño is part of a wider climate pattern called the El Niño-Southern Oscillation (ENSO) cycle.
The ENSO cycle also has a cool phase, known as La Niña, as well as a “neutral” phase. El Niño and La Niña events typically last between nine and 12 months, but can go on longer.
Below, Carbon Brief explains how the ENSO cycle works, its impacts on extreme weather and global temperatures and why this El Niño event is projected to be the most intense since records began.
The post Explainer: How the ‘super El Niño’ will reshape the world’s weather appeared first on Carbon Brief.
https://interactive.carbonbrief.org/el-nino-explainer/index.html
The second-largest reservoir in the US reached a record-low water height on Saturday – just days after the country’s largest reservoir broke its own record.
Both Lake Mead and Lake Powell are located on the Colorado River.
They provide water for populations across seven US states in the south-western US, with around 40 million people getting some or all of their municipal water from the Colorado River.
The river also provides water for around 5.5m acres (22,258 square kilometres) of farmland across Colorado, Arizona, California and the other states in the river basin.
Experts tell Carbon Brief that climate change, population growth and over-consumption are all contributing to the current record-low levels of the reservoirs.
Record lows
At full capacity, Lakes Mead and Powell can hold a combined 68 cubic kilometres of water – enough to supply all household consumption in the contiguous US for nearly 1.5 years. However, the water level in both reservoirs has been declining for decades.
The chart below shows the water level of Lake Mead, in metres above mean sea level. The reservoir, which began to fill in 1935 following the construction of the Hoover Dam, has a “full pool” maximum capacity of 347.60 metres. The water level in Lake Mead reached a record low of 317.11 metres on 7 August.
The following chart shows the water level of Lake Powell, in metres above mean sea level. Lake Powell’s full-pool level is 1,127.76 metres.
While the reservoir reached its maximum capacity several times in the 1980s, it has not done so since. On 15 August, the water level in Lake Powell was recorded at a new record-low of 1,072.87 metres.
Both reservoirs have continued to decline in the days since breaking their respective records. The downward trend will largely continue in both lakes until next spring, when the snowpack in the mountains of the Upper Colorado River Basin begins to melt, says Dr Jack Schmidt, a senior research scientist at Utah State University’s Center for Colorado River Studies. He tells Carbon Brief:
“The big dilemma of the moment is that we’re only in the middle of August, and we have no assurance of what the coming winter will be. The only thing we can be sure of is that we will be depleting overall total basin reservoir storage from now until, roughly, early April.”
Compounding factors
The record lows across the two reservoirs are the result of several compounding factors, experts tell Carbon Brief.
Since the turn of the 20th century, the amount of water flowing along the Upper Colorado River has declined by about 20%. Research suggests that half of this decline can be attributed to human-induced climate change.
Most of the river’s streamflow comes from the snowpack of the Upper Colorado River Basin, which stretches across five western US states but is primarily located in Colorado and Utah.
This region has been gripped by a historic “megadrought” for more than a quarter of a century. Nearly half of the megadrought’s intensity over 2000-18 is attributable to climate change, according to a 2020 study.
At the same time, the increasing population in the US south-west has put added pressure on the Colorado River’s water supply. The number of people obtaining some or all of their water from the Colorado system has grown by 15 million (around 60%) since 1992.
Schmidt tells Carbon Brief:
“There’s an ultimate cause of the present water crisis, and there’s a proximate cause. The ultimate cause is a warming climate, a warming planet and a pretty clear correlation between warming conditions and decreased runoff in the Colorado River Basin.
“The proximate cause is that in this messy democratic republic of ours, big policy decisions that match the variability of the climate occur painfully slowly – with intense political negotiations – and only incrementally.”
On 31 July, the US Bureau of Reclamation, which manages water resources in the western US, released an environmental impact statement on its proposed post-2026 strategy for managing Lakes Powell and Mead. The strategy itself has not been released yet.
Schmidt notes that the statement does appear to give the Bureau flexibility to “respond to crisis” by reducing the delivery of water to several states. However, he adds:
“They acknowledge it won’t work if we just stay critically dry, and of course every climate model for the 21st century, especially with a continually warming planet, says that that’s exactly what’s going to happen.”
The post Analysis: The two largest reservoirs in the US have hit record-low levels appeared first on Carbon Brief.
Analysis: The two largest reservoirs in the US have hit record-low levels
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