scale and pace of growth. A dozen years ago, China’s generating capacity was not much more than a third that of the United States. Today it exceeds the United States. Between 2005 and 2010, China’s total electricity capacity doubled. It is as though the country built in just half a decade a new electrical system of identical size to the system in place in 2005! About 22 percent of new capacity added in 2009 was hydropower, and about 11 percent wind. Natural gas has just 2 percent. Still, the bulk of the new capacity—65 percent—is coal (lower than the 77 percent in 2005). But this also means that new, highly efficient, supercritical and ultra-supercritical coal plants, with more pollution controls, are being brought on line, while older, more-polluting and less-efficient coal plants are being retired early.
Coal will continue to be the mainstay of the electric power industry. As a result of growing demand for coal, China is no longer self-sufficient in that resource either. Once a significant coal exporter, China is the world’s second largest importer of coal.
But greater diversification among fuel sources will still be sought. A substantial part of the country’s target for non-fossil-fuel energy will be met by large hydropower plants. The Three Gorges Dam, which began producing electricity in 2003, has an installed power-generation capacity equivalent to about twenty nuclear plants. About 80 nuclear power plants are either under construction or in planning.
State Grid, the largest utility in the world, is spending about $50 billion a year to build what some consider the most technologically advanced grid system in the world. This is another way to promote efficiency. China needs what State Grid chairman Liu Zhenya calls a “strong and smart grid” to transport power thousands of miles from the west and the north across the country to the load centers on the east coast and in the center of the country. This would also reduce the heavy burden of coal transport by truck or rail. The huge wind potential of the sparsely populated Northwest is seen as particularly desirable. It is not only clean energy, but is also an accessible domestic source that can be harnessed to meet China’s future need. But it is only accessible with a vast expansion of long-distance transmission.11
In its 12th Five Year Plan, adopted in 2011, China put further emphasis on what it called its emerging-energy policy—to disproportionally push for alternatives to coal and oil, which means renewables (including hydropower), nuclear, natural gas, electric vehicles—and efficiency.
ENERGY AND FOREIGN POLICY
When it comes to oil, there are risks of a clash of interests between China and other countries, notably with the countries of Southeast Asia and Japan. How real these risks become will depend upon how the nations involved define and adjust their maritime positions.
In terms of relations with the United States, the real risks would come not from competition in the marketplace but would more likely arise when oil and gas development becomes embroiled in geopolitical concerns, foreign policy, and human rights issues. One of those issues was Sudan, where a Chinese-led consortium produces substantial amounts of oil. Venezuela could become an issue, as Hugo Chávez is deliberately trying to play a “China card”—bringing in Chinese investment and promoting China as an alternative market in his campaign against the United States. But that does not seem all that strong a hand.
But currently there is only one country where the risk of energy and foreign policy interests colliding is high. That country is Iran, in light of its nuclear program and pursuit of nuclear weapons. As a result, Iran presents the most complex, contentious, and potentially most difficult issue. Western and Japanese oil and natural gas companies have withdrawn or are in the process of withdrawing from Iran owing to its standoff with the United Nations over nuclear weapons and the growing body of sanctions. This creates a vacuum, and thus an opportunity for China to secure a significant position for its “go out” strategy in one of the major Middle East oil and gas producers. Chinese companies have negotiated, at least on paper, tens of billions of dollars of contracts for investment in the Iranian oil and gas industry that would provide access to substantial oil and gas resources, but they are not moving fast. At the same time, China has a larger interest in the stability of the entire Gulf region, on which it depends for a significant amount of its imports. Chinese companies have prominent roles in Iraq.
China has