HOUSTON—China is the world’s largest coal consumer, greenhouse gas emitter, and importer of liquefied natural gas (LNG) while also generating the most carbon-free energy, producing more solar and wind power than any other nation.
It’s a paradox driven by a policy shift, from near-total reliance on fossil fuels a decade ago to the rapid development of renewable energy. The transition has accelerated significantly over the past five years.
During a March 11 roundtable discussion at CERAWeek—an annual energy conference organized by S&P Global and held at the Americas Hilton in Houston—six Chinese energy leaders and academics expressed views that sounded familiar to their contemporaries from more than 80 nations attending the event.
Coal, oil, and gas remain vital in the nation’s energy mix to provide baseload power for sustaining economic development, while emerging technologies and new energy sources are improved, commercialized at scale, and integrated into the mix. The Chinese leaders said that maintaining advances in renewable generation is a matter of domestic energy independence and national security.
He laid out three issues for panelists to discuss: how China’s diversification strategy is being implemented; how much of it is guided by the Chinese Communist Party’s (CCP’s) policies; and how it is “managed in a global trading system” that is increasingly rife with tensions and competition, especially with the United States.
Global trade is “on everybody’s mind,” Pascual said. “The good news for China is you’re very competitive. The challenge for the rest of the world is ... that you’re very competitive.”
The investment in clean technology is counter to “the reputation of China and coal,” he said, but its commitment to green energy “is massive” and relatively recent—less than five years old.
In 2020, Chinese leader Xi Jinping pledged to have carbon dioxide emissions peak before 2030 and to “achieve carbon neutrality before 2060,” while expediting the diversification of energy sources with an emphasis on renewables, including carbon-free nuclear, solar, and wind power.
Lei Yang, a research professor and deputy president of Peking University’s Institute of Energy, said the transition was spurred by an array of economic and national security concerns, but also by “terrible” air pollution.
The overall aim, he said, was “every year increase more than one percent” the decline in carbon generated by energy and the percentage generated by renewables, which was about 11 percent a decade ago.
The 2020 goal was to double wind and solar power to generate 1,200 gigawatts (GW) of renewable energy capacity by 2030.
“By end of last year, total solar installation [was] 800 GW and wind installation was 530 GW so you add these two numbers, it’s over 1,300 gigawatts for solar and the wind,” LONGi Green Energy Technology Co. Vice President Eric Luo said. “We are six years ahead of the target which we set up.”
Coal Curbing, LNG ‘Growing’
China National Petroleum Corporation Deputy Chief Geologist Li Guoxin said while China’s gross domestic product increased by an average 6 percent per year over the past decade, its energy consumption has increased by only 3.6 percent annually.“More energy, high efficiency. We actually see energy intensity,” he said.
Coal remains the largest source of power in China, Li said, but at 53 percent of China’s electricity generation, that’s the lowest share on record, increasing in consumption an average of 1 percent a year since 2020.
Li said China’s reliance on oil and gas, which generated about 12 percent of its energy, will also begin to taper in the coming years.
“Based on our statistics, actually oil as a fuel supply has probably already peaked in 2024 in China,” he said. “From the natural gas perspective, we believe that it will peak around 2040 in China.”
Sinopec Economics & Development Research Institute Vice President Fairy Wang disputed Li’s claim about oil peaking in 2024. She projected that “China’s total oil demand will peak roughly by 2027. The demand for [it] is still growing.”
She said in the coming decade “we will see coal demand peak, oil demand peak, gas demand peak, but we don’t see petrochemical demand peaking,” adding, “LNG will be still growing.”
China’s LNG imports last year increased by 7.7 percent, up to 76.65 million tons, a three-year high.
‘Cluster Manufacturer Advantage’
While the statistics are staggering, the real stunner is how swiftly China is moving away from fossil fuels and into renewables, S&P Global’s Pascual said, asking panelists how the transition is being implemented.“We call it cluster manufacturer advantage,” said Jian Pan, co-chair of CATL, a leading global electric vehicle and battery technology company.
“As we make a product, we figure out our method, how we make the capacity more efficient, how that’s been integrated with supply chain with technology, with manufacturer service, with a skill set of workers. You combine all this together, not just the product, everything combined.”
LONGi’s Luo said there are “three main points” in implementing the transition.
“Number one is technology innovation, which it’s more than just a product itself, it’s also the integrated manufacturing,” he said, similar to Pan’s “cluster manufacturer advantage.”
This is how LONGi operates within “the dynamic distribution of the Chinese solar supply chain,” Luo said, where manufacturers “can have everything, from the components to the manufacturing to the skill, even the software service ... within a three to four-hour drive.”
