background & key findings - ieej

background &

key findings

Release Speech

Xiaojie Xu Chief Fellow

Institute of world economics and

politics (IWEP)

chinese academy of social sciences

IEEJ : June 2015. All Rights Reserved.

About the Project

| Xiaojie Xu | China Energy Outlook｜[email protected]|

Nature - WECO is an interactive and long range researched

outlook currently focusing on China energy outlook and its

implications worldwide done on an annual basis.

Objectives - It provides independent insights and foresights with

our own database and independent investigation to energy

stakeholders.

WECO 2014-2015,

Focus on energy transition and policy options require for eco-

civilization construction including tackling climate change;

Prioritize energy trends and challenges around 2020 and their

impacts on well-off (affluent) society as planned and the entire

world.

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Features and Methods


1. We emphasize systematic, holistic and synergetic approaches.

2. We emphasize new policy scenario in the outlook period (2011-

2030) like the IEA does in its WEO.

3. However, new policy scenario is our current case, not central. We

do not follow IEA like current policy case and 450 case, instead,

developing eco-energy strategy scenario based on our best

understanding of eco-civilization drive after the 18th CPC, which

featured by environmental counter-pressures. Climate

commitments are included.

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New Policies


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A series of new and intensive policies, planning, regulations and plans for actions combined were released in the second half 2013 and throughout 2014, in a larger number than ever.

Most of these new policies are subject to unavoidable and growing environmental concerns

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Figure 24: New Energy Policies: 2013-2014

Coal

Natural Gas

Renewables

Plans for Action

Strategic Planning

Energy Strategic Implementation

Plan for Action against Emission from Coal fired Generation

Emission Standards for Thermal Power


Our comments on new policies


Key messages conveyed -

(a)Shift to cleaner energy mix by reducing dependency on coal, e.g.

diminishing burning coal and inefficient coal turbines.

(b)emphasize sustainable development through innovations. Enhance

savings and efficiency and reducing emission through recycling, high-

tech, policy incentives while developing new sources.

(c)Re-focus energy products as commodities through reform attempts

and enhance public interests.

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Eco-energy New Strategy Scenario


As our central scenario, eco-energy strategy in our research

indicates something new into the country.

1.Energy development serves but not limited to economic growth

2.Energy development means not only sizable spending and supplies,

enhanced employment and profit and tax resulted, but energy services

featured by multiple A, and clean, diverse and flexible and efficiency

utilization of all types of energy sources for the mankind.

3.Energy development is not only the business of the industry, but

interests of the state and the public, not only a matter of a country, but

the entire world. Therefore, multilateral and trans-regional and cross

border cooperation is required and a must.

Based on all the above mentioned, we build up our own database.

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Database 2014


The database 2014 version is the “ballast” of our energy outlook as a

whole.

Our data are largely well-defined and streamlined based on our best

understanding and in-house research of the said issues together with a

set of assumptions (population, GDP growth rates, urbanization,

energy prices and relevant indicators and index calculations).

Therefore, our data are neither the same received from State Statistical

Bureau or energy administration, nor the industry.

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Chapters for Outlook

Chapter 1 Global Energy Trends

1. Global energy trends

2. China energy outlook

3. Global implications

Chapter 2 New Energy Policy

1. Energy policies in key EMs

2. Energy policy trends in China

3. Sustainable energy: needs vs. features

4. Policy options for China

Chapter 3 Clean Coal and Policy

1. Global coal trends

2. Coal in China

3. Coal demand and supply

4. Policies towards clean coal


Chapter 4 Power Trends and Policy

1. Global power trends

2. Power sector in China

3. Power system and reforms

4. Power policy

Chapter 5 Nuclear and Policy

1. Global nuclear trends

2. Nuclear in China

3. Nuclear outlook for China

4. Nuclear policy options

Chapter 6 Energy Technology

1. Energy technology worldwide

2. Energy technology advances in China

3. Critical technological contributions to

outlook.

