Here comes the sun
Here comes the sun
For many parts of the world, solar energy has become one of the most cost-effective modes of power generation[1]. This is particularly true for China, who has emerged as a leader in the development of solar technology – creating positive potential knock-on effects for the Belt and Road initiative (BRI) and its solar projects. But given the COVID-19 outbreak and its aftermath, the future of BRI sustainable projects has come under question.
With broader calls to rebuild economies more sustainably, it is reasonable to expect that new BRI projects will also be more sustainably chosen and investment in sustainable energy should continue to be sought-after. Already on its path to recovery, China has invested in a BRI large solar energy farm in Laos since the outbreak.[2]
Further, with state subsidies being slashed domestically, Chinese solar-panel makers are expected to aggressively seek overseas contracts. [3]
These developments offer a ray of hope for ensuring that BRI’s clean energy initiatives stay on track.
State of the energy market in BRI economies
Countries under the BRI umbrella account for roughly one-third of global carbon emissions. Without significant changes to the energy landscape, that proportion could rise to two-thirds by 2050, jeopardising efforts to limit climate change.
And with severe power shortages curbing growth and restricting livelihoods in many BRI countries, more and more energy production is needed.
This demand poses a challenge to the sustainable future of Belt and Road. However, it also represents an opportunity.
While much of the energy-infrastructure investment under Belt and Road so far has gone into hydrocarbon projects, renewable power is inexorably gaining ground.
Developing countries – which comprise the majority of Belt and Road participants – accounted for 94 gigawatts (GW) of newly installed wind and solar power in 2017, outpacing wealthier nations.
And as of 2019, the world’s largest solar plants were all located in developing countries: the Noor Abu Dhabi solar farm, the Noor Complex in Morocco, the Longyangxia Dam park in China, and the Kamuthi, Kurnool and Shakti Sthala facilities in India.
Such activities are contributing to a shift in direction for the energy sector. According to research by Bloomberg New Energy Finance, renewable energy will account for 73 per cent of the USD11.5 trillion invested in power-generating capacity between now and 2050.
If this rate of change continues, half of all the world’s power will be generated by wind and solar by 2050 – an investment opportunity in itself that cannot be ignored.
Challenges ahead
The adoption of wind and solar power is not without challenges, however. The absence of stable policy frameworks (particularly in developing markets), challenges with integrating renewables into existing grids, overcoming the intermittent nature of solar and wind power sources, and risks associated with long-term power purchasing are all significant obstacles.
Yet these are steadily being surmounted.
The first means of overcoming these is by constructing wind and solar facilities on a massive scale – of the kind already being seen in India and China. Elsewhere, Dubai (along with several international banks including Standard Chartered) is investing USD13.6 billion in an enormous solar park that will become the world’s largest. Already capable of producing 213 megawatts (MW), when complete by 2030 it will generate 5,000 MW, enough to power 1.3 million homes and cut carbon emissions by 6.5 million tonnes a year.
Dubai is a wealthy emirate. For many developing nations along the Belt and Road, the cost of building plants on this scale is a major barrier to a clean-energy future. Countries will not shift to renewable power until it is cheaper to produce than fossil-fuel alternatives. This barrier is often described as the ‘tipping point’.
“The need for a transition to cleaner sources of energy is most urgent for developing nations,” said Sujay Shah, Global Head of CleanTech at Standard Chartered. “Belt and Road will help lower the physical and financial barriers to accessing renewable energy – and this in turn will create lasting impact, by driving prices down towards grid parity for BRI markets.”
Towards the tipping point
That tipping point is being brought closer, partly because of the plunging cost of renewables. The price of photovoltaic cells used to generate solar power plummeted by 83 per cent between 2010 and 2018. This has enabled many BRI countries to accelerate the process of energy transition.
Thailand achieved 50 per cent of its intended 2036 solar target of 6 GW in 2015. Vietnam has about 20 GW of solar investments in the pipeline, about half its existing capacity. China has already exceeded its 2020 solar targets by more than 50 per cent.
China, in particular, has developed a robust domestic solar sector that could act as a model for sustainable energy transition across the BRI. The country has moved quickly over the past decade and now leads the world in solar power, with at least 165 GW across solar farms and distributed generation. Today, it is home to six of the top-ten solar-panel manufacturers, and one-quarter of the world’s solar capacity.
In December 2018, a 500 MW solar farm in China hit an important milestone when it began selling power at RMB 0.316 per kilowatt hour, cheaper than the price of coal-fired power for the first time. Elsewhere, the fourth phase of Dubai’s massive Mohammed bin Rashid Al Maktoum Solar Park is promising to deliver the world’s cheapest prices for Concentrated Solar (7.3 US cents per kilowatt-hour) and Photovoltaic (2.4 US cents) power. That compares with hydrocarbon costs of between 5 and 17 US cents.
Deployed across BRI countries, this kind of technological expertise could have profound implications for transforming the world’s energy future.
A place in the sun
Several BRI-linked projects are already under way.
Pakistan’s energy sector, for instance, has faced major power challenges for several years, with daily outages lasting up to eight hours. Renewable energy currently accounts for one-third of total production, and solar power only 4 per cent of that. In 2015, a 100MW photovoltaic solar farm – the pilot project of an ambitious plan to develop the world’s biggest solar farm – started selling electricity to the national grid as part of the China-Pakistan Economic Corridor.
In Hungary, the construction of Central Europe’s largest solar plant is under way, a USD110 million deal resulting from Hungary’s involvement in the BRI.
And hope doesn’t just lie in mega-scale projects.
China’s National Energy Agency launched an initiative in 2016 giving financial incentives and technical assistance to approximately two million poor households in 16 of the country’s provinces for the installation of rooftop solar panels. Not only do the homes get cheap electricity, they can also earn money selling power back to the grid, helping to manage problems related to solar intermittency.
Community solar projects such as this – where power generation provides electricity, maintenance jobs and income – have enormous potential throughout developing BRI countries, demonstrating that the shift to clean energy can take place on multiple levels.
As the Belt and Road speeds-up the process of connecting economies, it can also plug them in to more power sources – and more sustainable ones at that.
In the past, economic recovery efforts have often been associated with higher emission growth than before the crisis. But following the widespread devastation created by COVID-19, if governments and businesses commit to acting in the interests of both humanity and the economy, BRI projects can also look forward to tapping into more sources of clean energy.
[1]World Economic Forum, 28 April 2020: The climate and COVID-19: a convergence of crises
https://www.weforum.org/agenda/2020/04/coronavirus-and-the-climate-a-convergence-of-crises/
[2]Nikkei Asian Review, 2 April 2020: China faces Belt and Road course correction after coronavirus
https://asia.nikkei.com/Spotlight/Belt-and-Road/China-faces-Belt-and-Road-course-correction-after-coronavirus
[3]The Diplomat, 7 April 2020: The Belt and Road after COVID-19
https://thediplomat.com/2020/04/the-belt-and-road-after-covid-19/
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