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10/26/2010
1
China’s Progress in Energy Efficiency and E i i R d i d I li i fEmission Reduction and Implications for
CHINA‐JAPAN‐U.S. Cooperation
Gang He
Research Associate, Stanford UniversityProgram on Energy and Sustainable Development
http://pesd.stanford.edu • Stanford Universityhttp://pesd.stanford.edu • Stanford University
Washington, DCOct 25, 2010
Program on Energy and Sustainable Development
PhD student, Energy and Resources GroupUniversity of California, Berkeley
Outlines
• Background: rising China’s greatest transformation• Progress in China’s the energy efficiency and emission
reduction• PESD’s research for China’s low carbon future: CCS in China as
a case study• Implications: understanding China’s domestic political
economy and align with China’s domestic incentives• Conclusion and implications
http://pesd.stanford.edu • Stanford University 2
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Background: Rising China’s Greatest Social Economic Transformation
• Greatest transformation• Four major socio‐economic transformations
– IndustrializationIndustrialization– Urbanization– Motorization– Modernization
• General socio‐economic target– 2000, well off society
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y– 2020, all round well off society– 2050, middle developed countries level
3
Why China’s energy and climate problems are extremely challenging?
Oil 20%
Nuclear Energy 1%
Hydro electric 6%
Coal Dominates China’s Primary Energy and Power Supply
Hydro
Nuclear2%
WindOthers
Natural Gas 3%
Coal‐fired
17%
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Coal 70%
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70% of China Primary Energy from CoalSource: 2007 data from China National Bureau of Statistics, 2008
Coal‐fired81%
81% Electricity Generated by CoalSource: 2008 data from China Electricity Council
Total: 2.65 btce Total: 3,427 TWh
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Economy: Export Oriented and Energy Intensive
• Export‐oriented• Labor intensive• Energy intensive• Energy intensive• Resources intensive
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Chart source: Google Public Data. News source: http://www.nytimes.com/2010/08/16/business/global/16yuan.html
Highlights on China’s Energy Efficiency and Emission Reduction Progress and Prospective
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Source: tttp://news.xinhuanet.com/english2010/china/2010‐03/13/c_13209617.htm
Source: McKinsey, China’s green opportunities.
Energy Saving: 600 million tceEmission Reduction: 1.5 Bt CO2
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China Tops the Clean Energy Booming
25
30 GW
Wind
In 2009, China was the biggest•PV exporter•New wind capacity installer
10
15
20
Nuclear
•Nuclear Capacity under construction•Investor in clean energy
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‐
5
1995 1997 1999 2001 2003 2005 2007 2009 2011Data Source: China Statistic Yearbook; CEC; Chinese Renewable Energy Industry Association.
Solar
China’s Renewable Energy Will Account 15% of Total Energy Consumption by 2020
150 140
160
GW Wind
70
40
60
80
100
120
Nuclear
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25 20
9
‐
20
40
1990 1995 2000 2005 2010 2015 2020 2025Data Source: China Statistic Yearbook; CEC; Chinese Renewable Energy Industry Association. 2020 targets proposed by Chinese planners, not officially released yet.
Solar
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China’s Green Infrastructure: High‐speed train and High‐voltage Transmission Lines
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Source: Ministry of Railway, 2008
A CRH train departs Shanghai station. Source: Xinhua.
Towards Market Oriented Environment and Climate Governance
• 11th five year plan mostly rely on command and control• Carbon tax, environmental tax and climate tax in discussion• China is discussing a Cap‐and‐Trade demonstration projectChina is discussing a Cap and Trade demonstration project
– Key energy intensive sectors: power, oil, chemical; SOEs– Low‐carbon demonstration cities: Tianjin, Liaoning, etc
• It’s not a big deal but has big implications– Domestically: show the transformation, building the capacity and infrastructure for future implementation
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– Internationally: deliver a clear message of China’s take on climate change
• Try and test: will first be voluntary , to see how it can work
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Stanford University Program on Energy and Sustainable Development
• Initiated in 2001• Works on political, economic and institutional perspective of
global energy systemglobal energy system• Completed research
1) Electricity Markets and Power Sector Reform2) Global Natural Gas Markets
• Active research1) Climate Change Policy2) The Global Coal Market
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2) The Global Coal Market– Business Models for Carbon Capture & Storage (CCS)
3) National Oil Companies and the World Market4) Building a Low‐Carbon Electricity Industry and the “Smart Grid”5) Low‐Income Energy Services
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Highlight Research on China’s Low Carbon Future
• China’s coal and power sector– Industry organization– Coal and power sector reformCoal and power sector reform– China’s clean coal technology
• Carbon capture and storage• Carbon policy and Clean Development Mechanism Reform• Increasing research on
– Fuel switch to natural gas
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g– Integrating renewable energy to the smart grid
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Coal is the World’s Fastest Growing Source of Fossil Fuel and China Consumes 43% of ItIncrease in primary demand, 2000–2007(IEA)
800
900
1 000
4.8%South Africa, 133.2, 3%
Germany, 114, 2%
Korea, 91.2, 2%
Poland, 84.8, 2% Australia,
81.3, 2%
Total Global Coal Consumption: 4.9 Btce
Mtoe
300
400
500
600
700
800
1.6%2.6%
2 2%
% = average annual rate of growthChina, 2098.6, 43%
Rest of World, 756.2,
India, 377.1, 8%
Russia, 177.5, 4%
Japan, 161.5, 3%
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0
100
200
Coal Oil Gas Renewables Nuclear
2.2%
0.8% USA, 788.1, 16%
15%
Consumption in million metric tons and share of global total, 2008
Sources: IEA WEO 2008, IEA Coal Statistics 2009. Note: Consumption is expressed in "million tons of coal equivalent“.
