China: Not Ready To Move Away From Coal

By Xie Kechang 15 April, 2015

Professor Xie shares his views on the future role of coal & strategies employed to ensure energy security in China, Professor Xie shares his views on the future role of coal & strategies employed to ensure energy security in China

On 10 December 2014, China Water Risk had the chance to talk to Professor Xie Kechang on China’s energy future and coal strategy during the UNFCCC COP 20 conference in Lima, Peru. On the following day, Professor Xie gave a speech about the revolution in China’s energy production and consumption. During the event as well as the whole conference, many voices were pro-decarbonisation or anti-coal. However, he holds a different view: China is still not ready to move away from coal. He suggests that the best way forward for China is to promote clean high efficient coal utilization together with of sustainable energy development.

Xie Kechang (XKC): There are many. Firstly, our energy consumption is shaped by the fact that China is “rich in coal, deficient in oil and lean in gas”. 58.7% of China’s oil, 33% of natural gas and 8% of coal supply are imported. It’s a huge challenge to secure energy supply. Meanwhile, our energy efficiency is still very low.

China is “rich in coal, deficient in oil and lean in gas”….It’s a huge challenge to secure energy supply with low energy efficiency and increasing energy demand

Secondly, our energy demand, driven by economic development, is increasing. The 18^th National Congress of the Communist Party set the target of doubling both GDP and the average income by 2020. This will apply huge pressure on energy demand; at the same time, the increasing urbanization rate, air pollution crisis and emission reduction commitment also put additional pressure on the energy sector.

Moreover, the changing global energy structure and landscape is another challenge. Changes in the global energy production and consumption bring external pressure; at the same time conflicts exist within China’s own system. All these mean we need an energy revolution.

CWR: An international viewpoint on the energy revolution is that we need to cut down fossil fuel consumption, especially coal consumption. Are we ready to move away from coal? What is your view?

XKC: This idea was brought about by concerns over climate change. We admit that CO₂ is a greenhouse gas. However, do we have to move away from coal in order to reduce the CO₂ emission?

In the US, even after the ‘shale gas revolution’, coal still represents 30% of primary energy consumption. The global share of coal is more or less the same. In Europe, coal consumption in Poland, France and Germany has been actually increasing.

….coal will especially continue to play an important role

The global energy society did not say that the world must move away from coal. At the 22^th World Energy Congress held in Daegu, Korea in October 2013, the final report predicted 10 trends for future energy development. One of them is that fossil fuel will remain the primary energy source in 2050 and coal will especially continue to play an important role.

In addition, BP’s analysis of global energy mix during 2004-2013 also shows that coal’s share has been actually increasing from 27.2% in 2004 to 31.1% in 2013. In comparison, oil’s share in global energy mix has dropped whilst natural gas remained flat.

CWR: Many countries are facing pressures to reduce emissions. China has set an ambitious reduction target a few years ago and has been trying to make great strides towards it. Some Chinese organizations are now calling for “coal reduction” and “moving away from coal”. But it seems you have different opinion.

XKC: I think it’s still too early for China to cut off coal. It will only send a wrong message to decision-makers. At the moment it is not realistic for China. The reason that meteorologists are calling for “moving away from coal” is that coal is the main contributor of greenhouse gas. I agree. But we will still use lots of coal in the near future and so we need to find ways to reduce the CO₂ emission from coal.

China’s energy mix is dominated by fossil fuels, which accounts for 90% of primary energy consumption;  of the fossil fuel consumption, coal represents a 73% in 2013. If we want China to move away from coal, then what will China replace coal with? The current share of renewables in the energy mix is only 10% (hydropower 7% & other renewables 3%); what other energy sources can supply the 90%?

President Xi expects more focus on coal’s better utilization

This is why President Xi has mentioned many times that coal is and will remain China’s primary energy source; therefore he expects us to more focus on its better utilization.

CWR: In the China-US Climate Change Agreement, China commits to peak its carbon emissions around 2030. Can we achieve this target?

XKC: According to the agreement, China’s carbon emission will reach its peak in 2030. Our research findings also support this. By that time, the coal share in primary energy consumption will be about 55%.

This share was 67% in 2013, making coal the No.1 energy source in China. According to the recent Energy Development Strategic Action Plan (2014-2020) issued by the State Council, the coal share will drop to 62% by 2020, around 4.8 billion tonnes of standard coal equivalent.

….to achieve China’s GDP targets, total coal consumption in 2020 is estimated to be 5.5 bn tce

However, according to our analysis, if China wants to achieve the dual targets of doubling GDP & average income, the total coal consumption in 2020 to achieve a GDP growth rate of 7.5% is estimated to be 5.5 billion tonnes of standard coal equivalent. This is a big gap from the State Council’s target.

CWR: If China peaks carbon emissions by 2030, will energy consumption peak as well?

