How is China’s energy footprint changing?

How is China’s energy footprint changing?
How is China’s energy footprint changing?
How is China’s energy footprint changing? Top

    Power can be derived from a country’s ability to leverage its resources toward economic and political gains. Conversely, dependency on foreign resources—such as energy—restricts policy options, thereby reducing the avenues through which a country can cultivate its national power. Sudden shifts in the energy market and overseas political instability may also diminish access to foreign energy sources or dramatically increase the cost of energy imports, further compromising the ability of import-dependent countries to pursue their national objectives.

    Renewable Electricity Generation

    What’s fueling China?

    Decades of rapid economic growth have dramatically expanded China’s energy needs. China is now the world’s largest consumer of energy, the largest producer and consumer of coal, and the largest emitter of carbon dioxide.

    Over the last half century, China’s large manufacturing-based economy has primarily been fueled by coal. From 1990 to 2015, China increased its coal consumption from 1.05 billion tons to 3.97 billion tons. In 2016, coal made up 62 percent of China’s energy use. Since 2011, China has consumed more coal than the rest of the world combined.

    In 2015, most of China’s energy and coal use came from the industrial sector, with 67.9 percent of the country’s energy use and 54.2 percent of its coal use due to manufacturing, agriculture, and construction. An additional 41.8 percent of China’s coal consumption came from power production activities.

    China’s dependence on coal for industrial power generation has significantly contributed to urban air pollution. According to World Bank data, in 2014, 71 percent of China’s emissions came from coal, compared to just 31 percent in the United States and 33 percent in the European Union.

    China’s heavy use of “subcritical” coal plants has exacerbated the issue, since such plants are notorious for burning coal in a dirty and inefficient manner. Efforts have been made to clean up coal production by renovating old coal-burning facilities, and some Chinese sources estimate that China will possess the world’s largest high-efficiency coal power system by 2020.

    Households also contribute to China’s emissions problem. While urban household CO2 emissions predominantly come from natural gas and liquefied petroleum gas, coal contributes to over 65 percent of China’s rural household emissions. Furthermore, roughly 72 percent of the electrical power generated in China in 2015 came from coal-powered plants, making coal the primary contributor to household CO2 emissions.

    China’s cumulative carbon emissions are the largest in the world. Between 1990 and 2017, China and the US were responsible for 20.8 and 20.1 percent of total global emissions, respectively. During this period, China’s global carbon input was larger than all other developed countries.


    Powering China’s Future

    China is increasingly looking toward securing its future energy needs with sustainable alternatives. A 2012 white paper on China’s energy policy emphasized the need to “vigorously develop new and renewable energy.” In accordance with the 2016 Paris Agreement, China has committed to make non-fossil fuel energy 20 percent of its energy supply by 2030.

    Over the last decade, China’s investment in renewable energy and natural gas has surged. In 2017, almost half of global renewable energy investment came from China, totaling $125.9 billion. This is more than double the $53.3 billion that China invested in renewables in 2013. China is becoming the largest market in the world for renewable energy. It is estimated that 1 in every 4 gigawatts of global renewable energy will be generated by China through 2040.

    A Conversation With Sarah Ladislaw

     

    0:05 - How vulnerable is China to imported energy? What is China doing to secure its energy needs?

    2:20 - How might efforts to stimulate the Chinese economy and stave off an economic slowdown boost energy consumption?

    3:59 - Can China realistically achieve the goals it has set for producing a greater percentage of its energy from renewable sources?

    6:03 - What role is China playing in South-South energy and climate issues?

    Due to large-scale investments in massive infrastructure projects, hydroelectric power has become China’s main source of renewable energy production. The controversial Three Gorges Dam, completed in 2012 at a cost of over $37 billion, is the largest hydroelectric dam in the world and boasts a generation capacity of 22,500 MW. The dam generates 60 percent more electricity than the second-largest hydropower dam, the Itaipu dam in Brazil and Paraguay.

    Including the Three Gorges Dam, China has constructed 4 of the top 10 largest energy-producing hydroelectric dams in the world. From 2000 to 2015, China increased its hydroelectric energy-generation capacity by an impressive 408 percent. As a result of the Three Gorges Dam and other projects, China became the world leader in hydropower in 2014.

    Over the past decade China has also emerged as a global leader in wind and solar photovoltaic (PV) energy. China’s electricity generated by wind power accounted for just 2.1 percent of its total consumption in 2012, compared to 3.7 in the United States and 9.4 percent in Germany. By 2015, China accounted for one-third of global wind-energy capacity. China’s wind power capacity in 2017 surged to 16,367 megawatts (MW), a 10.5 percent increase from the previous year.

    When you look at a one percentage delta in terms of Chinese GDP growth rate in either direction, that one percent change in their GDP growth rate can translate into the energy consumption of a large country like Brazil

    – Sarah Ladislaw

    In solar PV, China is both the leading supplier and consumer. Due to rapidly decreasing costs, aggressive policy incentives, and low-interest loans from local governments, China has dramatically increased its production of solar panels. In 2014, China became the world’s largest producer of solar panels, and a year later it surpassed Germany’s solar power generation capacity.

    China is now home to two-thirds of the world’s solar-production capacity. The future development of China’s solar industry, however, has been called into question. Due to an over-saturated domestic market, Beijing halted all new solar projects and lowered tariffs on imported clean energy in June 2018. Additionally, the ongoing trade dispute between the US and China could further disrupt China’s solar panel industry. In January 2018, President Donald Trump announced a 30 percent tariff on solar panel imports from China.

