China Energy Monthly - March

GOVERNMENT

“What China’s 12^th Five Year Plan Means for CCS” (March, 2011)

The 12^th five year plan covers 2011 to 2015. The goals include targets for low carbon, efficiency, and renewables. Due to more planned hydro, gas, and wind power generation, the share of coal is anticipated to drop from 72 percent to 63 percent, but new coal plants are not required to be fitted with CCS. The New Energy Industry plan does not discuss CCS specifically, but it does discuss IGCC and other clean coal technologies. Overall, the Five Year Plan includes technologies that are low carbon, but they also have other benefits. Nevertheless, R&D funding for CCS will increase as China seeks to increase technology innovations.

http://www.theclimategroup.org/our-news/news/2011/3/24/what-chinas-12th-five-year-plan-means-for-ccs/

http://www.chinadaily.com.cn/china/2011npc/2011-03/06/content_12122644.htm

http://www.chinadaily.com.cn/usa/china/2011-03/05/content_12120887.htm

Coal Industry Restructuring (3-29-11)

Inner Mongolian coal production companies will consolidate to form approximately 20 large companies. This is part of a national plan to improve production efficiency and eliminate outdated technology. The result of the restructuring will be 10 large companies with 100 million tons of production capacity each. The 10 companies will produce approximately 90 percent of China’s coal.

http://europe.chinadaily.com.cn/business/2011-03/29/content_12242739.htm

Government Air Emissions Targets Increase Renewables (3-10-2011)

CLP Group Holdings Limited, a utility, met its 2010 carbon intensity target required by the government’s standards for air emissions reduction targets. In 2010, 16 percent of CLP’s power generation was from renewables, exceeding the 5 percent goal set in 2004. CLP will continue to invest in renewables as it plans to reduce carbon intensity from power generation by 75 percent by 2050.

http://www.chinadaily.com.cn/hkedition/2011-03/10/content_12146108.htm

ENERGY TECH BUSINESS

“China, Germany lead clean energy recovery” (3-30-11)

China and Germany hold the number one and two spots respectively in renewable energy investments. In 2010, China invested $54.4 billion and Germany invested 41.2 billion. The U.S. was in the third place with $34 billion. Italy was in the fourth place with $13.9 billion.

http://www.dw-world.de/dw/article/0,,14953692,00.html

“China renewable sector eyes govt support amid nuke safety fears” (3-30-2011)

China currently has 26 reactors under construction and 28 planned. Although the Chinese government announced that it will revise its nuclear plans in light of the Japanese earthquake, this does not mean its reducing the number it is planning on constructing. As an alternative to nuclear, the renewable sector is calling for the Chinese government to invest in more renewables. Most Chinese reactors are second-generation technology, but there are six third-generation reactors under construction.

http://www.reuters.com/article/2011/03/30/china-renewables-nuclear-idUSL3E7EU15C20110330

http://www.chinadaily.com.cn/usa/business/2011-03/30/content_12250393.htm

The Bolshoi Petroleum Update – the Inaugural Post

“BP once stood for British Petroleum . . . [w]ith this deal, it now stands for Bolshoi Petroleum.”

Rep. Edward Markey, the highest ranking Democrat on the House Natural Resources Committee, thus masterfully described the recent stock swap between British Petroleum and Russia’s state oil company, OAO Rosneft’. Some thought Rep. Markey “a bit off” in referring to the Bolshoi Theater, home of “Swan Lake” and “The Nutcracker,” while discussing an oil deal, but he was actually right on the mark. While the Congressman likely meant that BP was about to become more Russian than British, with Rosneft’ being its largest shareholder (5% of BP’s stock), he also, hopefully, knew that bolshoi means “big” in Russian. Given the potential size of Russian Arctic oil and gas offshore resources, the BP-Rosneft’ stock swap is indeed a big deal.

Regardless of whether Rep. Markey intended it, his shrewd remark signifies the critical role that oil- and gas-producing states and firms play in our lives. With this “big” thought in mind, we are creating a new section of the IEE blog: “The Bolshoi Petroleum Update.” Russian oil and gas policy will be the section’s central theme. Why Russia? Several reasons. First, Russia is the largest oil producer in the world and second-largest natural gas producer. Second, oil and gas export revenues comprise more than half of Russia’s budget, making the nation largely dependent on fossil fuel production. Third, Russia is actively trying to increase its geopolitical influence by solidifying its role as the world’s leader in oil and gas production. Fourth, Russia’s domestic GHG emissions (fourth largest in the world), as well as its status as the world’s largest primary energy producer, make it a critical player in overcoming the toughest environmental challenge the world has faced thus far, climate change.

