Cross-posting from the oil thread as I feel like the two are intrinsically linked:
Ok couple of big posts coming up as I've been moving into a lot more oil & energy trades of late so here's the culmination of several weeks' of research:
In 2019, coal was the principal fuel for chinese electricity generation, providing more than half (60%) of China’s electricity generation. In that same year, over 89% of Australia's coal exports went to china.
Although changing natural gas prices and renewable costs generally produce proportional shifts in the electricity sector’s fuel mix, regionally-specific fuel dynamics and
resource availability are also important factors.
Decreases in natural gas prices produce the largest changes in the generation mix. Natural gas is relatively insensitive to changes in renewable costs in China, and the largest driver of natural gas generation remains natural gas fuel prices.
Solar could become the predominant source of electricity generation by 2050 if renewable costs are low and natural gas prices are high or at the reference level, however:
A combination of geographic unsuitability plus significant natural gas reserves (which are yet to be extracted) makes this unlikely.
At the 2019 Paris climate change conference, China also pledged to reach peak carbon output by 2030, however, China has nearly 250 gigawatts (GW) of coal-fired power now under development,
more than the entire coal power capacity of the United States. So when Xi says China will peak…what he is preparing us all for is a massive (they never stopped) and continued investment.
Our Chinese friends now have 97.8 GW of coal-fired power under construction, and another 151.8 GW at the planning stage. And so while some poor sap was penning Xi’s carefully crafted speech to the UN, Xi and his underlings were busy. Busy financing and building out what is likely to be the worlds most impressive global energy infrastructure.
Just this year plants accounting for some 17 GW began construction in China. To put this into context this is
more than the total amount approved during the previous two years. But they are not only investing in their backyard. Nope… according to a
Boston University database they have made more than $244 billion in energy investments abroad since 2000 with the bulk of that in recent years going into oil and gas.
(Yeah not wind, solar or renewable and recyclable Unicorn farts. Good 'ol O&G…)
A healthy $50 billion of has gone toward
dirty old coal!
They’ve done all of this, and will continue to do more, while paying lip service to “carbon emission reductions”. That our western leaders are as gullible as they are is a tragedy but simply ensures the west is going to end up being a source of houseboys for their Chinese overlords by the next decade.
As mentioned by the institute for energy research:
These Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal, according to tallies compiled by Urgewald, an environmental group based in Berlin. Many of the plants are in China, but by capacity, roughly a fifth of these new coal power stations are in other countries. In total there are 1,600 new coal-fired plants planned or under construction in 62 countries, according to Urgewald’s tally, which uses data from the Global Coal Plant Tracker portal. The new plants would expand the world’s coal-fired power capacity by 43 percent.
https://www.instituteforenergyresea...ement-china-india-continue-build-coal-plants/
So the question becomes, why?
Well, there's more to it than economics. Specifically, it's about the aforementioned
resource security:
As you can see, shipping coal from australia is nowhere near the gauntlet that has to be run from the persian gulf all the way to east asia - to get an oil tanker from saudi arabia to china you have to pass no fewer than 11 different countries, all of which hate you, and keep
several major shipping choke points/routes open all at once, and do so thousands upon thousands of KM from home.
Oil tankers are a lot of things, but nimble a 500,000 ton tanker is not:
And when they
have to pass through
multiple choke points that can be closed without even so much as needing a navy, straits just a couple of dozen KM wide where just a handful of beach-launched missile batteries (even 100 year old artillery guns have that kind of range) are enough to cut almost the entirety of your oil supply off literally over night:
You can see why china, and indeed, all of asia, is so desperate to get off oil dependence. The problem is that, as I showed before, renewable energy just doesn't work in asia - the climate simply doesn't give them enough wind/sunlight in order for renewables to be able to do the job, which means that coal is the next best option.
Even if that means coal dependence, coal's a hell of a lot more secure/easier to get from australia than oil is from the persian gulf.
The middle-east is also acutely aware of this fact and it is why Iran's Revolutionary Guard Corps troops on monday seized a south-korean oil tanker and forced the vessel to a nearby Iranian port in order to hopefully make the koreans release billions of dollars of Iranian assets frozen in South Korea under US sanctions:
Iran's seizure of a South Korean-flagged oil tanker comes after Tehran urged Seoul to release billions of dollars of Iranian assets frozen in South Korea under US sanctions.
In Other Non-OECD Asia, the main dynamic driving the region’s generation mix is a three-way competition between coal, natural gas, and renewable technologies. Without a unitary emissions policy in this region, natural gas and renewables are only
economically competitive with coal generation when their respective fuel prices and capital costs are low. Decreasing natural gas fuel prices by 50% by 2050 makes natural gas the primary fuel for electricity generation in the region. Conversely, raising natural gas fuel prices, particularly when combined with lowered renewable capital costs, raises the aggregate generation share of solar, wind, and hydro technologies to 61%, more than double the Comparative Reference case levels (29%). Solar resources are generally the most economically competitive and available renewable technology in this region. Unlike China, however, this region can develop economically attractive hydro resources to help balance intermittent generation produced from wind and solar technologies.
So in other words, even now, renewables
still aren't
economically competitive with oil, but it isn't
economics that's driving asia's energy policies, so we can expect endless subsidies for basically everything except oil (and obviously the more secure the energy type the more it will be favoured) until
some form of secure energy becomes
economically viable in asia, but simple geography (climate) means that that is still a
long way off.
It actually looks like it's going to be coal that's the "transition" energy production fuel between oil & renewables as whilst coal isn't great from a supply security perspective, it's still a hell of a lot more secure than oil.
It also explains why collective governments throughout asia (china especially) are throwing everything including the kitchen sink at electric car production as electric cars can indirectly run on the much more supply-secure coal whereas ICE cars cannot.
But even if we take the whole energy-security question out of it completely, they still have a major problem just producing enough energy in the first place even now, which I'll cover in the next post.