Energy agenda of China’s Belt and Road Initiative

* This is my article in BusinessWorld on July 21, 2017.

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In a presentation during the Asia Pacific Pathways to Progress Foundation, Inc. (APPFI) round table discussion on China Belt and Road Initiative (BRI) last July 11 at Astoria Plaza, Ortigas, APPFI president Dr. Aileen Baviera said that BRI is China’s new international development strategy. It will link China to the larger Asian region, Europe, and Africa through connectivity of policy coordination, facilities/infrastructure, trade/markets, finance (investments, loans, grants, AIIB), and people.

The Silk Road Economic Belt will span China, Central Asia, Russia, Europe while the 21st century Maritime Silk Road will span eastern China, South China Sea, Indian Ocean, Mediterranean, North Africa, Europe) + SCS-South Pacific and China-Europe via Arctic, covering 65 countries, 3 international organizations, 4.4 billion people and $21 trillion of trade.

Why is China doing this? Aileen said there are three main reasons.

(1) Economic — put excess local production capacity and funds to profitable use, help develop Western China, and access to markets and resources.

(2) Political — shore up domestic support for Xi (amid anti-corruption drive ad slowing economy), build platform for China to take leadership in the provision of global public goods, counter the China Threat Theory.

(3) Strategic — avoid Malacca dilemma, make the South China Sea irrelevant in developing transport and trading links in the region, access to ports and airports reduces need for overseas air and naval bases, and compete with the US influence and perceived containment efforts against China.

This is incisive analysis from a local scholar. She also showed maps of the Silk Road Beltway, the Maritime Road covering the three continents of Asia, Europe and Africa, and the Pan-Asia railway network.

In many discussions on China’s BRI, often left out is China’s energy agenda that spans practically the same continents and countries. Here are just three of several reports on this aspect.

(1) From NY Times, July 1: “When China halted plans for more than 100 new coal-fired power plants this year… China’s energy companies will make up nearly half of the new coal generation expected to go online in the next decade.

These Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal, according to tallies compiled by Urgewald.”

(2) From China Dialogue, May 5: “Global Environment Institute (GEI) figures show that between 2001 and 2016 China was involved in 240 coal power projects in BRI countries, with a total generating capacity of 251 gigawatts. The top five countries for Chinese involvement were India, Indonesia, Mongolia, Vietnam and Turkey.”

(3) From Financial Times, March 31, 2016: “China’s proposed investments in long-distance, ultra-high voltage (UHV) power transmission lines will pave the way for power exports as far as Germany… Exporting power to central Asia and beyond falls into China’s ‘one belt, one road’ ambitions to export industrial overcapacity and engineering expertise as it faces slowing growth at home.”

Europe’s problem is that they are committing sort of energy mini-suicide by relying more on intermittent wind-solar and closing down many of their reliable and big nuclear and coal power plants. So here comes China with huge domestic coal supply capacity plus additional coal plants in countries along the BRI route. It will have the capacity to augment Europe’s energy needs via those UHV transmission lines and power sources are several thousand kilometers away (see table).

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Source: BP Statistical Review of World Energy, June 2017
* Less than 0.05.

Notice the huge discrepancy between installed capacity of wind-solar and China, and the very small actual electricity output from them.

In a forum on “The Framework Code of Conduct, One Year After Arbitration” organized by Stratbase-Albert del Rosario Institute (ADRi) last July 12 at the Manila Polo Club, among the speakers were Roilo A. Golez, former National Security adviser; Antonio T. Carpio, senior associate Justice, Supreme Court of the Philippines, and Dr. Jay Batongbacal, director of UP Institute for Maritime Affairs and Law of the Sea.

Justice Carpio highlighted the energy aspect of China’s occupation of shoals and creation of artificial islands in the South China Sea or West Philippine Sea, and the huge implication for the Philippines if China will occupy areas near Malampaya, currently the source of about 3,000 MW of natural gas plants based in Batangas. Malampaya natural gas is expected to be exhausted around 2024 or less than a decade from now. We shall have massive, daily blackouts for many hours daily if no new gas is discovered or new gas facility is created.

