August 13, 2010
If energy consumption is a major standard by which to judge economic prowess, then China has joined the big leagues. The International Energy Agency now reports that China has surpassed this country to become the world's biggest energy consumer.
The distinction carries with it two implications. The first is that China now possesses unfettered weight in global markets while the second is that it carries new-found obligations to reduce its air emissions. While the Chinese are destined to supply most of their energy needs with coal, natural gas and oil for decades to come, they are nonetheless committed to building out their renewable and nuclear energy programs.
"China's demand today would be even higher still if the government had not made such progress in reducing the energy intensity (the energy input per dollar of output) of its economy," says the Paris-based IEA report. "It has also very quickly become one of the world's leaders in renewable energy, particularly wind power and solar energy, and paved the way for a big expansion of nuclear power."
China's energy needs are now expanding at 12 percent a year, says the energy agency. Yet, on a per capita basis it is still only around one-third of those of the average developed nation, it adds. Prospects for further growth are very strong considering the country's low per capita consumption level and the fact that China is the most populous nation on the planet, with more than 1.3 billion people.
China consumed in 2009 the equivalent of 2.3 billion tons of oil -- a benchmark that includes energy devoured from all sources such as coal, natural gas, nuclear, wind and oil. By comparison, this country used the equivalent of 2.2 billion tons of oil, although on a per capital basis, one American still uses five-times more energy than a single Chinese.
China, which has doubled its energy consumption in the last decade, did so because of its large population and the need to electrify rural areas as well as build out its manufacturing complexes. Its gross domestic product has averaged 8 percent a year but in the first quarter of 2010, its national economic output jumped to nearly 12 percent.
Last December, the Chinese came under attack from those nations that had agreed to sign on to a global warming treaty. The Asian nation had said it would not consent to firm reduction targets, emphasizing that it must focus on modernizing society there. Instead, it said it would cut the level of energy intensity from its 2005 levels by 40 percent by 2020. It would do this by becoming more efficient -- a daunting task, given that it keeps building new coal facilities. Nevertheless, it is doing the same with wind and nuclear.
"Our analysis shows that shifting China towards a low-carbon economy also brings with it large opportunities, not only costs," says Dr. Feng Fei, director of industrial economics research for the Research Development Center of the State Council of China.
With China having overtaken the United States as the leading contributor to greenhouse gases, the direction of its energy policy will have profound implications not just for it but also for the rest of the world. For sure, coal now provides two-thirds of that nation's generation. But green energy programs currently supply 9 percent.
According to the World Wind Energy Association, the average annual growth rate in wind energy alone there has been 46 percent since 2006. China, in fact, has surpassed Spain to become the globe's third leading producer of wind energy behind the United States and Germany. And despite perceptions, it is moving forcefully ahead to produce 15 percent of its energy -- 120,000 megawatts -- from green sources by 2020 and 30 percent by 2050.
Meanwhile, China says that its goal is to increasingly bring more nuclear power on line and to eventually supply as much as one-third of its energy needs. Mainland China has twelve nuclear power reactors in commercial operation -- six of which it has brought on line since 2002, and 23 under construction.
To get there, it's importing nuclear technologies from Canada, France and Russia. The country plans to build 30 new reactors by 2020. Altogether, China hopes to increase its nuclear portfolio from 2.3 percent of its generation today to 6 percent -- 40,000 megawatts -- by 2020. By 2050, the aim is to have at least 150,000 megawatts of installed nuclear capacity, or 22 percent of the mix.
In a Wall Street Journal story , the International Energy Agency's Chief Economist Fatih Birol said that China will need about $4 trillion over the next 20 years to build out its energy infrastructure and to avoid rolling blackouts. That would equate to constructing 1,000 gigawatts of new power generation. That's an extremely aggressive target, given that such growth equates to what this country currently possesses and something that took several decades to achieve.
"The fact that China overtook the U.S. as the world's largest energy consumer symbolizes the start of a new age in the history of energy," Birol told the Wall Street Journal.
Indeed, it means that as Chinese enterprises gain muscle, they will increasingly participate in foreign markets and continue to buy energy assets. A growing China will, furthermore, give American companies new opportunities to build out the infrastructure there. All that is to the good, except now China must focus with laser-like intensity on increasing the success of its efficiency and green energy programs.
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Ken Silverstein EnergyBiz Insider Editor-in-Chief
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