The Conventional Wisdom: China is Required CCS Deployment to 2050
Africa, $248, 11%
Other OECD N. America, $51, 2%
OECD Pacific, $215 9%
Power sector CCS investment in billion USD (IEA)
Africa, 117, 7%
Other OECD N. America, 66 4%
OECD Pacific, 148,
9%
Number of power sector CCS projects to be deployed (IEA)
China, $467, 20%
Cent. and S. America, $59, 3%
Other Developing A i $306
OECD Europe,
$268, 12%
USA, $270, 12%
$215, 9%China, 307, 19%
Cent. and S. America, 52, 3%Eastern EU
and Russia, 181, 11%
OECD Europe, 187, 12%
USA, 175, 11%
66, 4% 9%
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Eastern EU and Russia, $126, 5%
India, $204, 9%
Middle East, $86,
4%
Asia, $306, 13%
Total World: 2.3 trillion USD
India, 147, 9%
Middle East, 103, 6%
Other Developing Asia, 149,
9%
Total World: 1,623 projects
Source: IEA “CCS Roadmap” 2009. Assumptions based on IEA Blue Map mitigation scenario.
The Current CCS Logic: Climate Change ‐> CCS ‐> Coal ‐> China ‐> CCS in Chinese Power?
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CCS at Scale Could Harm China’s Energy Security
CCS at scale requires an extra 200‐300 million tonnes of coal
Chinese Coal Flows (2.9 B tons in 2009; 3.3 B tons estimated in 2010)
• Coal railway bottlenecks already a major constraint
• CCS at scale implies huge additional infrastructure costs
– new coal production– additional rail build– additional port capacityadditional shipping capacity
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– additional shipping capacity– Total est. additional costs: ~USD 50 billion
Source: IEA CCC 2007, Coal Supply Challenges for China.
Note: Our calculations show that achieving IEA’s Blue scale requires 375 GW (gross) CCS‐equipped coal capacity. Assumptions: 50% gross efficiency; 5% auxiliary consumption; 10% efficiency loss from capture; that is, 35% net efficiency with capture; 85% capture rate; 0.8 plant load factor. Given that today’s ~600 GW of coal capacity consumes 1.2 billion tonnes per year coal, an additional 25% for 375 GW (due to decreased efficiency) would represent an additional 190 million tonnes of coal (conservatively).
Coal‐power Conflict: Why International Financial Mechanism is Needed for Scaling up CCS in China
0.40
0.50
0.60 2008: China's power market cannot even bear the cost of coal
0.00
0.10
0.20
0.30
1/20/08 2/20/08 3/20/08 4/20/08 5/20/08 6/20/08 7/20/08 8/20/08 9/20/08 10/20/08 11/20/08 12/20/08
Shanghai Grid (RMB / KWh)
Coal Cost (RMB / KWh)
•Cheap power to fuel economic development and tame inflation is a political imperative that
http://pesd.stanford.edu • Stanford University 16
Source: He and Morse. Power price is Shanghai grid as reported by Shanghai Development and Reform Commission. Coal price is Qinhuangdao spot price as reported by Reuters.
