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AB 2000 studies

Alain Boublil Blog

 

The China energy transition

China is today the most important emitter of greenhouse gas but that has not been always the situation. The country over passed the United States only recently. As climate change is linked to the accumulated pollution, the new emitters have considered for a long time that the efforts had to be at first imposed to the countries which were responsible of the past accumulation. That was the China position but it has changed. The support, without any ambiguity, by Beijing to the Paris Agreement, is the proof of it and it is not the reflection of diplomatic or symbolic attitude. It expresses a deep and deliberate change in the country which has decided to put in place, in concrete terms and deliberately, an energy transition policy. Its principles are not fundamentally different from what has been observed in the United States for near ten years, despite of the official position of the Trump administration, which, in this matter as in many others, looks like a denial.

Chinese authority choices first answer to the aspirations of the population. Accelerated urbanization and growing power consumption have generated major pollutions in the big cities where life has become unbearable due to the degradation of air quality. Power was produced by coal units which not only emitted CO2 but also massive quantities of particles. The coal-to-gas switch has become a major priority along with a diversification through the development of renewable and nuclear plants. Coal production has yet increased in 2017 reaching 3 700 million of tons but small mines are going to be closed, production conditions are modernized and companies are restructured to cope with unbalanced financial situations. The capacities reduction will continue in 2018 with a 150 million tons cut after a more than 500 million one during the 2016-2017 period.

Despite of the persistence of a strong economic growth, with 6.8% during 2018 1st quarter, oil consumption slowed (+5.5%) as, even more, refined products (+2.2%). But Chinese companies are still investing in petrochemical. An agreement has been concluded between CNOOC and Shell about the construction of a new cracker able to produce 1.5 million tons ethylene through the utilization of the last up-to-date technologies. That also shows that the major Western groups are still committed to work with their Chinese counterparts through balanced partnerships.

As in the U.S., the major winner of the China transition policy is natural gas, both to be used in power plants and by households heating and cooking. Coal share in the power mix fell under 60% in 2017 and should fall again in the future. Power consumption jumped during the 1st quarter by 9.8% due to cold weather conditions at the beginning of the year and has reached 1 600 TWh. That has profited to renewable energy. Household wind and solar consumption has increased respectively by 60 and 38%. But that has only represented 5% of the power production, i.e. a very small share compared to fossil fuels. Household and service sector increased demand is the result of the first consequences of the Chinese economy rebalancing which is not anymore concentrated of the growth of heavy industries and exports but also on new activities like tourism, which is booming.

Natural gas consumption has increased during the 1st quarter by 10% to reach 71 bnm3. Forecasts for the current year are based on more than 260 bnm3. It reached only 73 bnm3 in 2007, which means that it has almost quadrupled in ten years. Natural gas share in the energy mix should rise from 10 to 15% between 2020 and 2025. It was only 4% in 2010. China production, even if it is on a strong rise, will not be enough to satisfy demand. It has reached 147 bnm3 in 2017 and the country is starting with success to develop the production of shale gas. Sichuan fields, located in Fuling, exploited by Sinopec have produced 5.8 bnm3 in 2017 and the company is targeting 10 bnm3 in 2018. Due to the increase of internal demand, imports will strongly grow in the future. The new pipe-line which is connecting the North of the country to Siberia fields would be operational in 2020. China relies also a lot on LNG. Imports increased by 59% during the 1st quarter. The construction of new terminals is accelerating and the country became the 2nd biggest importer in the world, over passing South Korea but still far behind Japan, which compensates in this way the stoppage, which is going on, of most of its nuclear power plants.

Prospects are impressive. Natural gas consumption would reach 600 bnm3 and national production 340 bnm3 in 2040, according to the International Energy Agency. Supply agreements are discussed with American producers with substantial volumes. That could reduce a little the trade unbalance between the two countries but the amounts, about one billion dollar, are without any connection with the magnitude of the deficit which was above 350 billion in 2017. Natural gas development is going along with a considerable effort in favor of transportation networks which would be increased in ten years from 64 000 to 125 000 kilometers and of distribution networks because the Chinese government has defined as a target that all the agglomerations of more than 500 000 inhabitants would be able to offer to them the possibility to have their homes connected to natural gas.

The switch from coal to natural gas in the power mix will be also encouraged by the launch of a Carbone market which, as a first step, will only apply to utilities. Experimented in several cities for two years, it has been generalized at the end of last year. To the difference to what is happening in Europe, mainly due to German and Polish lobbying, this market is well controlled by the State and prices are managed to bring a significant support to energies which emit less CO2, notably the natural gas, and to penalize coal use.

China is also re-launching its nuclear program which had been frozen after Fukushima. The fuel loading of the first EPR which is currently built in Taishan occurred April 10th and AP 1000 one, the 1st reactor located in Sanmen using the technology developped by Westinghouse has also started. Installed capacity would increase from 36 GWe in 2017 to 58 in 2020 and to 88 GWe in 2025. The construction of six to eight new plants would start in 2018. Among them, several will be based on the new model, Hualong 1, jointly developped by the two Chinese nuclear groups, CNN and CGN.

The size of the Chinese economy is so big that it won’t be possible to have a significant reduction of greenhouse gas emissions without its contribution. The followed policy, based on a progressive switch from coal to natural gas in the energy mix along with the simultaneous development of nuclear and renewable, seems to be a credible answer to the climate challenge.  

  

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