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Chapter on Energy Security

Chapter 7 Reframing Energy Security

1. Energy security, a global perspective

2. Energy security under EES scenario

3. Get energy security measurable

Chapter 8 Cooperation with Central Asia

1. Cooperation advances

2. Oil & gas developments in Central Asia

3. Cooperation policies

4. Prospects and outlooks

Chapter 9 Cooperation with ASEANs

1. Resources potential in ASEANs

2. Cooperation status quo

3. Destinations


Chapter 10 Cooperation with

Africa

1. Resources, production and

exports

2. Oil & gas policies

3. Advances and natures

4. Prospects and directions

Chapter 11 Energy BRICS

1. Definition and analyses

2. Energy BRICS analyses

3. Multilateral cooperation and

repercussions

4. Playing fields and roles

5. Directions and mechanisms

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Executive Summary


I. World Energy Trends and Changing Framework into 2030

II. Basic Trend of Energy Development: China vs. the World

III. Energy Policy Trend in 2014-2015

IV. Sector Policy Trends

V. Technological Contributions

VI. Reframing Energy Security

VII. Energy BRICS

VIII. Recommendations for 2015 and the 13th Five-Year Plan

Snapshots of key points on energy outlook on China

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I. Energy D/S Outlook into 2030


1. Energy demand continues to grow upward into 2020 and will level off

thereafter.

Energy D/S will continue to grow at 3.79% vs. 2.72% driven by economic growth,

new Four Drives and the environmental pressures, combined. However, both slow

down to 1-2% thereafter. Energy demand could be 3373 million toe while energy

supply could reach 2855 million toe by 2020. These data could be expanded if…

Meanwhile, energy mix will be reshaped obviously that is critical to the country in the

next 5 years to come (i.e., the 13th Five-Year Plan).

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65.7% 65.1% 62.6% 58.4% 50.4%

18.9% 18.7% 18.5% 16.7% 16.5% 151 171 207 10.5% 14.2%

193 222 225

7.9% 8.9%

0

500

1000

1500

2000

2500

3000

3500

4000

2013 2014 2015 2020 2030

Figure 5: Energy Demand in China

Others

Bio

Hydro

Nuclear

Gas

Oil

Coal

76.0% 74.3% 73.1% 67.4% 59.6%

8.8% 8.6% 8.4% 7.8% 7.9% 4.4% 4.9% 5.6% 7.7% 10.5% 8.2% 9.1% 9.0% 9.3%

10.5%

0

500

1000

1500

2000

2500

3000

3500

2013 2014 2015 2020 2030

Figure 6: Energy Supply in China

Others

Bio

Hydro

Nuclear

Gas

Oil

Coal


II. Coal Demand Growth


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2. Coal demand witness near-zero growth in 2014 and will be upward

steadily until 2020 when reaching peak plateau (below 2000 million

toe). The peak plateau could be lower if new policy could fully implemented

and expanded. Coal demand share will reduce from 65% in 2014 down

below 50% in 2030, remaining the King of energy mix in China. Near-zero

emission (SO2, NOx and ash) is possible. Clean coal is our future of choice.

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0%

10%

20%

30%

40%

50%

60%

70%

1600

1650

1700

1750

1800

1850

1900

1950

2000

Figure 7: Coal Demand & Supply and Share

Demand Output Coal Share


III. Oil Outlook


3. Oil demand will grow steadily while output increase at snail pace.

Foreign dependency will be around 60% or lightly higher.

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50%

52%

54%

56%

58%

60%

62%

64%

0

100

200

300

400

500

600

700

2013 2015 2017 2019 2021 2023 2025 2027 2029

Figure 8: Oil Output & Demand and

Foreign Dependency

Oil Demand

Oil Production

Foreign Dependency

Oil demand will be 636 million tones to

production 250 million tones in 2030,

well below some projections to 750, 800

or 936 million tones.

We believe an incremental demand of oil

could be substituted by non-oil fuels and

constrained by oil saving and upgraded

transporting system from substitution

drive and technology advances view.

