Sun, wind and water are Chinese best friends

The International Energy Agency (IEA) predicts that China will produce one-third of the world’s electricity next year. China’s ever expanding power grid is driving growth in its manufacturing industry, which in turn affects the economies of its trading partners such as the USA, Europe, and Japan. Furthermore, the cost of manufacturing tens of thousands of products in China is determined by the price of electricity. This means that the inflation rate of not only the yuan, but also other currencies such as the euro, dollar, and yen is affected.

Coal is currently the primary source of electrical generation in China, accounting for two-thirds of the country’s kilowatt production. However, the Chinese leadership stands out from many developed countries’ leaders by looking beyond the next 20-30 years. China faces a massive energy shortage beyond this horizon. Based on the BP Energy Outlook, coal deposits are projected to last for only another 35-40 years at current production rates.

However, the quality of the coal is expected to deteriorate each year, leading to increased production costs. This is due to the fact that the most easily accessible deposits have already been mined over the past two decades. Importing the required 4 billion tons to China is not feasible, either physically or economically. The country lacks the necessary infrastructure, and importing coal would make Chinese industry uncompetitive. Japan’s experience confirms this, as attempts to abandon nuclear power plants were unsuccessful, and the country is now urgently returning nuclear power units to operation.

China is implementing large-scale energy transformation programs to address the energy gap. One of the most significant initiatives is the electromobilization of the country. China currently accounts for every second electric car sold globally, with a domestic market share of one-third. This effort has yielded positive results, with the vehicle fleet in China growing from 240 million in 2013 to 400 million over the past decade. However, the consumption of gasoline and diesel has remained relatively stable.

Another significant area of development is coal chemistry. Recently, an industrial plant capable of producing 600,000 tons of ethanol per year from low-grade coal was launched in China. The goal is to increase coal ethanol production to 4 million tons per year. It appears that the Chinese have managed to reduce the cost of coal ethanol to below food grade prices by using inexpensive catalysts. Ethanol is already actively used as a biofuel component in the USA and Europe. Scaling up this technology in the next decade could significantly reduce the demand for imported oil from Chinese refineries.

However, China’s primary focus for energy development is to decrease the reliance on coal for electricity generation. Three significant trends can be identified in this regard.

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Sun, wind and water are Chinese best friends

The International Energy Agency (IEA) predicts that China will produce one-third of the world’s electricity next year. China’s ever expanding…