CHINA: CTL production accelerates despite rising climate directives
Greenwire, February 14, 2008 Thursday
mbtmag.com
Colin Sullivan, Greenwire West Coast reporter
SANTA BARBARA, Calif. -- China's appetite for coal is growing rapidly and moving quickly into the transportation sector despite central government directives aimed at curbing emissions of heat-trapping greenhouse gases.
The People's Republic is driving to use its vast coal reserves and coal imports to displace as much as 12 percent of its petroleum consumption by 2020, said James Brock, a Beijing-based consultant with Cambridge Energy Research Associates.
"Most of China's energy comes from coal," said Brock, a former energy company CEO and Bank of China employee. "This is not going to change significantly."
Coal-to-liquids (CTL) fuels would displace 1.5 million barrels of oil per day by 2015 in an effort to blunt rising imports from the Middle East, Brock said. Total daily oil consumption in China is about 7.3 millions barrels and rising.
"That is a very significant amount of oil substitution through coal," said Brock in a recent, wide-ranging speech at an energy conference at the University of California-Santa Barbara.
His address provided a shot of reality for U.S. energy players who are -- in Brock's view -- highly misinformed when it comes to China's economic drivers and culture. Brock said 85 legal and 40 illegal CTL conversion facilities are in the works.
The rise of China's CTL industry is not good news for California or the western United States, whose inhabitants will have to deal with the air pollution drifting across the Pacific from Beijing's coal-fired energy push. But Chinese officials are unlikely to view U.S. pollution concerns as a priority in the short term given the ruling party's economic goals, Brock said.
"The goal is to double the standard of living, and once you've doubled it, to double it again," Brock said. 'No grasp of recession'
Bigger picture, Brock said China's internal expectations for growth are close to about 9 percent annually for gross domestic product over the next 25 years, easily outpacing a prediction from the International Energy Association of about 6 to 7.5 percent per year. In the first three years of that 25-year period, Brock recorded GDP growth of about 11.5 percent annually.
That translates into energy consumption doubling over the first five years, according to Brock's analysis. "The IEA number is too low," he said. "They are doubling their energy needs at a rate of once every five years."
That rate of growth should slow after the next five years, but not by much. After that period, Brock predicts Chinese energy use and demand will double "roughly every 8 to 10 years" over the next 20, with energy efficiency improvements climbing about 2.5 percent a year.
Such growth means that in 10 years, "half the [Chinese] economy that exists now will not exist then," Brock added.
By contrast, Japan is lucky to experience such growth every 40 years, while the United States is doubling at a rate of once every 20 years.
"This is a point I have a hard time getting across to foreigners: China is doubling much faster," Brock said. "The majority of Chinese have never known a time in their life when the standard of living wasn't improving. Those under 45 [years of age] have no grasp of recession." Climate goals
In what some might see as a contradiction, Brock also argued that Beijing is taking climate change and clean energy development seriously. Others agreed and pointed to China's renewable portfolio goal of 15 percent by 2020 and recently enacted fuel economy standards.
Suntech's (NYSE: STP) director of external relations in the United States, Polly Shaw, said China is quickly developing its wind and solar industries as well as "focusing heavily on building energy use" and sustainable design.
In 2006, the market size for solar installations was about 10-20 megawatts, she said, but the sector is expected to see 300 MW of installed capacity by 2010 and 1.8 gigawatts by 2020. For wind, the target is to grow from less than 500 MW to 10 gigawatts by 2020.
"There are tremendous opportunities now for renewable energy in China," said Shaw, who joined the Chinese solar manufacturer in December after leaving the California Public Utilities Commission as part of the company's push into the United States (Greenwire, Feb. 11).
For his part, Brock offered a rare glimpse into how the Communist system in China attempts to enforce clean energy goals. The central government, he said, recently shook up its established order by demanding the country's "top thousand" enterprises -- what he called "the TT" -- comply with a directive to reduce energy intensity by 20 percent per unit of GDP in the current five-year plan.
The goal is to quadruple economic growth by 2020 while only doubling energy use, he explained. Local party and industry officials are to be judged by a set of "key performance indicators" used to determine success. In China, Brock said, "failure to succeed will have consequences."
The indicators serve as a kind of report card apparently enforced by the central government. The rating system breaks down like this: 35 percent for "no disturbances"; 25 percent for energy/environment/water compliance; 20 percent for the one-child policy; and 20 percent for economic growth. The previous report card didn't address energy or environment and weighed heavily on economic growth, disturbances and the one-child policy.
Explicit penalties for failing grades were outlined in a recent energy law passed in China and include both monetary and criminal punishment, Brock added. Chinese press
In the culture at large, Brock described a shift that has the public openly calling for action to help stop global warming. For the first time in recent history, the Chinese press has been able to run articles on the environment, energy, pollution and climate change -- all sanctioned by a shifting mindset within the government.
"None of these things were talked about two years ago," Brock said.
As such, Brock sees a real committment to the "20 in 5" plan and insists the culture is geared toward helping to fix climate change even as the country grows into the world's largest emitter of greenhouse gases. He also said China is far closer to energy independence (with 11 percent imported energy) than either the United States (roughly 40 percent) or Europe (60 percent).
Of climate change, he said, "People [in China] simply don't want to tolerate it."
Following the speech, a University of California-Santa Barbara professor predicted the energy challenges that Brock highlighted would bring more focus to the shifting nature of the global order.
"What's going on in China right now is amazing," said Alec Wodtke, the university's chairman of chemistry and biochemistry. "The international spotlight has shifted from the United States to China, and there is a real danger ... that you will hear sabre rattling from this side of the ocean." |
