Transcript energy and institution and in and china

Coal Mining in China
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Starting from early 2000s, major SOEs went through rapid consolidation and
expansion, small TVE mines were shut down for economic, safety and
environmental reasons.
Recently a large coal deposit was discovered in Inner Mongolia, enough for
70 years of total coal consumption at current levels.
Currently there is a bottleneck in terms of coal-preparation facilities. These
plants wash impurities like dirt and debris off raw coal; separate them
according to size and density; and standardize them. Treated coal are less
polluting, easier to transport and more energy efficient.
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Technologies are mature, all that is need are capital and policies.
Facing increase policy restrain over coal exports. Government slapped a
huge export tax in 2006. Also no longer eligible for VAT rebates compare to
other exports → encourage indirect export of coal →hidden in energy
intensive products that receives VAT rebates.
Coal-to-electricity generation in China
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Average efficiency around 32% in 2005 , on track to reach 40% in 2030
(technology to mature, old plants to retire and standards to be set)
China's total installed capacity is growing at 10~15% per year. In 2007, 85%
of total 720 GW was from fossil-fire plants. Reliance on coal-fire plants will
continue to increase in the short term (90 of 105GW new capacity last year).
Price of electricity is heavily regulated in China, as inflation is a highly
political sensitive subject. Since coal prices are free floating, recent spike in
world resources price caused many generators to shut down, causing
blackouts. (refer to the NYT article I posted)
Coal demand in China Today
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Coal demand could be divided into electricity generation and direct-use
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Manufacturing and Residential uses consume most electricity generated.
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Cement, chemicals and Steel-making use coal directly.
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Electricity and direct-use accounts for 85% of total coal demand. As
China continue to modernize and urbanize, demands for fertilizers, steel
and cements will increase proportionately.
However, in the short term, the government is trying to avoid an assets
bubble, electricity use for steel and construction will be restrained.
In the long run (ie. After transitioning into a developed economy), China will
follow the Environmental Kuznet Curve and become less energy intensive
and polluting, as political pressure for environmental control grows; its
economy become more service-based, and technologies/institution matures.
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Percent of total electricity from coal to drop from 85 to 70% in 20 years.
Coal Imports in China
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Transporting Coal is relatively expensive. China already the largest producer
in the world, why import from far away countries like Columbia? (Although
China mostly imported from Russia, Vietnam, Australia and Indonesia)
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1. China recently appreciated. (From 1 USD to 8 RMB to now 6.4 RMB)
Imports are now cheaper. (ie. Chinese exports now more expensive)
2. Price differential exists internally, sometimes it's cheaper for coastal
provinces like Guangzhou to import from Indonesia than to get it from
Shanxi. (Since June 07, consistent price differential of $5-15 USD per
metric tonne – Qinhuandao vs Indonesian prices)
3. Price controls creates excess demand for coal. Coal users must look
elsewhere for “unregulated coal”.
Problems:
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1. Coal plants are designed to burn local coals of specific composition.
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2. Import taxes, extra international transaction and transportation costs.
Other trends in the coal industry
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Rapid consolidation as major SOEs gobble up smaller private mines; also
going through rapid capitalization, safety regulation and automation, as
companies go public for more investment and market supervision.
Rapid expansion of the Coalbed Methane (CBM) and Coal Mine Methane
(CMM) industry. CBM and CMM are natural highly combustible byproducts of
coal mining, would lead to explosion if not properly dispensed. Production
exponentially increased from 0.1 bcm in 2006 to 3bcm in 2010.
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USA and Canada already have large production, technology transfer will
be a factor. China recently dropped import tariffs for such capital goods.
In ascending order of geological depth: CBM/CMM < Conventional gas
(associated or non-associated) < Tight sand gas < Shale gas
Extraction opportunity cost virtually zero, but delivery and storage costs
could be considerable. Production will depend on energy price parity.
(ie. How much other energy sources such as oil and coal are priced)
Cleaner Coal in China - Technologies
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Coal gasification and liquefaction (most important, highest R&D)
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Convert low rank coal into hydrogen gas or liquified hydrocarbon.
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Limit the release of CO2 and other pollutant at production, not consumption.
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Open possibilities to other technologies mentioned below.
Carbon capture and storage technologies
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Heavily constrained by technological uncertainty and high costs, not projected to
see mainstream application before 2030.
Sulfur and Nitrogen Oxides capture and elimination:
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Not yet commercialized in any part of the world, adds additional 100% to
generation costs.
Flue-Gas Desulfurization: reaching 95% install rate, strong policy and applicable.
Selected Catalytic Reduction: For Nitrogen oxides, currently commercially
prohibitive. No serious policy initiatives.
Energy-conversion efficiency
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Now 32% on average. Newer plants with 43%.
Coal-washing – medium heavy vortex commercialize → more efficient burning.
Government Policies – coal and electricity
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Policy Goals, pertaining to the 12th 5-year plan (2011-2016)
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Continue consolidation within coal mining industry.
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Tighten safety and environmental regulations, pragmatically.
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Alleviate transportation and treatment bottlenecks
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Push and Pull incentives to move away from coal by developing a
renewable energy manufacturing and production industry. (part of a
larger national strategy → energy security, economic restructuring)
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Harmonize coal and electricity pricing
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Smart grid → intelligently incentivized demand pattern.
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Push for higher energy efficiency, pollutant capture and storage systems
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Use electricity supply as a political and economic tool → whatever
industry need “cooling” → limit its energy supply and increase price
Introduce foreign technologies, capital, institutional oversight and
experiences.
Questions and Discussion
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Compare US's energy profile with China's, how much of the differences
between the two could be explained by endowment? By their respective
economic structures? By policies and historical reasons?
Why is there such a nice division of labor between coal, oil and gas in terms
of the functions they perform in the economy? How much of that could be
explained by their chemical properties? By economics? By geography?
Do you support developing clean coal technologies? Over solar/wind/nuclear
technologies? From the environmental standpoint? From economics?
Do you think the government has a role in shaping the country's energy
profile? Like how much foreign oil it consumes; how much nuclear plants will
be built each year; how much subsidies will be given to new clean tech
Administration and Enrollment
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After class, please come forward and ask for the instructor control code if
you have not already enrolled yet.
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