Cheap power to fuel economic development and tame inflation is a political imperative that constrains cost recovery for CCS at scale•Chinese power companies lost RMB 70 billion (USD 10 billion) in 2008 because power prices remain tightly controlled by the central government while coal prices are not, illustrating a key problem: the power market cannot internalize increased costs•Without power markets that allow for cost recovery, scaling of CCS technology is likely to prove elusive
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Uneven Reform of Coal and Power Sector
3000
3500
4000Twh, Mt
1000
1500
2000
2500
3000
P G ti
Central Planning Coal
Power
Two‐tier system introduced in 1985
Market expanding, electricity coal price
gradually relax
Major Market ‐oriented Reform
Coal negotiation Conference end in 2009
Central Planning
Generation partial open
State power corporation
1978 1992
1997 2002
http://pesd.stanford.edu • Stanford University 17
0
500
1975 1980 1985 1990 1995 2000 2005 2010 2015
Power Generation
Coal Production
Data source: China Energy Statistic Yearbook. Indicative Reform stage summarized by Gang He.
China’s Core Interests in Energy Supply and Climate Policy Implications
• Economic growth and macroeconomic/social stability→ “Energy security”: ensure lack of energy doesn’t impede
growth → supply diversification, efficiency improvement → Keep energy prices low to end users: economic growth and
social stability→ Develop leadership in energy technology manufacture
• Reduction of local pollution→ Pollution controls on coal plants→ Efficiency improvement
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→ Fuel switching away from coal
• Climate change mitigation→ Efficiency improvement→ Fuel switching away from coal
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Lessons: Strongest Motivation Emerges Where Goals Align!
For Example
• Higher‐efficiency coal technology (e.g., USC, IGCC)E S it POSITIVE (b tt ffi i )Energy Security: POSITIVE (better efficiency)Technology Capability Development: POSITIVEPollution Reduction: POSITIVE (better efficiency, less pollutant)Climate Mitigation: POSITIVE (better efficiency)
• Post‐Combustion Carbon Capture and Storage (CCS)Energy Security: NEGATIVE (energy penalty need even more coal)
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Technology Capability Development: POSITIVEPollution Reduction: NEUTRALClimate Mitigation: POSITIVE
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China’s CCS Projects Align with the AnalysisCCS Projects Technology Partnership model Financial arrangement Status
GreenGen Corporation IGCCPre‐combustion de‐carbonisationGasification or partial oxidation shift plus CO2
Huaneng with seven other state‐owned companiesPeabody Energy
Registered capital: RMB 300 million (USD 44 million)Huaneng 51%, and other 7 in the group 7% each
Under construction
separation. Total investment will reach RMB 7 billion.
Shenhua CTL Coal to synfuels (direct coal liquefaction)
Shenhua Group SasolWest Virginia University
USD 1.4 billion CTL operational, CCS expected to start in late 2009
Huaneng Beijing Thermal Power
Post‐combustion HuanengAustralia CSIRO
USD 4 million research project by CSIRO
Operational since 2008
Near Zero Emission Coal R&DD UKChina Ministry of Science and Technology
USD 5.6 million equivalent from the UK Government’s Department of Energy and Climate Change
In planning stages
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and Climate Change
COACH Project (Cooperation Action within CCS China‐EU)
R&DD COACH project groups 20 partners (R&D, Manufacturers, Oil & Gas Companies, etc)12 for Europe and 8 for China
Partially funded by European Union
In planning stages
Shanghai Huaneng Shidongkou
Post‐combustion Huaneng Corporation investment Under construction
Source: Summarized from company profile and news.
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Final Comments: Low‐Carbon Opportunities in China’s Energy/Power Sector
• Efficiency: Using coal more efficiently– Supercritical/Ultra‐supercritical technology– Integrated Coal Gasification Combined Cycle (IGCC)– Integrated Coal Gasification Combined Cycle (IGCC)– Poly‐generation and co‐generation
• CCS: Capture and store CO2 from coal plants• Displace coal
– Nuclear power– Natural gasI th f bl
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• Increase the use of renewable energy– Won’t be significant in the near future but can be a game
changer– Not just about renewable capacity, need actual generation
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Things to Watch…
• 12th five‐year plan: continuing energy conservation and emission reduction effort; the target won’t more aggressive, but the implementation will be more market oriented
• Two major targets by 2020:• Two major targets by 2020:– 40‐45% emission intensity– 15% renewable energy
• Booming of new energy– Nuclear, wind, solar, biomass, …
• Others– Low carbon cities demonstration
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Low carbon cities demonstration– Environment exchange, carbon exchange setting up the
infrastructure of market oriented approach – Carbon tax, environmental tax
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Conclusions and Take‐home Messages
• China is under its greatest social economic transformation and the opportunities lie with challenges
• China is progressing aggressively in energy efficiency and p g g gg y gy yemission reduction, and is leading the global clean energy revolution
• Domestic political economy has huge implication on applying international climate policy to China
• The best way to work with China is engaging China’s core interests.
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interests.
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Thanks!
Questions and comments are welcome:
Gang Heghe@stanford.edu
http://pesd.stanford.edu • Stanford University 24
ghe@stanford.edu
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