AnalysisOnline » Welcome

China's Energy Future - Coal to Nuclear to Renewables

Some factual background: Coal demand is expected to rise still further in China, having risen by 57% between 1994 to 2004 [1]. The 11th five-year plan from 2006-2010 will take coal production from 2. 1 bn tonnes to 2. 4 bn tonnes [2]. This represents 36% (BP) of world coal output in energy equivalent terms. Coal makes up 69% of China’s primary energy consumption. This is the way it will stay for some time, as China has plentiful reserves of good quality coal, while its less adequate reserves of oil have meant rising reliance on imports and its natural gas reserves are less developed, supply only 2.6% of its energy production. There is room for expansion here but it will not be quick, unless the Chinese can persuade Russia to send more of its natural gas south rather than east to Japan.

As for nuclear, even with the involvement of Westinghouse of the US and Areva of France (which will quadruple the number of nuclear power stations in 15 years) nuclear’s contribution to energy demand will be only 4% in 2020. Moreover, each station will cost $2 bn (Le Figaro Economie, 28 fevrier 2005). To go further, the problems of safe operation and waste disposal would magnify greatly. But the Australians are quite happy to supply the uranium while the US worries about reprocessing for weapons.

Renewable energy in the form of hydro power makes up nearly 8% of energy production, but, as the Three Gorges project showed it is a huge economic and social project to expand further. It is fraught with social and environmental consequences. The same is true of other forms of renewable energy. Given rapidly increasing energy demand and a lack of the kind of planning consultation regime developed countries worked out over decades, these developments lead to land confiscations and quite often revolts (as in Dongzhou in early December - economist. com 12/12/05 - Trouble in Chinatown) and sometimes deaths. As in other coal producing regions new power stations are more acceptable for obvious reasons. While there is scope for new renewables they are unlikely to expand fast enough even to meet growth in energy demand.

Update 2009: While energy use has been increasing, the energy balance has remained more or less the same as in 2005. Coal production has risen ahead of target, to 2.7 bn tonnes in 2008. The increase in coal output in China has been quite spectacular rising from 998 million tonnes in 2000 to 2,720 million tonnes in 2008.

This has been the major factor behind the move of China to become the largest global emitter of carbon dioxide equivalent greenhouse gas in advance of previous projections.
At the same time the number of fatal accidents in coal mines has fallen from a peak of 6,995 in 2002 to 3,786 in 2007 and a calculated 3,200 in 2008. Expressed as a rate per million tonnes of coal produced this fallen considerably, as output has increased dramatically: from 5.8 fatalities per million tonnes to 1.182 fatalities per million tonnes in 2008. This figure remains very much higher than the rates for developed countries.
In renewables, China has more solar heated water than any other country, with the arrival of cheap, locally produced panels, which can be seen in their thousands across the roves of Chinese buildings.

Viability of Renewable Energy Sources

It’s more difficult with renewable energy as new land is required, whether for new dams or wind turbines and this can lead to land and property confiscations, giving rise to questions of proper compensation and actual payment, whereas coal mining communities are more accepting of new coal power plant. These are often located next to existing, older plant anyway. This is no different in any other country, except that it can be even more difficult where planning inquiries are the norm.

Improving the Supply/Demand Picture in China

The ‘virtuous fuel’ remains to be tried: improved energy efficiency and conservation. The 11th five year plan sets a target of a 20% improvement in energy efficiency/conservation. This is extremely ambitious and few developed countries have achieved it without external shock therapy such as an oil crisis. Japan is the most virtuous, along with some small EU member states and Germany. All are technology rich.

Future of Coal, Oil and Natural Gas

China will have to rely on coal, or it will have to buy much more oil and gas off the world market. The effect on the global price is already apparent, with China making up around half of increased global oil demand, something few expected. Unpredicted, except by a few energy analysts was also the lack of supply, with has been critically restricted by the complacency that sets in during periods of low prices, the poor judgements made by the US and the UK in Iraq, the restrictions on foreign investment in the Middle East and the fact that the oil and gas reserve base has been steadily moving eastwards anyway, as Western (mainly US, UK) oil depletes and Mexican fields matures. Hurricanes do not help either; nor do refinery explosions, as at BP’s major US facility recently.

On its current economic growth trajectory, China is expected to overtake the US as the biggest world energy consumer sometime after 2025 and also the biggest emitter of carbon dioxide (CO2), the main Greenhouse gas. Accordingly, it has been hunting for diversified energy supplies around the world, with its well-trained diplomats engaging in discussions globally. This, of course, has been different from the U, Japan or Europe, where economic power, vested in large energy companies has helped out. However, as has been seen in the case of Shell, their energy reserve bases are dwindling or they are over-stated.

Coping with Environmental Concerns and the World Economy

Question: If China is to continue their push for coal extraction, safety and mining methods must be improved. How do they go about making a more rapid advance towards safety and efficiency? Will the technology improvements of developed countries be adapted to the Chinese mining industries through knowledge exchange and joint ventures between Western and Chinese companies?

The second question involves the leap-frogging or bypassing by China of the arduous route to development in its coal consuming and producing industries. If we do not help, the incipient oil price shock could become very real, even provoking a world recession. The planet’s atmosphere will have to cope with a much larger dose of CO2 unless an economic recession of sufficient scale drastically reduced world energy demand or the sky high oil price led to huge energy substitution, with high hydrocarbon prices making renewables and nuclear more economic. This is very tricky stuff, which deregulated and liberalised electricity companies cannot easily plan for.