E.g., new energy vehicles will be one of

substitution, even EV/HEVs are far from

satisfying our targets at present but

could be boosted by new policy. At least,

100 mt of oil could be substituted. 0

10

20

30

40

2016 2017 2018 2019 2020

EV/HEV Growth 5mm@2020

EV/HEV V


IV. Gas Outlook


4. Natural gas demand will continue to grow at two digital rate

(although slow down a bit in 2014) driven by price reform,

technology advances and clean energy policy. Surplus of supply

is impossible.

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20%

25%

30%

35%

40%

45%

50%

55%

0

1000

2000

3000

4000

5000

6000

7000

2013 2014 2015 2017 2020 2030

Figure 9: Gas Outputs and Imports in China

Imports

Conventional Gas

CBM

Shale Gas Output

Foreign Dependency

Gas fired generation is

encouraged from 15% to 20%.

Domestic output driven by

unconventional gas sources while

multiple import sources are

ample.

Gas surplus could be possible but

not understandable and

impossible if absorbed and

managed well.


V. Nuclear Outlook


5. China is a lower nuclear power user (1% in its energy mix) with big

potential to expanded.

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0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

0

20

40

60

80

100

120

2013 2014 2015 2020 2030

Figure 10: Nuclear Installed Capacity

Nuclear Installed Capacity Nuclear share

GW

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

0

200

400

600

800

1000

2013 2014 2015 2020 2030

Figure 11: Nuclear Power Generation

Nuclear Power Generation

Nuclear share

TWh

The next decade will be seen a rapid

growth of nuclear electricity generation

averaged at 12.8% from 2013 to 2030

(compared with 4.2% of electricity growth

nationwide and 2% of energy demand).

Nuclear electricity generation will be 867

TWh based on 112 GW installed capacity,

accordingly, both shares in energy mix will

be 8% and 4.35% in 2030.

Why 112 GW? Lower than some expected

because of our conservative view of

nuclear sector and its constraints in

industrial chains, HR and public

acceptance.

Acceptable size and growth rate are critical

to nuclear policy making moving forward.


VI. Renewables Outlook


6. Modern renewables will be witnessing rapid growth while hydro power increases steadily. Non-fossil fuels including nuclear, geo-thermal and bio-fuels will surpass oil in energy mix (16%) in 2020.

However, renewables encountered

uncertainties. Besides higher costs

and lower transfer rate, unstable

utilization hours, not to mention

management of wind and solar PV

are distinguished from thermal

powers. CSP and bio-energy are

less developed.

There exist wastes in wind, solar PV,

even hydro sources being subject to

policy innovation and marketization.

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0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

18.0%

21.0%

24.0%

0

100

200

300

400

500

600

700

800

2013 2014 2015 2020 2030

Figure 12: Non-fossil fuels Growth

Others

Bio

Hydro

Nuclear

Non-fossil fuels share

Mtoe

* geo-thermal and bio-fuels included


VII. Electricity Outlook


7. Electricity Generation has reached 5540 TWh based on installed

capacity 1338 GW. Shares of coal and hydro installed capacities will

be decreased because of increases in nuclear, gas and renewables.

Coal power capacity reduced from 65% down to 48.7%; gas used for

power generation will increase from current 15% up to 20% if gas fired

turbine facilities nationalized, gas price rationalized, plus policy renewed.

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64.5% 62.7% 61.0% 55.1% 48.7%

0

500

1000

1500

2000

2500

3000

2013 2014 2015 2020 2030

Figure 13: Power Installed Capacity Others

Solar

Wind

Bio

Hydro

Nuclear

Gas

Coal

GW

75.6% 72.8% 71.9% 68.1% 60.1%

0

2000

4000

6000

8000

10000

12000

2013 2014 2015 2020 2030

Figure 14: Power Generation Others

Solar

Wind

Bio

Hydro

Nuclear

Gas

Coal

TWh


VIII. Carbon Emission


8. Under the EES scenario, carbon emission target would be

met and surpassed.

