China Energy Monthly - December

GOVERNMENT

After Copenhagen, there is still support for the Kyoto Protocol
(12-28-09)

Hopes are dashed as Copenhagen resulted in a disappointing 12 paragraph non-binding statement of intention. China’s news outlets insist it will continue its efforts to address climate change, but more often than not they mention the Kyoto Protocol’s Clean Development Mechanism (CDM). CDM is not a perfect tool or the only tool with which to achieve agreement and it certainly has weaknesses. Nevertheless, the U.S. should consider Kyoto Protocol characteristics it is willing to adopt in a new agreement before the 2010 meeting in Mexico, given the simple fact that one of the world’s largest CO2 emitters is agreeable to such a system.

China asserts that it continues to work on the Bali Roadmap, which was developed at the 2007 UN Climate Change Conference in Bali, Indonesia. The Roadmap sought to (1) agree on a second set of emissions targets for developed countries to follow from the current Kyoto protocol targets, which conclude in 2012, and (2) to agree on action by all countries as part of an agreement on climate change. The second set of emissions targets likely will require developed countries to purchase more CDM credits from developing countries like China. China plans to work with the international community towards completing the Roadmap at the 2010 U.N. climate talks in Mexico. Exactly what China will offer is unclear. What is clear is that China is happy with CDM and the economic advantages of international carbon trading.

The World Bank indicated that the average carbon trading growth rate between 2006 and 2008 was more than 320%. The gross carbon trade in 2008 was worth approximately $126 billion, more than 100 times of that in 2004. 50 MW of wind power capacity can be traded for 10 million Yuan ($1.46 million). No wonder CDM is popular. A recent op-ed in the China Daily stated that the international carbon trade market may become the largest commodity market within five years. Already, China is the largest carbon emissions cutter under the CDM mechanism. It accounts for over 58% of global reductions among all registered emission reduction volume.

The positive economic gains include negative impacts. Many developed countries rely on CDM to meet their emissions targets, but currently CDM creates perverse incentives that undermine GHG emissions reduction goals. Instead of creating carbon reduction projects that are outside of business as usual projects, the income stream from CDM encourages questionable practices. For example, some factories expand in order to create more emissions so that when reductions are made they can claim CDM credits. Other companies profit from efficiency gains from practices they would have adopted anyway. Other criticisms include the secondary environmental and cultural impacts, such as environmental degradation from hydropower and moving native population from forests to claim carbon offsets. The current regime expires in 2012. Drawing from the developing Bali Roadmap and the Bali Action Plan, revisions to the regime can address these issues, one of which must be incorporating more effective methods for screening business as usual projects.

Even with its weaknesses, the Kyoto Protocol’s CDM has at least created the beginning of a CO2 reduction system in which China has participated for many years. The U.S. must acknowledge the agreements and systems that have had an impact, negative or positive, and prepare to adopt and adapt them to meet its goals rather than unilaterally dictating its own ideas.

Sources:
http://unfccc.int/meetings/cop_13/items/4049.php
http://cdm.unfccc.int/public_inputs/2009/cdmimprov/cfi/CAN_submission_on_CDM_Improvements.pdf
http://www.chinadaily.com.cn/thinktank/2009-12/22/content_9211364.htm
http://www.chinadaily.com.cn/china/2009-12/27/content_9233855.htm
http://www.chinadaily.com.cn/enmobile/2009-12/23/content_9221441.htm

“China Pushes Use of Clean Energy” (12-28-09)
On Saturday, December 27, the standing committee of the China’s National People’s Congress passed an amendment to the 2006 renewable energy law. Electric grid companies will be required to purchase all energy generated by renewable sources. Renewable sources include wind, solar, hydro, biomass and geothermal. Cooperatively, the State energy department, power regulatory agency and finance departments will “determine the proportion of renewable energy power generation to the overall generating capacity for a certain period.” Utilities that refuse to purchase from renewable energy generators will be fined. The new law also requires utilities to upgrade transmission to “enhance grid capabilities to absorb more power produced by renewable energy generators.” One option is adopting smart grid characteristics such as intelligent monitoring system that could integrate renewables on a large scale.
http://online.wsj.com/article/SB126192809041606467.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
http://www.chinadaily.com.cn/bizchina/2009-12/28/content_9236212.htm
See also http://www.chinadaily.com.cn/china/2009-12/26/content_9233691.htm

“Ministries Clash Over Overcapacity in New Energy Sector”
(12-22-09)
In August, industry, the China’s Ministry of Industry and Information Technology and the National Development and Reform Commission released a report on the overcapacity of the renewable energy sector. Now the Ministry of Science and Technology (“MST”) released a report rebutting the alleged overcapacity. Specific data was lacking, but the MST found that the data relied upon by the other agencies were on planned capacity, not installed capacity. MST also concluded that photovoltaic production has increased and it is important for the government to upgrade the grid and create production incentives concurrently with the installation of renewable energy facilities.
http://www.eeo.com.cn/ens/Industry/2009/12/22/158647.shtml

