What's happening in China and India?

While it is necessary for the developed world to meet the challenge of reducing its CO2 emissions, China and India also face the challenge of holding down their emissions as they industrialise.

That we live in a rapidly changing world is hardly a surprise, but the rate of change is indeed staggering.

This can be seen in a simple graph of the growth in electricity generation included in the International Energy Agency (IEA) report, ‘2011 Key World Energy Statistics'. This shows that worldwide electricity generation increased from 5400 TWh in 1971 to 20,000 TWh in 2009, a staggering 270 per cent increase in just 38 years.

While OECD electricity generation has grown progressively over this 38 year period, it is quite noticeable in this chart that the increase in China's generation has been much more rapid in recent years. Less noticeable, but also significant, has been the increase in generation in the rest of Asia, which includes India.

China

The IEA Tracking Clean Energy Progress report shows that China has given priority to providing electricity to industry and households at an equivalent low cost to that available in western countries. This has resulted in massive expenditure on coal-fired electricity generators. Since 2000, China has trebled its installed capacity of coal-fired electricity generators. At the same time, a reasonable proportion (a little over a third) of the generators it has installed in that period have been of the more modern kind, with China likely to install only the more modern plants in future.

The advantage of modern generators is they are more efficient than old style electricity generators, and therefore produce less CO2 emissions per kWh of electricity generated. This is a very significant difference, and can result in 35 per cent less CO2 emissions per kWh than the older plants.

Market signals are also important in China, and when China adopted market pricing for coal, in 2006, this meant that coal became relatively more expensive (but it is still cheaper than the alternatives). It is also noted that China is making tentative moves towards introducing a carbon price. However, the mooted price of 10 yuan ($1.60) per tonne of CO2 must be considered to be more cosmetic than real. Like everyone else, China wants to make sure that its industries maintain their competitive advantage.

China has not put all its eggs into the coal-fired generators' basket. It has been investing in nuclear energy also, with 26 nuclear reactors under construction in 2011, nearly half of the world's planned additions to nuclear in that year. Yet the IEA reports that the Chinese government temporarily froze the approval process for new plants in the light of the Fukushima accident. That accident is something everyone will have to take into account, even the most ardent nuclear advocates cannot ignore this. Indeed, according to the IEA, Belgium, Switzerland and Germany have plans to phase out nuclear, and the situation in Japan is very problematic for nuclear.

China has significantly increased hydro-power capacity in the last decade. It is the largest hydroelectricity producer in the world, with hydro contributing 17 per cent of total electricity produced in China. In addition, in 2010 it became the world leader in total installed capacity of wind, with US in second.

Interestingly, China also leads the world in active solar thermal capacity. This is an attractive option for providing heating and cooling systems in residential and commercial buildings, with the installed cost per energy output being much lower in the latter due to the economies of scale involved. China could be leading the way for the rest of us here. Indeed, the IEA are advocating a much greater take-up of such systems in the period up to 2020, as shown in the following graph.

India

Like China, India is engaged in the industrialisation of its economy. However, India is at an earlier stage in the process than China, and the challenges facing the Indian government are quite different from those facing Beijing. Primarily, since India is a democracy, it cannot implement changes as easily as can apparently be done using China's top-down approach. Hence there are difficulties at every point in the process.

A major problem in India is the low efficiency of its coal-fired electricity generators. In the 1970s the generators achieved efficiencies of 25 per cent, whereas well-run modern plants can achieve efficiencies of 45 per cent. This is not an insignificant difference, since modern plants will emit 45 per cent less CO2 than an unimproved older plant. Even many of the new generators being installed are not using the latest technology, so the long-term outlook is for India's emissions to grow rapidly as new electricity generating plants are installed. Nevertheless, India aims for 50 per cent to 60 per cent of new coal-fired generators to at least be supercritical (not the most efficient, but a significant improvement).

A price signal, being a price on CO2 emissions from electricity generation, could provide an economic incentive to modernise the existing plants and ensure only the higher efficiency modern plants are installed. Such a signal would be more effective than a government edict. This kind of signal could be generated in a non-intrusive manner by India legislating to apply a carbon price on electricity production, but rebating it fully back to electricity users (it could be called a rebatable carbon levy). Such a levy would result in a price signal being created at the electricity generator level, which would encourage lower-emission electricity generation.

