Displacement efficiency of alternative energy and trans-provincial imported electricity in China

Abstract

China has invested heavily on alternative energy, but the effectiveness of such energy sources at substituting the dominant coal-fired generation remains unknown. Here we analyse the displacement of fossil-fuel-generated electricity by alternative energy, primarily hydropower, and by trans-provincial imported electricity in China between 1995 and 2014 using two-way fixed-effects panel regression models. Nationwide, each unit of alternative energy displaces nearly one-quarter of a unit of fossil-fuel-generated electricity, while each unit of imported electricity (regardless of the generation source) displaces ∼0.3 unit of fossil-fuel electricity generated locally. Results from the six regional grids indicate that significant displacement of fossil-fuel-generated electricity occurs once the share of alternative energy in the electricity supply mix exceeds ∼10%, which is accompanied by 10-50% rebound in the consumption of fossil-fuel-generated electricity. These findings indicate the need for a policy that integrates carbon taxation, alternative energy and energy efficiency to facilitate China's transition towards a low-carbon economy.