“China to Establish New National Energy Commission”
(12-14-09)
China will announce the establishment of a new energy agency. The new “National Energy Commission.” The current National Energy Administration (NEA) lacks ability to implement a unified energy policy because the responsibility and decision making power are dispersed among different agencies. The NEA has no ability to issue permits to the coal industry, implement price reform, or change market access. The new National Energy Commission is supposed to develop national energy policy and act as the highest office in charge of energy issues.
http://www.eeo.com.cn/ens/Politics/2009/12/15/158171.shtml

WIND

“China’s green energy goes to waste in distribution bottleneck” and grid expansion (12-23-09)
Inner Mongolia has wind power capacity of 7.05 GW, with 3.25 GW under construction. However, less than 2 GW of that power makes it into the grid. The Inner Mongolia Development and Reform Commission said that while it is expanding the grid, it cannot keep up with the growth of wind power because the grid must have five times the capacity of the amount of wind power generated to deal with the intermittency of wind power. Currently thermal power takes 91% of the grid capacity in Inner Mongolia. The Inner Mongolian Power Company plans to build two 500 KV lines to Hebei. Beijing and Tianjin are located in the Hebei province and it is home to more than 65 Million people. California, the largest state by population in the US, has a population of only 37 Million.

Due to the inability to transport wind power to more populated regions, wind power competes with thermal power in the less developed areas of Inner Mongolia, causing financial harm to thermal power plants, perhaps even driving them out of business. Nevertheless, the wind power project manager for Inner Mongolia notes renewable energy has value under the Kyoto Protocol’s Clean Development Mechanism.
http://www.chinadaily.com.cn/enmobile/2009-12/23/content_9221441.htm
See also article above “Ministries Clash Over Overcapacity in New Energy Sector”

ENERGY TECH BUSINESS

“China’s Ministry of Commerce looks to lift domestic consumption” (12-26-09)
The Ministry will try to stimulate domestic consumption in 2010, which includes the “home appliances to the countryside” program and subsidies for an “old-for-new” auto trade in program. It remains to be seen whether increased home appliances will increase electricity demand and whether the demand will be met with renewables or coal.
http://www.chinadaily.com.cn/bizchina/2009-12/26/content_9233370.htm

Smart Grid Conferences in Beijing
(November and December, 2009)
In the last two months, two consulting companies, GSL Consulting Ltd. and China Decision Makers Consultancy (“CDMC”), put on smart grid conferences in Beijing. The two day CDMC event was attended by the national government and international companies such as IBM and Siemens. Initially, China’s State Grid and Energy Bureau discussed the need for information sharing and measuring equipment to improve the grid’s reliability and safety. There was also emphasis on clean coal and improved efficiency at coal plants. One important challenge discussed is communication and collaboration between national and regional governments as regional governments are less likely to implement energy programs without direct local economic benefits. Regulations and standards must not only harmonize the different local standards, a variety of incentives for regional governments, utilities, industries, investors and customers are needed. Italy’s Enel group, well known for its work with smart meters, presented to the audience, step-by-step, its recent deployment of 23 million smart meters, and experiences with improved reliability and decrease in consumer charges. The National Development Reform Commission also discussed renewable energy law, including investment recovery tool such as feed in tariffs. Issues remain as to who will pay for the smart grid and its impact on consumers.
http://www.smartgridschina.com/en/
http://www.cleanergreenerchina.com/category/greener-tech/
See also http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2009/12/smart_grids_chi.html

OIL

“Challenging conditions may continue, says Sinopec” (12-25-09)
Sinopec Group, Asia’s largest refiner, expects crude oil prices to rise while demand lags behind expansion in processing capacity. While oil companies are increasing refining capacity to meet industrial demand due to the government’s stimulus program, Sinopec’s fuel sales growth may decrease due to a slower economy. Sinopec expects the overcapacity impact to be softened by the government’s pricing system, where the government will adjust prices when crude oil costs change more than 4% over 22 consecutive working days. China has raised gas and diesel prices five times this year. The last time was by 8% on November 10.
http://www.chinadaily.com.cn/bizchina/2009-12/25/content_9228303.htm
See also http://www.chinadaily.com.cn/bizchina/2009-12/24/content_9224279.htm

CNPC gets exclusive operating rights of China-Myanmar oil pipeline (12-21-09)
China National Petroleum Corp. (“CNPC”), an oil and gas producer has signed an agreement with Myanmar’s Energy Ministry to build and operate a 771 km crude oil pipeline from Maday Island in western Myanmar to Yunnan, in southwestern China. The agreement requires the Myanmar government to guarantee CNPC’s ownership, operating rights and safety of the pipeline.
http://www.chinadaily.com.cn/bizchina/2009-12/21/content_9209633.htm