XKC: The China-US Climate Agreement only mentions “peaking of CO₂ emissions around 2030”; not an energy consumption peak. Our research shows that if we calculate China’s energy demand based on an annual average income of USD17,000 and annual energy consumption per capita at 6.5 tonnes of standard coal equivalent (US & Germany are at 8-12 tonnes), our total energy consumption will peak around 2040.

China, as a developing country, needs to grow its economy….60%-70% of energy is consumed in production processes

It’s easy to set up a carbon emission reduction target. But we should realize that China, as a developing country, still needs to grow its economy. China’s energy mix also proves that it is still a developing country: 60%-70% of our energy is consumed in production processes, whilst US and European countries, use the same for domestic consumption instead.

CWR: So how can China reach the carbon emission peak in 2030?

XKC: Firstly, China should promote clean and high-efficient utilization of fossil fuels, especially for coal. Secondly, China must increase the proportion of non-fossil fuel energy in primary energy consumption. Thirdly, China needs to promote energy saving.

That said, we cannot underestimate China’s current energy demand challenge. According to the Energy Development Strategic Action Plan (2014-2020), non-fossil fuel will account for 20% of primary energy consumption by 2020; in another words, 80% will come from fossil fuels. The carbon emissions from consumption of each type of fossil fuels are:

• Coal: 2.66 tonne CO₂ per 1 tonne of standard coal equivalent
• Oil: 2.02 tonne CO₂ per 1 tonne of standard coal equivalent
• Natural gas: 2.47 tonne CO₂ per 1 tonne of standard coal equivalent.

China’s total carbon emissions will not fall materially

Therefore, even if China replaces all its coal with oil and natural gas, total carbon emissions will not fall materially.

CWR: Indeed, some people are calling for a more aggressive target of renewable energy to ensure “peaking of CO2 emissions” by 2030. What is your opinion?

XKC: Clean high-efficient and sustainable utilization of coal is as important as the development of renewable energies. China should have a diversified energy mix. To adjust the current energy mix, we should balance these two strategies.

Two energy strategies: 1) clean high-efficient & sustainable utilization of coal; and 2) development of renewable energies

The development of both strategies will require investment of thousands of billions RMB. It’ll be up to the decision makers to decide whether the money goes towards renewable energy or clean high-efficient coal utilization. My opinion is that both are equally important.

However, such decisions are difficult due to conflicts of interests within government. There are 25 government departments in charge of energy. President Xi said that China’s energy revolution should cover four aspects: supply, consumption, technology and the management system. Reforming the management system will be a big challenge.

CWR: As you mentioned, President Xi mentioned many times that China should “make good use of coal”. Is clean, high-efficient and sustainable utilization the only solution?

XKC: Although challenging, I don’t think that CO₂ is the most pressing issue in China. In fact, if we use coal in a clean and highly efficient way, coal will not be the only one blamed for carbon emissions.

Actions along the coal value chain: 1) coal mining should become “green”, safe and highly efficient; 2) reduce the death rate in mining.

There is still much improvement to be done along the coal value chain. Firstly, the coal mining should become “green”, safe and highly efficient. Currently the average recovery rate of coal mines is only 20-30%, which means on average 70-80% of coal is not extracted for each coal mine. Secondly, we should reduce the death rate in mining. Currently the death rate is about 0.75% for producing one million tonnes of coal. Despite the falling trend, it is still relatively high compared to the global standard. Water is another issue: the geographical distributions of China’s coal reserves and water resources do not match and extracting 1 tonne of coal needs 2.5m³ of water.

Moreover, China’s current coal supply is not well matched: sustainable production capacity only represents 33% of the total capacity. “Clean and Adaptation Digress”¹ is also not very high, only 35-40% compared to 70-80% for developed countries. If we can improve on this front, we could cut carbon emissions. In addition, we also need to improve the quality of coal. But it is not easy to do this with low-quality coal.

China needs to balance coal transportation and electricity transmission

Furthermore, we need to balance coal transportation and electricity transmission. Can ultra-high voltage (UHV) alone solve the issues related to long-distance electricity transmission? Is it cost-effective? I think we have to have both.

Finally, coal-fired power generation has to become clean and efficient. Our current total carbon emission is about 9 billion tonnes, of which 3-4 billion tonnes come from thermal power. Assuming that by 2030 China’s carbon emission peaks at 10 billion tonnes and 20% of primary energy will be supplied by renewable energy and non-nuclear thermal power generation will be 44-47% of total power generation. This alone will result in 4.4-4.5 billion tonnes of CO₂. Therefore it is key to make power generation cleaner and more efficient.

CWR: Are there any good practices and experiences in other countries that China could learn from?