On coal consumption China is adding to its electricity generating capacity every two years an amount equivalent to the total UK generating capacity. Most of this is coal but fortunately much is using the cleanest coal technology commercially available - the supercritical boiler, which can improve energy efficiency and reduce emissions by 20% or more. Even better clean coal plant is being proven and will be available in the near future (see IEA Coal Research - International Energy Agency). Both the EU (see EU-China Summit 2005 www. europa. eu. int) and the US (Dept of Energy) have major technology transfer projects in this area, including the technology for carbon capture and storage (also known as carbon sequestration - scrubbing CO2 during combustion or or out of coal in pre-generation and pumping the gas into disused oil/gas wells). These programmes need to be stepped up.

Update 2009
China has been remarkably successful in replacing large numbers of small thermally inefficient power plant (20-29% thermal efficiency) with big, much more efficient (41-43% thermal efficiency). These much cleaner plants have reduced coal consumption and CO2 emissions, as well as other gas emissions per unit of electricity.

As at end 2007 China had commissioned 226 large supercritical units and 9 of the very modern and efficient ultra-supercritical units. These supercritical units operate at higher pressures and temperatures than normal pulverised fuel coal plant, which are in standard use elsewhere in the world, including the US and Europe. Relatively few supercritical units are operating outside China, despite the fact the technology was developed in the advanced countries.

Moreover, since 2003, China has become self-sufficient in the production of the new units, although it has licensing agreements with Western manufacturers. The power generation equipment industry is extremely strong, unsurprisingly, as the annual installation of new capacity reached over 100 GW in 2006, compared with the annual addition of 7 GW in 1978, the first year of economic reform.

Self-sufficiency has been a clear government policy, which holds true for the production of energy, too, in so far as is possible. China is 94.2% self-sufficient in energy supply, compared with only 68.6% for the US and less for EU countries, with the temporary exception of the UK.

On coal production itself, this is more difficult, as the Chinese industry is so vast, so differentiated between small village private mines, township mines and large mechanised mines in the state sector. Different solutions are needed for each of these, with closure of the worst culprits regarding accidents being attempted now in the small mine sector. And yet the market is fuelling illegality, as demand pushes prices higher in a partially deregulated market. The longer term strategy must involve two things, crucially: the rebasing of the coal industry on large, efficient mines working good seams, probably going deeper. This could be done by the kind of reorganisation into large coal combines, envisaged in the 11th five year plan. It would require a large injection of capital. This could come from the West as well as China via joint ventures, or more likely on a basis similar to Western firms taking shares in large Chinese oil companies and banks. China would almost certainly not privatise its coal companies, any more than the US would allow China to buy its oil companies.

Update 2009

In the last few years China has closed thousands of the small, unsafe and inefficient mines and made fast progress in reorganising large mines into sizeable companies, with increasing output. These companies have now diversified into other coal-related business, other energy production and into chemicals and transport. They have taken advantage of the new cleaner coal combustion technology, in building power plant and the Clean Development Mechanism to use coal mine methane, a dangerous gas which causes frequent explosions in China’s gassy mines, to produce energy for the mine, sell it on to the electricity grid and earn carbon credits.

From a safety point of view, what is needed is the transfer of best practice and expertise as well as technology. China’s most advanced mines are not much less mechanised than Western ones, and its mining engineers no less skilled. However, the management of safety needs to be improved. Mining engineers, in particular, need to learn, as they had to in the West that technical improvements help but are insufficient by themselves. Without proper training and use they can be ineffective at best or harmful at worst, as mechanised mining was at first in the West. Incidence of ‘black lung’ climbed before dust suppression technology was developed.

The developed countries took decades - a century in the case of the European countries - to learn first, why socially, they should do and secondly, how to do it. The dreadful accident rate in Chinese coal mines is now in full public view both in China and throughout the world in a way that it never was in early industrial Britain, Germany, France or the US. Emile Zola and ‘Germinal’, apart.

Examples of Chinese in Confront Mining Safety issues

The Chinese authorities have embarked on this colossal project with an increasing amount of international help from the US (US$2. 5m Dept of Labour), Australia (A$4m Federal Govt), Japan (in the form of technical assistance in mining technology) and, hopefully in the near future, the EU. The ILO is also, crucially, involved. I believe the authorities are genuinely beginning to grapple with the very difficult issues involved. As was the case in the UK, the various interests - Government (politicians, energy economists, mines inspectors), owners, mining engineer/managers and unions are being forced to find new ways of working together.

What will help here more than anything else is the development of a concept of safety organization, one which includes joined-up thinking and co-operation between these groups. Miners’ safety representatives, 100, 000 of whom are to be appointed in next months, need to be given clear powers and properly trained. It is in the miners’ most direct interest to help solve these problems and it is clearly in the interests of the country to do so, too, not to mention every Western auto driver.

Update 2009
The China-US mine safety co-operation was completed in 2008, with the evaluation report submitted to the funding department (US Department of Labor), detailing its great success in the transfer of knowledge, techniques and experience. The China-Australia programme is underway. A small China-New Zealand programme has been completed and a major new China-EU programme is now also underway. All of these have experienced excellent co-operation with the Chinese government

[1] http://www.bp.com/genericsection.do?categoryId=92&contentId=7005893
[2] http://www.energybulletin.net/3566.html
(c) 2005 David Shvartsman

Be the first to comment on Understanding China's Energy Future: What it means to the West