China has a different agenda in its massive BRI project, some are useful, some are harmful to their partner countries. The Philippines should craft foreign affairs and energy policies that will secure the country’s economic needs, not China’s needs.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

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Developing Asia’s love affair with coal

Energy precedes development, not vice versa. Developing countries cannot sustain growth without cheap and stable energy supply.

I am reposting some recent reports about efforts by many developing Asian countries to grow fast via cheaper energy from coal power. Enjoy.
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“Pakistan’s Water and Power Ministry… investment project with China, it’s committed to spending $15 billion on as many as 12 new coal power plants over the next 15 years…

To anyone who would criticize the move, Piyush Goyal, India’s power minister, had this to say: “India is not a polluter,” he told the Financial Times. “It’s America and the western world that has to first stop polluting.” There’s a grain of truth to that: America and Europe did a lot of coal burning during their development, and now have strong economies to leverage in order to clean up their acts.” – May 3, 2017, https://www.technologyreview.com/s/604323/india-and-pakistans-continued-love-affair-with-coal/

“$54 billion China Pakistan Economic Corridor (CPEC), which includes spending of about $33 billion on a total of 19 energy projects, including coal-fired and renewable power plants, transmission lines, and other infrastructure.

Combined, the projects will eventually generate 16,000 megawatts (MW) of electricity, which the government says is urgently needed. About three-quarters of the newly generated power will come from coal-powered plants, and the government insists that these will be fitted with the latest technology to reduce pollution and climate-changing emissions.” – May 2, 2017, http://www.reuters.com/article/us-pakistan-energy-coal-idUSKBN17Z019

“China’s production of electricity from coal stayed at elevated levels post the northern hemisphere winter after reaching a high of 423.6 billion kWh in December – and the highest level recorded based on available data going back to January 2010.

And electricity production from coal in March 2017 rebounded strongly following the Lunar New Year lull in February, rising 7.7% year on year to 396.1 billion kWh, according to the National Bureau of Statistics data.” – May 2, 2017, http://blogs.platts.com/2017/05/02/china-coal-fired-power-generation-surprises-naysayers/

“India is heavily reliant on coal for its electricity, more than three-quarters of which was generated by its 132 coal-fired power stations in 2014-15, according to the most recent data from the central electricity authority. However, while it is the world’s third-biggest emitter of greenhouse gases in absolute terms, its per capita emissions are a fraction of many other nations’, at just 1.59 metric tonnes a year, compared with 7.55 for China and 16.39 for the US.” – May 3, 2017, https://www.ft.com/content/18268438-2e3e-11e7-9555-23ef563ecf9a

“A MoneySuperMarket report listed Mozambique, Ethiopia and Zimbabwe as having “the most environmentally friendly people in the world,” while ranking Americans as being some of the least eco-friendly people on the planet. That may not be a bad thing, though, given the greenest countries also tend to be poor and run by authoritarian regimes.” – April 22, 2017, http://dailycaller.com/2017/04/22/worlds-greenest-people-live-in-ridiculously-poor-authoritarian-regimes-graph/

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“America was built on cheap and abundant coal. Fossil fuels powered the U.S. into the industrial age and replaced inefficient windmills and woodburning as the primary sources of electricity. America currently has access to 500 years’ worth of coal — far more than any other nation. Even despite the last decade’s war on coal during the Obama years, the U.S. still derives about one third of our power from coal — second only to natural gas.” – April 17, 2017, https://spectator.org/coals-colossal-comeback/

“China’s fundamental demand for coal and natural gas has improved alongside better-than-expected economic growth in the first quarter,” Tian Miao, an analyst at North Square Blue Oak Ltd. in Beijing, said by phone. “The government’s investment in infrastructure has boosted power consumption while the move to replace coal with gas to fight pollution is also gaining some traction for gas demand.” – April 17, 2017, https://www.bloomberg.com/news/articles/2017-04-17/china-coal-production-rises-as-government-avoids-output-limits