XKC: We could improve energy efficiency of coal-fired power generation by adopting advanced technologies. The best technology is now in Shanghai Waigaoqiao Power Plant. That plan only uses 270g of standard coal equivalent (gce) to generate 1kWh; while, the national average is about 326gce. If we could reduce the coal consumption for generating 1 kWh of electricity, we can save a huge amount of coal consumption every year.

China’s current national emission standard for thermal power plants has not yet included CO₂ as a monitoring parameter, but only included nitrogen oxides, sulfur dioxide and dust, etc. Should we revise the standard and include CO₂ as well?

CCS is not yet mature and will reduce energ generation efficiency of the power plant

In some developed countries like the US, CO₂ emissions from thermal power plants should be captured through CCS (Carbon Capture & Storage). However, the current CCS technology is not yet mature and requires lots of investment. Given the current technology, adding CCS equipment will result in a 4-7% drop in energy generation efficiency of the power plant, so CCS is not yet globally mainstream.

CWR: You are also a promoter of energy savings. Do you think there is a lot of potential here for China?

XKC: I think energy savings can be seen as “the fifth energy source”. It’s also the most practical way of dealing with climate change. According to IEA’s forecast, energy saving alone can contribute to 56.9% of carbon emission reduction during 2010-2030; while, renewable energies, CCS and nuclear energy contribute 22.9%, 10.1% and 9.97%, respectively. In other words, energy savings is key.

IEA forecasted energy saving to contribute 56.9% of carbon emission reduction during 2010-2030

China’s current energy efficiency is only about half of the global average. If China can increase its energy efficiency to the global average level, we can save 1.8 billion tonnes of standard coal equivalent, let alone if China reaches the level of the US or Japan. By doing this, it can not only cut down carbon dioxide but also sulfur dioxide carbon dioxide. Energy saving measures could lie within management, technology and the energy mix.

CWR: There has been concern about the development of coal-to-gas and coal-to-oil. Water pollution issues in the coal-to-chemicals process has been highlighted by the central government. Do you think that the coal to-chemicals industry will expand in the future?

XKC: Our view is that coal-to-gas and coal-to-oil are of strategic importance. China’s oil reliance has reached 60% and 70% of imported oil is shipped via the Straits of Malacca. If this is blocked, all the cars, weapons and aircrafts in China will run out of oil. Therefore, from the national strategic perspective, China needs to master coal-to-oil technology, in order to secure energy supply in case of an emergency.

….large scale development of coal-to-oil should not be promoted

However, under the current circumstances, large scale development of coal-to-oil should not be promoted. Converting coal to oil and gas is a process of changing molecular composition, phase and structure and requires a lot of energy. Also, if oil prices keep falling, it will be not economic to invest effort into making oil from coal. In the future, if China starts to extract shale gas, the coal-to-chemicals industry will face an even bigger threat.

CWR: Wastewater treatment is also a big challenge for coal-to-chemicals industry. Some companies within the industry claim “zero emission”. What’s your view? Is it even possibl

XKC: As long as we use energy and resources, it is impossible to achieve “zero emission”. We can try to achieve “near-zero emission”, “close to zero emission” or “super clean emission”. “Zero emission” is purely a concept to fool people.

CWR: What about water usage in coal-to-chemicals industry? As you mentioned, “the geographical distributions of China’s coal reserves and water resources do not match”. The government now requires new projects in coal energy bases to consider water resource availability. Meanwhile, a few inter-province or long distance cross-province water transfer projects are under construction. Is water transfer the only way to solve the water constraint in coal energy bases?

XKC: Water risk should not be highlighted without a specific context. According to CAE’s calculation, the whole coal-to-chemicals industry only used 1.43 billion tonnes of water in 2010, which is about 1% of total water use in China.

CAE has done the national strategic planning for the coal-to-chemicals industry. The study concludes the following issues for a region to consider before proceeding a project: 1) coal reserves; 2) local coal reserve-production ratio; 3) water resource availability; 4) local environmental capacity including carbon dioxide, sulfur dioxide and dust; 5) local economy and technology development level.

Ningxia, Inner Mongolia, Shaanxi, Xinjiang and Yunnan to be suitable for coal-to-chemicals

After considering all the above issues, from a purely technically feasible point of view, we consider Ningxia, Inner Mongolia, Shaanxi, Xinjiang and Yunnan to be suitable for coal-to-chemical industry development. However, there are other considerations such as ethnic and social factors.

As for water transfer, it is important to figure out the purpose: is it for restoring ecosystem, developing agriculture, or for developing more industries and growing more GDP? The decision makers need to be clear about the priority.

Conflicts in sustainable development of coal such as that between water and coal resources should all be addressed

In fact, sustainable development of coal is not only about solving mismatched geographical distribution between water and coal resources, there are other conflicts. For example, China’s 36 ecological protection zones also overlap with the coal bases. These conflicts exist and should be addressed by decision makers.