    Over the past two decades, new extraction techniques have made shale gas, a type of natural gas trapped in sedimentary rock, into a viable energy source. Natural gas is less carbon heavy than coal when efficiently combusted, emitting up to 60 percent less CO2. In 2017, China consumed 240.4 billion-meter cubic meters of natural gas, making up 6.4 percent of China’s total energy consumption. This represents a notable increase from a decade earlier, when just 2.7 percent of China’s energy consumption was from natural gas. To further promote natural gas consumption, China has pledged to source 10 percent of its energy demands from natural gas by 2020.

    China is also turning to nuclear power to decrease its reliance on fossil fuels. As of July 2018, China operated 41 nuclear power reactors, which generated 38,419 (MW) of energy. Since 2017, China has trailed only France and the United States in terms of nuclear electricity generation. China’s 13th Five-Year Plan reaffirmed the country’s commitment to nuclear energy and outlined plans to construct 40 additional plants by 2020.


    How does China secure its energy needs?

    Much of China’s foreign energy supply comes from politically unstable regions and must travel through narrow straits and contested waterways before reaching China. Securing guaranteed access to foreign sources of energy is vital for China’s ongoing growth and development.

    China holds the third largest coal reserves in the world, which it has historically leaned on to satisfy its domestic energy needs. Yet as its economy has grown, China has increasingly relied on imported coal. In 1990, China produced 1.02 billion tons of coal for consumption, needing just 2 million tons of additional imports. By 2009, China’s rising demand drove it to become a net importer of coal, importing 125.8 million tons of coals to meet domestic consumption demand.

    China fulfills its demand for coal by purchasing it from regional neighbors. In 2017, its coal imports primarily came from Australia (79.9 million tons), Indonesia (35.2 million tons), Mongolia (33.5 million tons), and Russia (25.3 million tons). Prior to 2017, North Korea was China’s fourth largest coal supplier, ahead of Indonesia and Mongolia. Due to the implementation of UN sanctions on North Korea, China has suspended all coal imports from the regime. As a result, China has shifted to rely more on Russia and Mongolia to fill its coal needs.

    China’s demand for crude oil similarly outpaces its domestic production. Since 1993, China has been a net importer of crude oil, and in 2017 it surpassed the United States as the largest importer in the world. According to China National Petroleum, more than 70 percent of China’s crude oil supply in 2018 will come from imports. This dependence on foreign energy is likely to increase. Some estimates have suggested that by 2040 around 80 percent of China’s oil needs will be sourced from elsewhere. While China has taken steps to diversify its oil portfolio, it still must confront potential bottlenecks to access.

    Given its political instability, the Middle East represents an important energy security concern for China, as roughly half of China’s oil imports come from the troubled region. China’s reliance on Middle Eastern oil is only likely to increase in the future. The International Energy Agency predicts that China will double its Middle East imports by 2035.

    China’s oil trade with Iran is especially illustrative of this uncertainty. While sanctions against Iran had for years restricted Chinese access to Iranian oil, this quickly changed once a preliminary agreement on Iran’s weapons program was reached in November 2013. Chinese imports of Iranian oil in 2014 surged by 28 percent compared to 2013. In 2016, China imported 8.2 percent of its crude oil from Iran, just behind Iraq at 9.4 percent. The withdrawal of the US from the Iran nuclear deal in May 2018 has had seemingly little effect on this exchange, as China remains the top destination for Iranian oil.

    China has diversified its oil portfolio by investing heavily in Africa. Africa only possesses around 9 percent of global proven petroleum reserves (compared to 62 percent in the Middle East), but there is considerable potential for gaining access to untapped resources. China has pursued a strategy of offering economic development loans to African states, such as Angola, in exchange for favorable access to oil reserves. Additionally, in 2015 China sent troops to support UN peacekeeping operations in South Sudan, where China has considerable oil investments. While South Sudan’s oil represents a miniscule amount of China’s total imports, in 2016, 66 percent of Sudan and 100 percent of South Sudan’s oil exports were sent to China.

    I think China is a real leader when it comes to South-South energy and climate discussions.

    – Sarah Ladislaw

    Securing maritime energy shipments is another critical energy-security priority for China. Over 80 percent of Chinese maritime oil imports by sea pass through the Strait of Malacca. Therefore, this strategic waterway represents a potential risk to China should it be unable to protect its shipping interests in the narrow strait.

    Another means through which China is seeking to mitigate its dependence on foreign oil is by building a strategic petroleum reserve (SPR), which is designed to insulate China from external market shocks. In November 2014, China’s Bureau of Statistics announced for the first time the size of China’s SPR, claiming to have 91 million barrels, or around nine days of reserves. China aims to accumulate 600 million barrels of oil, which would meet the OECD standard of 90 days of import reserves.

    FDI

    With over 60 percent of its trade in value traveling by sea, China’s economic security is closely tied to the South China Sea. Learn more about China's South China Sea Trade.

    Although China holds the world’s largest shale gas reserves, the amount of natural gas readily available for extraction is much lower due to geographical complexities. Some deposits are buried as deep as 3,500 meters underground, making extraction difficult. In 2017, 38.4 percent (95.5 billion cubic meters) of China’s natural gas needs were met by foreign sources, a 27 percent increase from 2016.

    China currently relies on foreign natural gas delivered via land pipelines and carriers in the form of liquefied natural gas (LNG). The only two existing pipelines supplied 46 percent of China’s gas natural imports in 2017, with three-quarters of this natural gas coming from Turkmenistan. The share of overland energy sources is likely to increase in coming years. In 2014, China and Russia signed a 30-year, $400 billion deal to deliver Russian natural gas to China starting in December 2019. Conversely, China imports LNG from several different countries, including Australia (47 percent), Qatar (21 percent), and Malaysia (11 percent) in 2017. The International Energy Agency predicts that in 2030, over 60 percent China’s natural gas demands will have to be met through imports. ChinaPower