“Coal conversion has become profitable in China because of an unusual combination of low coal prices relative to state-set gas or petrol prices.  Coal-to-liquids projects normally make economic sense only when oil prices are high or supply is limited. The technology was first developed in Nazi Germany, and commercialised in apartheid-era South Africa.” https://www.ft.com/content/02931290-1d94-11e7-a454-ab04428977f9

“despite a huge workforce of almost 400,000 solar workers (about 20 percent of electric power payrolls in 2016), that sector produced an insignificant share, less than 1 percent, of the electric power generated in the United States last year (EIA data here).

coal3In contrast, it took about the same number of natural gas workers (398,235) last year to produce more than one-third of U.S. electric power, or 37 times more electricity than solar’s minuscule share of 0.90 percent. And with only 160,000 coal workers (less than half the number of workers in either solar or gas), that sector produced nearly one-third (almost as much as gas) of U.S. electricity last year.” – May 3, 2017, http://www.washingtonexaminer.com/todays-most-productive-energy-workers-are-in-coal-and-gas-not-solar/article/2622029

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“According to a recent International Energy Agency (IEA) report, Japan’s 600 MW Isogo plant in Yokohama is probably the best in the world. It is an ultra-supercritical HELE plant, with emission levels comparable to a natural gas combined cycle (NGCC) power plant.” — April 18, 2017, https://dddusmma.wordpress.com/2017/04/18/japan-and-china-remarkably-clean-coal/

“The Petra Nova carbon capture system was installed in the W.A. Parish generation station. This is the largest and cleanest fossil fuel generaton station in the United States.” — April 18, 2017, https://wattsupwiththat.com/2017/04/18/clean-coal-carbon-capture-and-enhanced-oil-recovery/

India’s “plans to build nearly 370 coal-fired power plants… The construction of 65 gigawatts worth of coal-burning generation with an additional 178 gigawatts in the planning stages would make it nearly impossible for India to meet those climate promises, the researchers say.” — April 25, 2017, https://wattsupwiththat.com/2017/04/25/india-wont-be-able-to-meet-paris-climate-agreement-commitments-due-to-expanding-coal-power-plants/

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Two other useful sources here,

  1. http://www.jcoal.or.jp/eng/
  2. GWPF, “THE PARIS AGREEMENT and the Fifth Carbon Budget” by David Campbell, http://www.thegwpf.org/content/uploads/2016/09/Campbell.pdf  (13 pages long)

Bottomline: more environmentalism, more UN, more government renewables cronyism are bad for developing economies that want cheaper energy for them to develop faster and sustain growth.

Asia retains big coal use

There are many reports now saying that “Asia moving away from coal” or “Asia embracing more renewables, ditching coal” and similar stories. These claims are half-truths and hence, generally not correct. See these reports and stats below.

http://thediplomat.com/2017/02/why-is-asia-returning-to-coal/
Why Is Asia Returning to Coal?
The fossil fuel is undergoing an unexpected renaissance in the region.
By Grace Guo
February 17, 2017

“For Japan, coal has emerged as the best alternative to replacing its 54 nuclear reactors, which are deeply unpopular with the population and seen as symbols of devastation after the Fukushima Daiichi nuclear disaster six years ago…

But why did Abe go with coal and not renewables or, say, natural gas? After Fukushima, Japan initially ramped up its imports of liquefied natural gas, but realized that LNG would be prohibitively expensive in the long-term…. Coal power already made up 31 percent of Japan’s energy mix in 2015 but under the current plan, the fossil fuel will become the country’s primary power source by 2019.”

http://oilprice.com/Energy/Coal/US-Coal-Miners-Find-A-New-Buyer-In-Asia.html
U.S. Coal Miners Find A New Buyer In Asia 
By Dave Forest – Mar 23, 2017, 10:41 AM CDT

An Important shift is now underway in global coal trade. With a completely new export route opening up for U.S. producers over the last few weeks.

To South Korea.

Platts reported yesterday that coal buyers in Korea have seen a surge of bookings for U.S. thermal coal. With sources telling the news service that 1.5 million tonnes of total U.S. supply have now been arranged for delivery between July and September.

https://www.bloomberg.com/…/coal-addiction-spreads-as

“Pakistan has begun to dig up one of the world’s largest deposits of low-grade, brown, dirty coal to fuel new power stations that could revolutionize the country’s economy.