This scheme could be introduced without this price signal resulting in an immediate increase in the electricity price (and a loss in competitiveness of Indian industry). Such an approach could quickly put India on the correct path towards lower-emission electricity generation, and could result in older plants being upgraded. In the long-term it could lead to lower overall electricity prices as a result of the higher efficiency being achieved.

One of the harder to quantify benefits of greater electricity production in India is that it would lead to a reduction in soot in the atmosphere. A factor in the global warming debate, which is often overlooked, is the importance of ‘short-term' pollutants on the climate. Such pollutants as soot do not stay in the atmosphere for long, but they have a significant effect on the atmosphere while they are in the air. Reducing the impact of particulates of this kind will be necessary if we want to reduce greenhouse gases in the atmosphere. This has particular relevance in the Indian situation, where 25 per cent of the population do not yet have access to electricity, and still use the traditional methods of heating and cooking.

Like China, India is also installing new nuclear reactors. However, its program is much more modest than China's. It has also new large-capacity hydro-power under construction. In addition it has a project in hand for a (subsidised) industrial-scale solar plant in Maharashtra state. Ironically, this project has been delayed in getting planning permission to use land designated to remain as forestry. Such problems will continue to arise, and the Indian government will find it necessary to carefully handle the competing demands of the different interest groups as it moves towards a low-carbon, but fully industrialised, future.

Carbon Capture & Storage

The examples of China and India indicate that, in the medium-term at least, the world's use of coal-fired electricity is not likely to reduce, but rather it will increase. Coal is certainly not under the threat of being exhausted within a generation or so, whereas this needs to be considered in relation to other fossil fuels. Indeed, the life of the world's coal reserves is likely to be extended by the use for more efficient generating plants, which will also serve to reduce CO2 emissions from this source.

However, even after efficiency improvements, CO2 emissions from coal-fired electricity generators will still contribute massive amounts of CO2 to the atmosphere. Further steps are required to reduce the level of these emissions. Carbon capture and storage (CCS) is the currently the best hope for achieving this outcome.

Currently, there are three main technologies being explored to capture the CO2 emissions in coal-fired plants:

-- Post-combustion process. This is where the CO2 is removed from the flue gases in the smoke stack. If done at this point, the CO2 has to be separated from the other gases in the flue.

-- Pre-combustion process. A pre-combustion process is used to gasify the coal, capturing the CO2 before combustion.

-- Oxy-fuel combustion. The coal is burned in oxygen instead of air, producing an almost pure CO2 stream.

Each of these technologies has a cost, and research is currently under way to try to reduce these costs. It is an area where government funding is required in order to bring the technologies up to the point where their commercialisation can be considered.

Australia has its own projects in this area, and governments around the world are funding similar projects. This funding is mostly directed to incremental improvements in these processes, although there remains the possibility that a breakthrough new discovery will be made that will change the entire dynamic. For this reason, our emphasis at this point should continue to be on researching the best way to capture or use CO2 emissions, even though progress appears to be frustratingly slow. It is in our self-interest that, as a major beneficiary of coal production, Australia continues to make a significant contribution to these research efforts.

Even after the carbon has been captured, it still has to be stored, with underground storage (carbon sequestration) being the only realistic option at this point in time. This process is depicted in the 2010 Carbon Sequestration Atlas of the US and Canada, produced by the US Department of Energy.

It is a simple case if the CO2 can be used to force out underground natural gas fuel, where the gas is difficult to access because of the nature of the rock and sand surrounding the deposit (so-called “tight gas”). This technology is already being used in the US and elsewhere.

Another straightforward case covers the situation where the CO2 can be stored in depleted oil and gas fields. Here the challenge is to ensure that the returned CO2 does not compromise or conflict with the further recovery of oil and gas, leading to legal disputes over rights and responsibilities.

Finally, it will be necessary to find other geological formations where the CO2 can be safely and permanently stored. Some regions have suitable storage locations, and others have none. Nevertheless, the US Department of Energy Atlas, cited above, indicates that it is unlikely that there will be a shortage of storage locations.