05 Nov 08 Eddie's Blog China

China - trying to square a very hard circle

It is impossible to begin to think about energy demand in the world without thinking about China.

Its economy has been growing at +10% since 1978.  When an economy is at that stage of industrial development its energy demand outstrips GDP growth in % terms.  If there were enough fossil fuels to go round then China would have had 20% growth in electricity demand each year.

By contrast the USA can grow at 4% in GDP and its electricity demand grows at 1%.  I imagine it has got to do with the US being saturated with appliances getting more efficient each year allied to the fact that it has been “offshoring” its industry for some twenty years now, click here for further information.

China is adding two new coal fired powers stations every week.  It derives 70% of its energy needs from coal, with just 20% from oil.  China has doubled its electricity capacity since 2000 and now has 713,000MW installed.  It adds the equivalent of one new Germany each year and if oil and coal were as cheap as they were in the 1990’s then it would add one and half new Germany’s equivalent each year.  Click here for more information.

There is no law which says that the supply of fossil fuels must equal demand!  In fact it is amazing that for a century and a half this has turned out to be the case.  China, in its modernisation drive is feeling this pain more than anyone else.  So whereas it has enough power stations it doesn’t have enough coal to run them.  Click here for more information. We have seen the price of coal on the international markets rise to $220/tonne and we have seen it fall back to $140 in the face of reduced demand due to the recession. China is trying to square a very hard circle.

It is possible in the type of economy it runs to control many variables, like wages, currency, planning decisions leading to huge infrastructure build etc. but when, as is inevitable, it tries to control prices in the face of rising world demand, it finds prices and demand are linked.

In fact if China and India are to take their place at the table of wealthy nations, they will have to do so in an innovative manner (energy wise at least).  You see folks the fossil energy isn’t there to allow two new German equivalents to be added every year.  We all welcome them but when you are discovering new oil reserves at one sixth the rate at which oil is being consumed then there exists an equation which doesn’t work.

Fortuitously it is good for the climate that shortages of fossils are forcing innovation in energy  supply.  We have heated the world up by half a degree. Current debate is centred around whether we will have a 2o  or 5o rise induced by humankinds explosive release of CO2 and other climate forcing gases.  Click here to review article substantiating this.

Coal in particular is a very guilty climate change candidate.  I read recently that levels of mercury in our largest commercial fish are giving rise to dangerous symptoms in the health of fish eaters everywhere.  This mercury comes from coal.

I find it hard to understand why China just doesn’t say its going to deliver all its new energy from sustainable sources.  Wind and solar, China has in abundance.  With 60% of its surface experiencing more evaporation than precipitation it has glorious quantities of sun.  I know from measurements conducted in Inner Mongolia that there is enough wind there to power much of China. I find it all the more surprising given that China has piloted hvdc transmission on a scale not experienced elsewhere.  It is the best country in the world at moving electricity around.  It probably has 50 companies capable of making wind machines that have availabilities higher than 95%.

Remembering that China lead the world in all technology, art, sculpture, logistics, for most of the previous 3000 years.  (See speech delivered by yours truly to the Institute of European Affairs), wouldn’t it be great to see it lead again?

Free fuel, reduction in international tensions arising from competition for scarce hydrocarbons, help from the west in terms of Clean Development Mechanisms (CDM), less mercury in our food, cleaner air for Chinese people (and for the rest of us) a hedge against rising fossil prices, reduced rate of desertification in China and the Sahara, and world leadership in the technologies of the future would be the outcome of China moving to an all sustainable future.

What about that then!