Energy Finance

2021
Chen^, Xu, and Denise L. Mauzerall+. “The Expanding Coal Power Fleet in Southeast Asia: Implications for Future CO2 Emissions and Electricity Generation.” Earth's Future 9, no. 12 (2021).Abstract
Coal combustion for power generation made up 30% of global CO2 emissions in 2018. To achieve the goal of the Paris Agreement to keep global average temperatures below 2°C, power generation must be decarbonized globally by mid-century. This requires a rapid phase-out of coal-fired power generation. However, global coal power expansion continues, mostly in developing countries where electricity demand continues to increase. Since the early 2010s, Southeast Asia's coal power capacity expansion has been among the fastest in the world, following China and India, but its implications for the global climate and regional energy transition remain understudied. Here we examine Southeast Asia's power generation pipeline as of mid-2020 and evaluate its implications for the region's CO2 emissions over the plant lifetime as well as projected electricity generation between 2020-2030 in Indonesia, Vietnam, and the Philippines. We find that power plants under construction and planned in Southeast Asia as of 2020 will more than double the region's fossil fuel power generation capacity. If all fossil fuel plants under development are built, Southeast Asia's power sector CO2 emissions will increase by 72% from 2020 to 2030 and long-term committed emissions will double. Moreover, in Indonesia, Vietnam, and the Philippines, projected electricity generation from fossil fuel plants under development, combined with generation from renewable capacity targets and existing power capacity, will exceed future national electricity demand. As a result, fossil fuel plants will likely be underutilized and/or become stranded assets while also potentially crowding out renewable energy deployment.
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Chen^, Xu, Zhongshu Li^, Kevin P. Gallagher, and Denise L. Mauzerall+. “Financing carbon lock-in in developing countries: Bilateral financing for power generation technologies from China, Japan, and the United States.” Applied Energy 300 (2021).Abstract
Power sector decarbonization requires a fundamental redirection of global finance from fossil fuel infrastructure towards low carbon technologies. Bilateral finance plays an important role in the global energy transition to non-fossil energy, but an understanding of its impact is limited. Here, for the first time, we compare the influence of overseas finance from the three largest economies – United States, China, and Japan – on power generation development beyond their borders and evaluate the associated long-term CO2 emissions. We construct a new dataset of Japanese and U.S. overseas power generation finance between 2000 and 2018 by analyzing their national development finance institutions’ press releases and annual reports and tracking their foreign direct investment at the power plant level. Synthesizing this new data with previously developed datasets for China, we find that the three countries’ overseas financing concentrated in fossil fuel power technologies over the studied period. Financing commitments from China, Japan, and the United States facilitated 101 GW, 95 GW, and 47 GW overseas power capacity additions, respectively. The majority of facilitated capacity additions are fossil fuel plants (64% for China, 87% for Japan, and 66% for the United States). Each of the countries’ contributions to non-hydro renewable generation was less than 15% of their facilitated capacity additions. Together, we estimate that overseas fossil fuel power financing through 2018 from these three countries will lock in 24 Gt CO2 emissions by 2060. If climate targets are to be met, replacing bilateral fossil fuel financing with financing of renewable technologies is crucial.
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Li^, Zhongshu, Kevin Gallagher, Xu Chen^, Jiahai Yuan, and Denise L. Mauzerall. “Pushing out or pulling in? The determinants of Chinese energy finance in developing countries.” Energy Research & Social Science (2021).Abstract
China is now one of the world’s largest financiers and investors in the global electric power sector. While a number of important qualitative analyses have examined the determinants of Chinese energy finance, this paper deploys new data to perform the first econometric analysis to examine the determinants of Chinese overseas financing for electric power plants. Drawing on that earlier work, we examine a number of ‘push factors’ – incentives in China that facilitate investment abroad—and ‘pull factors’ – incentives in recipient countries that facilitate Chinese investment into their country. On the push side, we find that domestic overcapacity in China plays a key role in facilitating China’s development finance in these plants. On the pull side, we find that the size of local demand for new power projects and the resource potential for electric power in recipient countries are significantly correlated with the size of Chinese financing. We also find existing Chinese involvement in past power projects likely facilitates new Chinese overseas financing.
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2020
Chen^, Xu, Kevin P. Gallagher, and Denise L. Mauzerall+. “Chinese Overseas Development Financing of Electric Power Generation: A Comparative Analysis.” One Earth 3 (2020): 491-503.Abstract

IN BRIEF:

The Paris climate goals require rapid decarbonization of the global power generation sector. To achieve this goal, it is critical to redirect international development finance away from fossil fuel toward renewable energy technologies. We find that East Asian national DFIs have committed to finance a new generation of coal power plants. However, China’s new domestic decarbonization goal, if extended to its overseas finance, will be enormously valuable in reducing future carbon emissions from recipient countries.

SUMMARY:

Global power generation must rapidly decarbonize by mid-century to meet the goal of stabilizing global warming below 2C. To meet this objective, multilateral development banks (MDBs) have gradually reduced fossil fuel and increased renewable energy financing. Meanwhile, globally active national development finance institutions (DFIs) from Japan and South Korea have continued to finance overseas coal plants. Less is known about the increasingly active Chinese DFIs. Here, we construct a new dataset of China’s policy banks’ overseas power generation financing and compare their technology choices and impact on generation capacity with MDBs and Japanese and South Korean DFIs. We find that Chinese DFI power financing since 2000 has dramatically increased, surpassing other East Asian national DFIs and the major MDBs’ collective public sector power financing in 2013. As most Chinese DFI financing is currently in coal, decarbonization of their power investments will be critical in reducing future carbon emissions from recipient countries.

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Li^, Zhongshu, Kevin P. Gallagher, and Denise L. Mauzerall+. “China’s global power: Estimating Chinese foreign direct investment in the electric power sector.” Energy Policy 136 (2020): 1-9.Abstract
We analyze the spatial and technological distribution of China’s overseas electric power investments around the world, and the pollution intensity of Chinese coal fired power plants relative to those held by non-Chinese entities. We find that Chinese firms hold approximately $115 billion USD in electric power assets globally, with an average of 73% ownership stake in a total capacity of 81 GW. Chinese power investments span the globe but are largely found in developing countries, particularly in Asia and Latin America. The vast majority of Chinese investment goes to coal (24.5 GW), gas (20.5 GW) and hydropower (18.1 GW), while the share of wind (7.2 GW) and solar (3.1 GW) is relatively small but may be rising. The energy mix of Chinese overseas investment is similar to the existing world portfolio. Within the coal sector, between 2011 and 2017, the majority of Chinese greenfield investment in coal used supercritical technologies (58 percent) while only 34 percent of non-Chinese coal plants built during this period were supercritical.
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