NATURAL GAS

“Pipeline pulls region closer” (12-15-09)
Leaders of China and Central Asia opened a 1.833 km natural gas pipeline linking Turkmenistan to China’s Xinjang region. Leaders from Kazakhstan, Turkmenistan, and Uzbekistan were present. When it reaches full capacity in 2012 or 2013, it will be able to deliver 40 billion cubic meters of gas per year, more than half of China’s current gas consumption.
http://www.chinadaily.com.cn/bizchina/2009-12/15/content_9178977.htm

NUCLEAR

“Nuclear power plants set to go inland” (12-22-09)
New inland nuclear power plants will use AP1000 technology developed by US based firm Westinghouse. Two or three inland power plants are expected to begin construction at the end of 2010. They are awaiting approval from the government.
http://www.chinadaily.com.cn/bizchina/2009-12/22/content_9211214.htm

“China, France ink aviation, nuke deals” (12-22-09)
The two countries will cooperate on two nuclear reactors to be built in the Guandong province with an investment of more than $7 Billion. This joint venture between Electricite de France and China Guandong Nuclear Power Group will be the largest foreign joint venture in China’s electricity industry. The two countries also signed agreements with regard to nuclear waste disposal, nuclear equipment purchase and aviation.
http://www.chinadaily.com.cn/china/2009-12/22/content_9210229.htm

“Nuclear Power Expansion in China Stirs Concerns” (12-16-09)
China wishes to increase its nuclear capacity from the current nine GW to 70 GW by 2020 and 400 GW by 2050. In the last 15 years, China has not had any incidents with the current 11 operating reactors. It has been careful to avoid scandal. China National Nuclear Corporation, one of China’s two state owned nuclear companies, deleted all mentions of Kang Rixin, the president arrested in a $260 Million corruption case in August. It has enlisted the help of foreign nuclear organizations such as the International Energy Agency in Vienna. In addition, Premier Wen Jiabao ordered the Nuclear safety agency to increase its staff to 1,000.
http://www.nytimes.com/2009/12/16/business/global/16chinanuke.html

Lets Remember Smart Grid Work in the E.U.

In the last couple of months, smart grid has received heavy press coverage in the U.S. With the $3.4 billion stimulus funds for smart grid development, smart grid presentations at Copenhagen and smart meter litigation in California, it is easy to forget that European countries have made smart grid improvements since 2001, hence, this quick review that highlights past and present activities.

History
2001 – Italian utility, ENEL launched large scale smart meter project
2005 – SmartGrids European Technology Platform for Electricity Networks of the Future was launched as a result the 2004 International Conference on the Integration of Renewable Energy Sources and Distributed Energy Resources
Jan. 2005 to Dec. 2006 – EU provides funding for “Energy Savings from Intelligent Metering and Behavioral Change” (partners included Austria, Denmark, Germany, & U.K.)
2007 – European Smart Metering Alliance created

Pilot projects
Denmark - Large utilities initiated advanced metering infrastructure project that plans on deploying 390,000 smart meters to customers by 2011
France - A consortium pilot project looks to install 300,000 power line communications meters
Germany - Stadtwerke Dusseldorf announced in 2008 that it will implement an Advanced Metering Management system for its 520,000 electricity customers. Another company, RWE, provides smart meters to 100,000 households.
U.K. - 15,000 homes were installed with smart meters in a pilot project in 2008

Legislation
May, 2009 - The U.K. plans on installing smart meters in all homes by 2020
Feb., 2009 - Denmark plans a zero carbon electric car network based on its wind resources
Ireland, Netherlands, and Norway are expected to mandate smart meters as well


As the U.S. makes improvements on its own electric grid, we can learn from European experiences.

Get in on the smart grid party!

Developing countries are just as interested in the smart grid as developed countries. This YouTube video by IBM shows simply the attractiveness of a new utility system. Chinese subtitles included! Developing countries also would like to install electronic improvements to generation, transmission, distribution and end user systems to improve communication and interoperability. With bigger populations than the U.S., developing countries such as China and India could use the efficiency gains and "leap frog" over traditional systems. Like the installation of cell phone towers instead of land telephone lines, where it became easier to call on a cell phone in the middle of the Cambodian jungle than find an old fashioned telephone in a village, it makes sense to spend money on new infrastructure with the most up to date proven technology.

One question is how new technology from western countries would be transferred to the eastern countries. The Wall Street Journal wrote today that Duke Energy is considering working with China's State Grid Corp. on power transmission inside the U.S. Chinese utilities are interested in smart grid technology, which Duke has, and Duke is interested in China's experience with transmission lines. China recently has focused on building more ultra-high voltage lines and has a 1,000 kV AC line that is the highest-voltage system operating commercially anywhere in the world. These types of cooperative projects show the beginning of how both countries could implement a smart grid by sharing experiences and technology.