XI JINPING’s STATEMENT AT UN
Chinese President Xi Jinping, in his official statement at the General Debate of the 76th Session of the United Nations General Assembly on September 21, announced that China would step up support for other developing countries in generating green and low-carbon energy and would not build new coal-fired power projects abroad.
Such a statement from the top leadership of China has important future implications for the clean energy and power sector across developing countries since China is a major investor/builder in the coal-fired power sector across developing Asia, including Bangladesh. Hence, Bangladesh has got the opportunity to shift from fossil fuel-based power generation to clean energy-based power sector development in the coming years.
President Xi presented four points in his commitment on “Bolstering Confidence and Jointly Overcoming Difficulties to Build a Better World”. One of the important messages under the second point was staying committed to harmony between man and nature.
The key message is: China needs to accelerate transition to a green and low-carbon economy and achieve green recovery and development. China will strive to reach its peak in carbon emissions before 2030 and achieve carbon neutrality before 2060. This requires tremendous hard work, and China will make every effort to meet those goals.
RECENT INITIATIVES BY CHINESE COMPANIES
Chinese investment under the Belt and Road Initiative has focused on energy transition. The Chinese embassy in Bangladesh is reported to be cancelling planned coal-based power plants.
Indonesia has announced to stop building new coal-fired power plants after 2023. This announcement is likely to be influenced by China’s stance.
In the recent past, various Chinese public and private sector organisations have expressed their unwillingness to bankroll coal and fossil-fuel based power generation at home and abroad.
Major Chinese political leaders in their public statements have been indicating the policy stance. This is also reflected in declining Chinese overseas investment in coal-fired power projects and rising share of investment in renewable energy.
China’s stance on renewable energy and clean power is reflected in its joint statement with the US, where it pledged to expand overseas investment in renewable energy in order to help developing countries transition from fossil fuels.
Chinese Ministry of Commerce and Ministry of Ecology and Environment encouraged companies, which are going for foreign investment and cooperation, to follow international green rules and standards.
Overall, China’s global investment in the power sector would likely foresee a directional change through the policy statement of President Xi, provided how this will be enforced institutionally and operationally on the ground.
POSSIBLE IMPACT ON POWER SECTOR
Bangladesh may experience a number of the impact of future Chinese policy on power and energy and operational modalities based on the statement of President Xi. It is important to understand the key messages of the statement.
The statement indicates that China will not build any new coal-fired power plants. This is supposed to include no public and private outward foreign investment of Chinese companies, no engagement of Chinese companies as contractors in power projects, and no shareholding or financing of Chinese financial institutions in coal-fired power plants. Such a stance would stop Chinese investment and engagement in coal-fired power sector in Bangladesh.
The statement mentioned that China would support “other developing countries”. Bangladesh will also be included in the category. At present, Bangladesh is categorised as a least-developed country. The status will continue till 2026, when the country will graduate to a developing nation.
It has been announced that China will step up support for other developing countries in developing green and low-carbon energy. Hence, Bangladesh could seek Chinese support for clean energy development.
The support could come in two ways: direct support in developing the renewable energy sector and indirect support by discouraging fossil fuel-based power plants.
Under the direct support, the nature of Chinese support could be several types: (a) ensuring fresh new Chinese investment for renewable energy-based power generation; (b) ensuring fresh public and private financing of Chinese companies for renewable energy-based power generation, transmission and distribution; (c) allowing proactive engagement of Chinese companies as the contractor for implementing renewable energy-based power generation, transmission and distribution; (d) being shareholder of companies focused on renewable energy-based power generation with companies of other countries, including Bangladesh; and (e) promoting green energy in other sectors, particularly transport, agriculture, and manufacturing.
Under the indirect support, China could promote green growth by not participating in fossil fuel-based power generation related projects. These include not investing in building HFO/HSD-based power plants and natural gas-based power plants.
More importantly, it is expected that China will not go for building LNG-based power plants. This includes Chinese public and private investment in LNG-based power plants, setting up floating storage regasification unit (FSRU) and land storage regasification unit (LSRU) and other related investments in transmission and distribution.
However, the most important impact would lie in whether and how China will consider its existing investment in fossil fuel-based power generation and the similar projects that are currently in the pipeline.
Bangladesh Bank data showed China has a total stock of foreign direct investment in Bangladesh’s power sector amounting to $450 million, all in fossil fuel-based power plants.
Two coal-fired power plants with a combined capacity of 1,845 MW, backed by Chinese companies, are currently in operation, according to the Bangladesh Working Group on External Debt.
There are another five coal-fired power plant investments by Chinese companies with a generation capacity of 4,460 MW. The plants, located in Banshkhali, Barishal, Payra, Patuakhali, and Saidpur, are now at different phases of implementation. However, these plants are not included in the list of the 10 plants declared abandoned by the Ministry of Power Energy and Mineral Resources.
The important point is how China will withdraw its investment in the above-mentioned projects. Given its official stance for shifting from coal-fired power plants to renewable energy-based power generation, China should withdraw its investment in coal-fired power plants that are in the “construction” phase.
It is expected that China will discuss with Bangladesh to discontinue the operation of existing coal-fired power plants before their official lifespan. Considering its stance on reaching the peak in carbon emission before 2030, China should negotiate with Bangladesh for the closure of their operation by 2030.
All the locations of the coal-fired power plants should be replaced by renewable energy-based power generation, transmission and distribution backed by new Chinese investment.
SUGGESTIONS FOR PROMOTING RENEWABLE ENERGY-BASED POWER GENERATION
It is expected that China will take a proactive stance on investment at the existing and future power sector projects.
Pakistan is discouraging investment in new coal-fired power plants, which is likely to be influenced by China’s decision to shift from coal-fired power plants as China is a major investor in Pakistan’s power sector.
Bangladesh’s power sector would get space to develop renewable energy sector if the five China-backed power plants are not implemented, and China withdraws its investment from those plants and redirects them to renewable energy-based electricity generation. China has taken a similar decision in the case of investment in Zimbabwe’s power sector.
Bangladesh’s coal-fired power generation will be shortened and be able to enter a cleaner power regime if China is ready to repay the fund for the operation of two coal-fired power plants after they reach halfway their life span in 2030. In this case, coal retirement financing led by the COP26 Energy Transition Council could be a possible option.
Bangladesh’s green energy regime will be stronger if China does not invest in LNG-based power generation, FSRU and LSRU.
China may consider undertaking several renewable energy-based electricity generation initiatives that will tremendously support the clean energy development in the country.
First, Chinese companies that are currently committed to investing in coal-fired power plants may announce investment in renewable energy-based power plants and the development of smart grid systems at the existing locations of the coal-fired power plants and in nearby areas.
Second, Chinese investors and lenders could consider investing in large scale renewable energy-based power generation projects.
Third, Chinese contractors could consider investing in the construction of large scale renewable energy projects.
Fourth, Chinese banks could undertake projects jointly with other international financiers to promote renewable energy.
It is expected that the Bangladesh government will take a proactive move to sign a memorandum of understanding with the government of China to reduce the use of fossil fuel and promote the use of renewable energy as a baseload in power generation. In this context, the Ministry of Foreign Affairs, Ministry of Power, Energy and Mineral Resources and the embassy of China in Bangladesh and Bangladesh in China should jointly take steps for clean power sector development.
The author: Khondaker Golam Moazzem is the research director of the Centre for Policy Dialogue
Source: The Daily Star, Bangladesh, October 3, 2021