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0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

2005 2010 2015 2020

Figure 16: Energy Instensity and Carbon Intensity

Growth

Energy Intensity Carbon Intensity

41% reduction between 2005 and 2020

48% reduction between 2005 and 2020

CO2 Ton/10K RMB Oil Equivalent Ton/10K RMB

CO2 emission from fossil fuels

could reach 8000 mt in 2015

and 9200 mt or higher in 2020

before leveling off thereafter.

Because of coal demand peak

in 2020, CO2 emission could

fall around 9500 mt. Therefore,

CO2 emission target for 45%

reduction to that in 2005 will be

met in 2019 and 48% in 2020,

well higher than committed.


IX. Differences (IEA vs. IWEP)


10000

11000

12000

13000

14000

15000

16000

17000

18000

Energy Demand

IEA

IWEP

20000

25000

30000

35000

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Electricity Generation

26000

28000

30000

32000

34000

36000

38000

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Carbon Emission

9. Comparison between IEA and IWEP on China’s energy

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IX. Differences (IEA vs. IWEP)


IWEP energy mix vs. that of IEA:

- Our coal share is lower while gas share higher than those by the IEA

in energy mix

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2020 2030

Figure 17: Energy Demand Mix in China

Others

Bio

Hydro

Nuclear

Gas

Oil

Coal

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2020 2030

Figure 18: IEA Energy Demand in China Mix

Others

Bio

Hydro

Nuclear

Gas

Oil

Coal


X. Global Impacts


10. Against the global energy demand mix, we believe China

under EES scenario would facilitate global energy

transformation into 2030

资料来源：IEA，WEO 2014

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0%

20%

40%

60%

80%

100%

2012 2020 2030

Figure 4: World Energy Mix

Others

Bio

Hydro

Nuclear

Gas

Oil

Coal

IEA: Global energy demand will grow

fairly steadily and see snail growth from

2% in 2025 down to 1% in 2030.

However, shares of clean energy sources

(gas, nuclear and renewables) will

increase from 40% up to 46% in 2030

globally indicating a greater optimization

in energy mix.

This trends could be seen earlier because

of changes taking place in OECD and

Non-OECD (China mainly).


XI. Energy Transformation - China


11. There are evident transformation seen in OECD countries and non-

OECD.

De-couple of energy demand and economic growth in OECD while the ties between the

two are tightly indexed in Non-OECD. Energy efficiency, saving and innovation play key

roles in both types of energy transformation.

Greater energy transformation will be seen in China around 2020 featured by reduction

in energy use, enhanced energy efficiency, technology innovation.

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0.00

0.50

1.00

1.50

0%

50%

100%

2010 2013 2015 2020 2030

Figure 1: Industrial Structure and Energy Use

Primary Industry

Secondary Industry

Tertiary Industry

Energy Use by the secondary Industry

Tce/10k GDP

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2015 2020 2025 2030

Figure 2: Urbanization and Energy Use

Urbanization Energy use per capita

Toe/person


Key Data for Well-off Society


Field Items Unit 2015

Planning

2015

EES

2020

EES

2020

Industry

Energy

Consumption &

Efficiency

Energy Consumption 100 mtce 40 41.9 48.9 52.7

Coal share % — 63.6 57.3 60.4

Non-fossil fuels % 11.4 11.1 14.8 13.7

Electricity TWh 6150 6000 7390 8610

Energy Intensity Tce/10kRMB 0.68 0.71 0.59 0.64

Coal use by thermal Power Grame/kwh 323 318.6 308.6 308.6

Electricity

Installed capacity GW 1490 1420 1830 2030

Coal fired GW 960 880 960 1210

Hydro GW 290 310 380 400

Nuclear GW 40 33.37 59.45 61.6

Gas fired GW 56 50 90 77.88

Wind GW 100 100 210 200

Solar GW 21 35 100 50

Ecosystem

protection

CO2 emission intensity Tone/10kRMB — 1.43 1.12 1.23

Reduction of CO2 cimmited % — 33.3 47.8 42.5

Well being

Energy use per capita tce — 3.0 3.4 3.7

Electricity per capita kwh — 4364 5133 5986

Electricity per capita for

residential kwh 620 574 737 1172

Population using gas 100 million 2.5 2.9 ?? ??