Despite a fair amount of media coverage regarding Russia’s plans to explore its offshore resources, we found little analysis in English-language sources of how these plans fit into Russia’s existing oil and gas regulatory framework. Additionally, while working on “The Arctic Offshore Oil and Gas Guidelines in the Russian Federation,” a white paper for the Inuit Circumpolar Council, we discovered that English language literature gives little attention to the issue of environmental protection in relation to offshore oil and gas development in Russia. Finally, we think that the existing coverage of Russia’s climate policy will benefit from a look through the prism of the country’s push for new oil and gas horizons.

If you would like to know more about oil and gas production in Russia, its environmental impacts, and Russia’s climate change policies, check in regularly for the Bolshoi Petroleum Update.

Sources

Guy Chazan, BP, Rosneft Deal Draws Criticism, Wall Street Journal, (Jan. 14, 2011), http://online.wsj.com/article/SB10001424052748704511404576085932247348132.html

Central Intelligence Agency, World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html (last visited Feb. 28, 2011).

Interfax, http://www.interfax.co.uk (last visited Feb. 28, 2011).

U.S. Energy Information Administration, http://www.eia.doe.gov/cabs/Russia (last visited Feb. 28, 2011).

With Nuclear Off the Table, Will Japan Digress to Fossil Fuels?

The natural disaster in Japan has prompted a spirited discussion about the future of nuclear energy. Many believe that the gigantic ocean waive that caused severe damage to Japan’s coastal communities also spelled the end of the “nuclear renaissance.” But if nuclear power is no longer an attractive option, what comes next?

Thus far, most of the discussion about Japan’s energy future revolved around fossil fuels. The Japanese government is turning to fossil-fuel-powered electric power plants to compensate for the 11 nuclear reactors that were shut down in the aftermath of the earthquake. The government will ask utilities to increase power output at coal and gas-fired facilities. Major liquefied natural gas (LNG), oil, and coal suppliers have assured Japan that they will provide additional fuel to satisfy the increasing demand.

Although increasing output at the existing power plants will likely alleviate the current problem, it is clear that Japan will need to develop new generation capacity. Some financial analysts predict that the country is “certain to turn to oil” as a replacement for electric power generation fuel. For example, Barclays Capital estimated that Japan would need an additional 200,000 barrels per day of low sulfur crude to satisfy this goal. Facilities powered by natural gas are cited as a more attractive alternative. Gas-fired plants work extremely well with solar and wind facilities. They can be quickly deployed to compensate for the intermittency of sun and wind. According to Deutsche Bank analysts, an additional 5 to 12 billion cubic meters of LNG a year could be headed to Japan.

With the nuclear option almost certainly off the table, Japan has a unique opportunity to make significant progress in developing safe, carbon-free energy. Although replacing nuclear reactors exclusively with fossil fuel-fired power plants may be a more cost-effective solution in the short term, the emissions from burning oil and coal will contribute to the problem, consequences of which may dwarf the current devastation.

Sources:

Natural Gas Prices on the Rise as Nuclear Power Questioned Due to Crisis in Japan, PennEnergy, Mar. 18, 2011, http://www.pennenergy.com/index/petroleum/display/3597176815/articles/pennenergy/petroleum/finance/2011/03/natural-gas_prices.html?cmpid=EnlDailyPetroMarch212011.

Josephine Moulds, Japan Crisis Forces Rethink of the Nuclear Option, The Telegraph, Mar. 23, 2011, http://www.telegraph.co.uk/finance/newsbysector/energy/8392636/Japan-crisis-forces-rethink-of-the-nuclear-option.html.

Eric Watkins, Suppliers of LNG, Coal, Oil Look to Replace Nuclear in Japan, Oil&Gas Journal, Mar. 15, 2011, http://www.ogj.com/index/article-display/5412665280/articles/oil-gas-journal/general-interest-2/20100/march-2011/suppliers-of_lng_.html?cmpid=EnlDailyMarch162011.

Fukushima Nuclear Plant, Japan

Like the entire world, our thoughts are with the people of Japan. We are also concerned about the current events unfolding at the Fukushima nuclear plant.

Almost 30 percent of Japan's power is from nuclear. The earthquake forced the country to shut down 11 of its 55 nuclear power reactors, causing it to lose approximately 20 percent of its capacity. The Fukushima plant alone had a capacity of 4.7 GW. The impacts from the loss of large central power generation is exacerbated by the loss of power delivery infrastructure. Ongoing debates not only involve the appropriate methods to prevent a nuclear meltdown, but the existence of falsified safety reports at Fukushima and whether the U.S. is overreacting in its own nuclear policy.

At this very early stage, one lesson is apparent. Nuclear is not and should not be the only energy source. It is one of the many types that should make up a balanced energy portfolio. In times of natural disasters and emergencies, there is a role for distributed generation, micro grids, and renewables such as solar and wind. In the words of our Director this morning "We cannot put all of our eggs in one basket."