The Chinese and UK energy markets are vastly different in scale and diversity of supply, but there are mutual lessons to be learnt about skills and technologies. Lois Vallely reports.

China is the most populated country in the world and boasts the fastest-growing economy to go with it. Even though it has seen successive stock market tremors over the past fortnight (see box, facing page), the economic miracle overseen by the country’s communist masters has transformed the country, and has also turned China into the world’s largest consumer and generator of energy.

According to the figures from the Heritage Foundation and the American Enterprise Institute, since 2005 China has invested more globally in energy than in any other sector, almost $400 billion (see graph). This figure covers contracts to help secure energy supplies for a population of 1.4 billion people, but also large stakes in energy utilities and fossil fuel mining companies.

James Brodie, a manager at the China-Britain Business Council, says the UK and China energy markets are “incomparable”, both in terms of scale and diversity. China’s market is not only huge, but is heavily reliant on coal. In 2013, coal accounted for 65 per cent of the country’s electricity generation, so an increase in demand for coal that year of 2.6 per cent equated to an additional 93 million tonnes being burnt.

To put this in context, in 1983 in the UK, the year before the miners’ strike when coal was a major generation fuel source, the country’s entire mining industry produced 119 million tonnes.

However, although China is reliant on coal, arguably yesterday’s fuel, its ultra-supercritical coal-fired technology is by no means backward. Indeed, Brodie says it is “leading the world”.

Ultra-supercritical power plants operate at temperatures and pressures above the critical point of water. This is where there is no difference between water in its gas and liquid states, a condition that results in higher efficiencies (above 45 per cent), so such plants require less coal per megawatt-hour, produce fewer emissions at lower cost.

Yet even though these ultra-supercritical plants emit 11 per cent less carbon dioxide than conventional plant for the same output, pressure is mounting for China to go much further on emissions. According to research from Berkeley Earth, air pollution in China results in around 1.6 million premature deaths a year, well over 4,000 a day.

China, then, urgently needs to fast-track its decarbonisation agenda, and after years of prioritising economic growth, it has recently made high level strategic plans to do so. In the first half of this year, coal consumption has plunged by more than 8 per cent and carbon emissions by 5 per cent. Analysis by Greenpeace suggests that this carbon reduction could be equal to the UK’s entire emissions over same period.

Adding to the picture of a new and more sustainable China, Brodie points out that, in terms of installed renewable capacity, the country is number one in the world for solar and onshore wind.

The UK, meanwhile, clings firmly to its claims of leadership in offshore wind where it has both higher installed capacity and better technologies than China.

“That’s mostly thanks to the skills we’ve got from the oil and gas industry, which has given us more deep water technology,” Brodie says. “We’ve been able to move up that technology curve much faster than some other industries.”

According to data from Renewable UK, the UK has just over 5GW installed offshore wind capacity and, with ten years more experience there’s plenty of opportunity for UK firms to offer services and skills to the Chinese market. Indeed in 2013, then-energy secretary Ed Davey signed a memorandum of understanding with Chinese leaders to facilitate just that, hoping to cash-in on China’s plans to develop 30GW of offshore wind by 2020.

Despite a deceleration in its economy last year – which has continued into 2015, causing mounting concern in global markets – China has simultaneously experienced a dramatic increase in renewable energy investment across a range of technologies. In 2014 the renewables investment growth rate hit 31 per cent with $89 billion invested in projects.

According to the US Energy Information Administration (EIA), this made China the world’s leading investor in renewable energy, a trend it says is likely to continue. Sizeable investments are expected through the next five-year period to help China reach its strategic renewable energy and carbon emissions goals.

So, China looks to be rapidly transforming from the world’s most carbon-intensive industrial powerhouse to a mature (slower growth), less export-intensive economy with a sustainable renewables-based energy system. But is this really the case?

According to China’s National Energy Administration, the number of wind turbines sitting idle in China rose nearly 7 per cent in the first half of 2015, compared with the same period last year.

As with many countries, China’s electricity grid has found it is coming under strain from new intermittent renewable capacity. Coupled with an increase in coal-fired capacity and a dip in the rate of electricity consumption growth, this has meant the demand for wind power has decreased. The region of Jilin alone saw 2.29 billion kWh (43 per cent) of wind power sit unused in
Q1 2015.

Grid operators have therefore begun slowing the connection of turbines to the grid and limiting the use of wind power, which is leading to wasted capacity and lower returns on investment.

So, despite investments and projects which seem impossibly ambitious compared to figures quoted in relation to the UK’s small-island aspirations, China is left with significant energy security and decarbonisation challenges. It remains the world’s biggest emitter of greenhouse gases – a status it had the dubious honour of claiming in 2007.

In the run-up to the UN Climate Change Conference in Paris, ahead of which China committed to cut its greenhouse gas emissions by 60-65 per cent (against a 2005 baseline) by 2030, China needs to get its emissions down a lot further. Increasingly, it will therefore be looking around the world for those that can help it do so quickly.

Q&A: Alfred Chan, managing director, Towngas.

Alfred Chan is the managing director of the Hong Kong and China Gas Company, otherwise known as Towngas, the sole provider of natural gas in Hong Kong. It supplies gas to 85 per cent of Hong Kong households, as well as commercial and industrial customers. This year, he won the Leadership Award in Igem’s Gas Industry Awards 2015 .

Do you see a place for natural gas in China’s future energy mix?

Our major market is in China. The actual commercialised use of natural gas only has a history of about 15 years. The infrastructure has been built for high-pressure transmission pipelines, the import of LNG is being developed and a trading platform has been set up so the gas market has become more open. That gives opportunities for companies like us, which aren’t state-owned, to move into the market.

What are the main differences between the UK and China in terms of their use of natural gas?

China as a country has got a smog problem, which the UK doesn’t have today. Only 6 per cent of the energy use in China comes from natural gas, and in the UK this is 35 per cent.

The infrastructure in the UK has been well developed; China has got a lot of infrastructure expansion [to do]. Once you expand the network, you reach new markets.

The only way for China will fulfil its strong greenhouse gas emissions reduction commitments is to use natural gas.

How can natural gas be used to reduce China’s carbon emissions?

There are a lot of toxic emissions, so how can China turn this around? Of course, you can use a lot of renewables: solar, wind, maybe nuclear, but today, natural gas seems to be the natural choice. It is the cleanest fossil fuel and it is abundantly available globally.

China has committed to reduce its greenhouse gas emission intensity by 40 per cent by 2020, measured from 2005. That is a very strong commitment and the only means they can achieve it is to use more natural gas.

Is there anything the UK gas market can learn from China?

I probably wouldn’t use the word “learn”, but opportunities are there in China, and the UK has got so much expertise because of its five or six decades of natural gas development.

There’s a lot of quality training, equipment sales, and upgrading of systems for China. That kind of opportunity is out there. So if UK people, knowing their own domestic market is quite limited… I’m not saying that they should abandon it, but they have another opportunity in China.