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XII. Energy Security Reframed


12. Today we are facing interlinked landscape of energy security. To

make the concept measurable and manageable is required.

In our report, we reframe energy security by a set of relevant aspects covering

energy industry, regulators, environmental concerns, biological care, societal

relation, public expectation, international relations, infrastructure and future

development before indexed.

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0 2 4 6 8 10

Non-traditional threats

Ecological threats

Corridor security

Policy Synergy with relevant countries

FX employed for security

Price

Bi/multi cooperation mechanisms

Exporting capability & stability

Long term cooperation with exporters

Stockpile and supply dates

Chokepoint security

Transportation satisfaction

Foreign dependency

Supply self sufficiency

Energy efficiency

Market sustainability

Industrial Stability & Sustainability

Figure 25: Energy Security Evaluation

Evaluation

Security Indicator


XIII. Energy Cooperation


14. Such an energy security is also

subject to multilateral cooperation

arrangements:

- China-Russia-Central Asia

- China-ASEANs

- North Indian Ocean

- North Pacific

- Sino-Europe-

- Partner with Intl Institutions

Multilateral cooperation objectives:

build up mechanisms to enhance

energy demands, efficiency,

technology advances with intent to

reframe an open, inclusive and

sustainable energy government at

regional, trans-regional level.

Energy BRICS was proposed to

strengthen multilateral cooperation

with emerging economies.

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Conclusions


1 There are some big gaps between new energy policies witnessed

and studied and our EES scenario, which leaves a set of questions to

be answered in the coming five years.

2 The year 2020 will be critical milestone for energy transformation in

China before its moving to next one/new heights aiming at

sustainable development. We believe this milestone 2020 could be

the last chance to the country to build up its well-off society as

expected.

3 Obviously, there are new requirements and efforts deserved to come

to deal with shortages and laggards and pave way ahead in policy

making from EES scenario points in the 2nd half 2015 and 2016 (we

are closely watching, investigating and advising)

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Top 10 Outstanding Issues


① Coal fired generation <50% while coal used for power >50%

② Oil demand and its substitution prospects

③ Gas “supply surplus” and utilization

④ Nuclear issues (size, growth rate and inland deployment)

⑤ Wind and solar power utilized

⑥ Continue to build up energy storage capacity

⑦ Intra-regional power grid connections

⑧ Near zero emission and its economics

⑨ Near zero emission and energy savings

⑩ Urbanization and energy services

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Advices


1. For Policy makers - Policy refocus, enhancement in line with

governmentally smarter role together with integration, inclusiveness and

implementation are advised

2. For the Industry – We encourage the industry to be more open and resilient

to market competition and upgrade energy supply oriented strategy towards

energy services oriented strategy (indicating the importance of stability of

supply, public acceptance, fairly accessible, more mobile facilities, smarter

grid, and inclusive development).

3. For the public: A direct dialogue between the public, industry and the

government is required and indispensible because joint efforts for better

energy services, energy saving and emission reduction are imperative to

unlock the benefits of the energy transformation worldwide.

4. For the rest of the world: A better understanding of Chinese energy policy

deserves not only high level dialogues but also an exchange of data, analysis

along with the outlook like today we’ve attempted.

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Thanks & Closer Cooperation


Thanks for your listening

Thanks to IEEJ plus Mr. Masuda Tatsuo for your

invitation and arrangements.

We are seeking a closer cooperation with IEEJ on the

energy outlook program.

We are also seeking closer cooperation under the flag of

CICA energy security roundtable panel I chair as well.

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Contact : [email protected]

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