“Second is scale-up the manufacturing,” he said. “Three, a consistent policy. You have public or private partnership, then you have government. The more you drive those three elements, the more you make, also coupled with the market demand.”
Pan said that while the CCP sets the policy directions for the quick adoption of electric vehicles, the restructuring of “industrial activities, the environmental mandates for all the industrial activities, as well as the fluctuation in the international oil market, all come [into] play.”
The CCP orchestrated a rapid increase in electric vehicle production, making China the world’s largest manufacturer and disrupting the global auto manufacturing industry and oil markets, the panelists noted.
Vitol CEO Russell Hardy said during a March 10 CERAWeek discussion that China’s growing electric vehicle (EV) market and projected flat demand for oil and gas are among the reasons why oil prices hit a three-year low of $68.33 a barrel last week.
“China demand concerns and global GDP are posing a little bit of a threat to oil prices,” he said, projecting that global oil demand will rebound until the early 2030s before slipping into a permanent decline with broader adoption of EVs that will be exported by China.
‘Common People Embrace EVs’
Sinopec EDRI’s Wang said China’s EV industry “developed so fast ... first, definitely, [because] the government is supporting it. We have policy support. We have some incentives. The government provides some subsidies for EV during the past 10 years.”EVs are less expensive in China than anywhere else and also provide other cost savings, she said.
“When you recharge your electronic vehicles, it only cost[s] you 30 to 50 yuan. That equals to roughly $7 to $8. But if you [are] refilling gas in your car, it will cost you 500 yuan [about $70]. So, you see that the price of charging is only one-tenth of the price of gasoline. So, that’s why common people embrace EVs,” she said.
Wang said competition is spurring cost-cutting improvements.
“There are many [companies] manufacturing automobiles in China and competing,” Wang said.
She added that Chinese consumers are drawn to purchasing EVs due to the added technology and smart features.
“The big appeal for Chinese consumers today to buy an EV is, really, the sort of intelligent features and the connectivity of the new EVs, which cannot be provided by the traditional combustion engine cars,” she said. “It’s really the additional smart features that are creating all this demand.”
Pan said: “Most people think EV demand, it’s not adding to the grid, right? But if you turn the table, it can potentially be a source of alleviation for the pressure.”
He said there are pilot projects in China “where you have so many EVs with batteries, essentially it’s storage. So, when consumers are not running EVs, they can use batteries as a source of power to balance the demand on the grid.”
Trade, Tensions, Tariffs
China is poised to dominate the EV market as it already controls the photovoltaic solar panel market.“You’re well aware of the discussions around China, between the United States and China, but it’s also been with Europe and others, of the tariffs that have been put in place on electric vehicles, the concerns about the things which China got very good at, in particular critical minerals,” Pascual said. “It’s created this tension in trade relations, and sometimes it spills over into political issues as well.”
Pan said it’s not good that any one nation dominates a market, since that can create resentments and tensions.
“Just from a [EV] battery perspective, I think today, if you look at the global production, today it is concentrated in China. But if you look at the demand side, it’s also concentrated in China,” he said. “So, in that sense, it’s actually relatively balanced.”
However, it won’t stay that way, and Chinese EV makers are figuring out how they can be industry leaders while creating a manufacturing and supply chain that is “more balanced geographically because the demand will go up in other parts of the world,” Pan said.
There are three segments to being “balanced geographically,” he said. “You have countries where they have mineral resources. You have countries like China that have technology and manufacturing capacity. And you also have countries where there are many markets.”
Every nation, state, and town “wants to have the local production. So, in the end, you have to sort of get a balance of it. Maybe, you know, 20 percent in the countries where resources are derived from, maybe like 40 percent in China, and another like 20–30 percent in markets. So, I think it’s evolving.”
Luo said LONGi and other Chinese solar panel manufacturers are diversifying manufacturing and supply chains, including building factories in the United States despite threats of tariffs and sanctions.
LONGi will continue to expand anyway as part of a “capacity adjustment,” he said, because solar power is in demand, generates jobs, and is carbon-free power.
“We can tariff the product, but we cannot tariff the capacity. The capacity and the product are different. The capacity is integrated,” Luo said. “As long as we focus on these fundamentals, eventually you are winning. So, let’s see.”
Pan said Chinese manufacturers understand that being predatory is not good for business in the long term and are not stubbornly proprietary in keeping “innovations in technology” exclusively to themselves.
“We’re not keeping it away from others in the world. We’re quite open-minded about it,” he said. “That’s what we’re doing in the U.S. We’re supporting U.S. partners to manufacture batteries in the U.S. without [U.S. government] support, so we’re fully open-minded about it.”