The project is one of the most expensive among an array of ambitious energy developments that China is helping the country to build as part of a $55 billion economic partnership. A $3.5 billion joint venture between the neighbors will extract coal to generate 1.3 gigawatts of electricity that will be sent across the country on a new $3 billion transmission network.”

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In China, there were many reports of “China’s coal consumption has fallen for 3 years straight.” That is true, but not mentioned on those reports is the fact that China’s coal consumption is already at a very high level, almost 2 billion million tonnes oil equivalent (MTOE)/year from 2013-2016. Data below from 1966-2015. Basic data taken from BP’s Statistical Review of World Energy (annual report).

ch coal (1)Source: https://ycharts.com/indicators/china_coal_consumption

India keeps ramping up its coal consumption. Data from 1965-2014.

in coalSource: https://ycharts.com/indicators/india_coal_consumption

Asia needs cheap electricity and stable energy sources. Governments should respect this consumer demand and aspiration — industrial, commercial, residential consumers. It’s good that many Asian governments and private sector players realize this. The endless lobbying to “kill coal to save the planet” will never prosper. Asia’s many developed and emerging economies cannot afford frequent blackouts and expensive energy that can make their manufacturing and service sectors become less competitive, less reliable.

China’s coal and Germany’s renewables

Two recent articles here. The first is long, click the article if you want to see the full paper. Enjoy.
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Is China’s Use Of Coal Really Declining?
David Campbell
Global Warming Policy Forum, 16 May 2016

… there has been no departure from China’s policy of expansion of coal-fired generation capacity, and the rate of installation continues at the astronomical rates. China was responsible for 80% of the entire world’s increase in coal consumption this century and now consumes as much coal as the rest of the world combined. Coal-fired capacity has increased by 10% since 2013, and in 2015 approval was given for 155 new coal plants which themselves will have a capacity more than twice Germany’s entire capacity.

Though currently under-utilised, it is of course anticipated that this capacity will come on stream, part of the current Five Year Plan that proposes to pursue growth rates of 6.5% which, though a reduction on the previous 10% rate, is double or treble the best western rates. Such slowing down in consumption and installation is not evidence of peak coal but of the Chinese authorities trying to tailor growth in coal to the current slowdown in Chinese growth overall. This is not an absolute slowing down but a marginal slowing down in an overall absolute increase. To understand the position, one has to put these developments in the context of China’s energy mix, in which there is indeed planned to be a shift to renewables.

Chinese power generation is overwhelmingly dominated by fossil fuels, which accounts for 90% of capacity, coal itself accounting for 67%. Renewables account for the remainder, with this 10% being dominated by the 8% of hydro. Nuclear is 1%, solar and wind 1%. It is obvious from these facts that the great growth in solar is possible only because the growth starts from a very small base, though such is the absolute size of the Chinese economy that this tiny fraction of its capacity is very large by comparison to other countries’ solar industries. Even leaving aside the question of how much the Chinese renewables industry is directed towards export, it is equally obvious that even the current great growth in solar can have only a small marginal impact on the Chinese energy mix. It is justifiable to claim that China plans to raise the share of renewables in the energy mix to 20% by 2030, of which solar will provide a small fraction, and to cap coal at less than 62.5%. But it is preposterous to claim that this represents a movement from coal to solar that has any real significance for global emissions.

In brief, the planned shift in the energy mix cannot possibly represent peak coal because it is part of a plan to absolutely increase coal-fired generation. Yet again, the concept of carbon intensity is causing dreadful confusion. Even if this shift (and the installation of new fossil fuel plant) lowers carbon intensity, this will be brought about, not in reversal of, but in the course of continued growth in Chinese power generation and therefore of coal-fired generation. There is simply no possibility, other an unforeseen economic catastrophe or a technological miracle, that Chinese coal consumption will not grow by absolute amounts that are astronomical by western standards, and to a concomitant rise in emissions….

