Climate change: China among countries that should rein in natural gas power plant expansion if global net-zero ambitions are to be met, think tank says

Almost a fifth of the world’s gas power capacity under construction and a tenth of the planned capacity are in China, San Francisco-based Global Energy Monitor says
China’s planned gas capacity not a ‘stranded asset’ risk, as it is required to meet peak power demand, Hong Kong-based analyst says

Business of climate change

Eric Ng

Published: 10:45am, 26 Mar 2022

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China – with the world’s biggest pipeline of natural gas power plants under development – should join major developers including Europe, Vietnam, Brazil and the United States in reining in expansion to give the world a better chance of meeting its climate goals, a US clean energy think tank said.

If all of the world’s 615 gigawatts of projects, of which 161GW are being built and 454GW are planned, are completed, this will raise global gas capacity by a third, San Francisco-based non-profit research organisation Global Energy Monitor said in a report published last week. The total investment involved is estimated at US$509 billion.

“Much of this investment represents a stranded asset risk, since it will need to be retired before the full lifespan of the plants under the International Energy Agency’s [IEA’s] 1.5 degrees net-zero pathway,” said report authors Jenny Martos and Julie Joly.

Almost a fifth of the world’s gas power capacity under construction and a tenth of the planned capacity are in China, they said. At 77GW, its total projects pipeline is the world’s largest, compared to 65GW in Europe, 56GW in Vietnam, 49GW in Brazil and 34GW in the US.

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The US’ operating fleet of 528GW – 29 per cent of the global capacity – was the world’s biggest as of January this year and much larger than China’s 103GW.

Gas power gave rise to 2.7 billion tonnes of carbon emissions in 2020, or 22 per cent of total emissions from power generation, according to the IEA. Electricity accounted for 36 per cent of global energy-related emissions.

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For the world to achieve net-zero emission by 2050 and global warming to be contained at 1.5 degrees Celsius by 2100 from preindustrial levels, carbon emissions from electricity generation need to fall to zero in advanced economies in the 2030s, and in developing countries around 2040, the IEA said last May.

Gas power plants have a lifespan of 30 to 50 years. Coal power’s carbon emissions during combustion are around twice that of natural gas, which is seen as a “transition fuel” to renewable energy.

“Investments in gas-fired power face a growing likelihood of underutilisation, as the costs of renewables with battery storage now outcompete gas in much of the world,” Martos and Joly said.

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However, in China, gas plants, which can be fired up and turned down flexibly, will still play an important role in ensuring energy supply security, as it phases down the world’s largest fleet of coal plants, analysts said.

“We do not see the planned gas capacity in China as having substantial ‘stranded asset’ risk, because it is required as one of the flexible capacity sources to meet peak power demand and help manage the intermittency of solar and wind generation,” said Lucas Zhang Liutong, director of Hong Kong-based WaterRock Energy Economics.

It is currently not economically feasible to simply relying on solar and wind power, because the grid operators will need to install battery systems with huge capacity, which are in the early stages of commercialisation and are prohibitively expensive, he added.

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In the longer term, gas plants can also be “decarbonised” by installing carbon capture facilities, or by undergoing retrofitting to change the fuel source to zero-emission hydrogen, Zhang said.

Campaigners against gas power’s growth have also suffered a setback recently in Europe. The European Commission (EC) on February 2 adopted a controversial policy that labels certain gas projects as acceptable “transitional” investments to be included in its taxonomy for green finance.

“Perfunctory attempts to paint [gas] ‘green’ do not alleviate their climate or financial risks,” said a report published this month by the US-based Institute for Energy Economics and Financial Analysis.

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It cited a 2020 study by US-based environmental organisation The Natural Resources Defense Council, which found that greenhouse gas emissions during the manufacture and transport of liquefied natural gas were almost equivalent to that from the gas’s combustion.

The EC has put in some safeguards in the taxonomy: admissible gas projects must be replacing the same capacity fed by more polluting fuels such as coal; they should not exceed a stringent emission standard; and are backed by clear commitments by the developers on full conversion to renewables or low-carbon projects by 2035.