China’s strategic target, restated in its statement to the UNFCCC Secretariat of its Independent Nationally Determined Contribution, is to create ‘a moderately prosperous society’. Under the current Five Year Plan, this is to involve doubling 2010 gdp and per capita income by 2020, which will be made possible by a concomitant increase in power generation, with 2010 energy consumption expected to double by 2030. Even accepting that the share of renewables in the energy mix will double and that of coal decrease by 5%, elementary arithmetic shows that coal-fired generation will itself almost absolutely double. Let us give overall power generation the value of 100, of which 90 is fossil fuels (67 coal) and 10 is renewables, and then add another 100, of which 20 is renewables and therefore 80 is fossil fuel (62.5 coal). The shift to renewables has but the smallest impact on an absolute growth of fossil fuels to 170 and coal to 129.5….

It remains only to add that nothing has been said here about the position of India, which in 2014 overtook the US as the world’s second largest coal consumer.

Dr David Campbell is Professor of Law at Lancaster University Law School
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Germany’s Volatile Power Grid Spinning Dangerously Out Of Control …Prices Go Negative 25 Times In 2015! 
Pierre Gosselin
No Tricks Zone, 21 May 2016

The more volatile supply wind and solar energy that comes online in Germany, the more insane the market prices become. Too often the wind blows and the sun shines when power is unneeded, or they are simply AWOL when demand is high like in the wintertime.

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Germany’s wildly fluctuating wind and solar energy are creating grid and market havoc. Source: Agora.

Earlier this month Germany saw a spate of both sunny, windy days, thus leading to huge power grid surges during the Ascension holiday weekend, a time when many factories were running close to idled (see chart above).

Despite billions annually in subsidies, wind and sun still puny

And for a few minutes last Pentecost Monday afternoon – a holiday that saw very low national electricity demand – wind and solar provided almost enough power to cover all of the country’s electricity needs, reported Die Welt here. Leading Greens cheered, and proclaimed that coal and nuclear had not been needed for a time. But they cheered “too early” writes Die Welt’s business journalist Daniel Wetzel, pointing out that market and technical conditions became dangerously precarious and that in total “electricity represents only 21% of Germany’s total energy need.”

While Germany’s installed solar and wind energy may be able to get fairly close to fulfilling total electricity demand for a few minutes in rare instances that weather and demand conditions are just right, their share of total primary energy is still depressingly measly. Die Welt puts it all in true perspective:

“Despite billions in subsidies, ‘renewable energies’ wind and sun covered only 3.7% of Germany’s primary energy needs last year.”

Negative wholesale prices becoming rampant

Another debilitating feature of the weather-dependent renewable energies are the havoc they create on the electricity exchanges. Last week’s power grid overloading by wind and sun led to deep negative wholesale prices.

Spiegel here writes that the wholesale power price plummeted to -130 euros per megawatt (see blue curve in the right chart)! Literally, foreign consumers were being paid to take the power. (The black curve shows total German demand).

Moreover the phenomenon of negative wholesale prices (i.e. excessive power feeding uncontrollably into the grid) occurred a record 25 times in 2015, Spiegel writes. That was 4 times more often than in 2011.

Among the highest electricity prices in the world

With wholesale electricity prices dipping into negative territory, one might think that power must be very cheap for the consumer. Unfortunately this is not the case. At negative prices power companies lose money, and so are then forced to pass along these extra costs along to the end consumers. German consumers are paying close to €0.30 for each kilowatt-hour they consume – among the highest in the world.

The situation has gotten so alarming that leading politicians of Chancellor Angela Merkel’s CDU conservative party are now demanding an end to subsidies for new wind and solar installations.

Denmark slams brakes on wind projects

Not only Germany is struggling with wildly fluctuating grid and market conditions, which are leading to massive costs and pain for consumers, but so is Denmark. Die Welt writes:

“The situation has also led wind energy leader Denmark to a rethinking. Press reports say that Energy Minister Lars Christian Lilleholt has stopped the planned construction of five large offshore wind farms in order to protect consumers from large cost increases.”