China’s energy future: an interview with Ella Chou

China is investing in solar. Photo: Getty Images

Chi­na con­tin­ues to invest in solar, but it is dif­fi­cult to per­fect an ener­gy mix. Pho­to: Get­ty Images

Pre­vent­ing rad­i­cal cli­mate change pre­dom­i­nant­ly falls to the two biggest car­bon emit­ters, the Unit­ed States and Chi­na; Chi­na passed the U.S. in emis­sions in 2006, though remains far below the U.S. on a per cap­i­ta basis. New York City’s long term secu­ri­ty thus hinges on agree­ments between our two coun­tries. But if Chi­na achieves Amer­i­can lifestyles using fos­sil fuels – dupli­cat­ing the way the U.S. devel­oped in the 20th cen­tu­ry – emis­sions will far exceed the ‘tril­lion ton­ne’ mark regard­ed as the safe lim­it for green­house gas­es. The del­i­cate rela­tion­ship unfold­ing is well described in the cur­rent issue of Rolling Stone, “Chi­na, the Cli­mate and the Fate of the Plan­et.”

Ella Chou is a ris­ing expert on ener­gy in both the Chi­na and the U.S. She spoke with City Atlas about China’s ener­gy future, North Amer­i­can ener­gy inde­pen­dence, frack­ing, and the rela­tion­ship between Chi­na and the U.S. Chou is a Senior Research Assis­tant at The Brook­ings Insti­tu­tion, one of the old­est and most pres­ti­gious research orga­ni­za­tions in Wash­ing­ton, D.C. Our con­ver­sa­tion with Chou con­tin­ues a dis­cus­sion that began at the Asia Soci­ety, where Chou joined a pan­el on frack­ing in Chi­na.

Can you describe China’s cur­rent ener­gy sys­tem?

That’s a very big ques­tion. Coal makes up about 70% of China’s pri­ma­ry ener­gy con­sump­tion. Nat­u­ral gas accounts for only 4%, petro­le­um about 17% , and elec­tric­i­ty 9%. When we are look­ing at elec­tric­i­ty, though, we are see­ing the share of renew­ables grow­ing much, much faster. Wind ener­gy in 2013 pro­duced more megawatts than nuclear. Chi­na is push­ing very hard on nuclear as well. Right now the biggest chal­lenge they have is to reduce the coal mix of the entire pri­ma­ry ener­gy mix from 70% to 65% and to raise the per­cent­age of nat­u­ral gas from around 4.5% to 7% or may­be even 8%. Right now, our esti­ma­tion is that 8% of nat­u­ral gas would be very hard for Chi­na. That’s the biggest chal­lenge for them, that’s why you have seen a lot of the gas deals, such as the Chi­na-Rus­sian gas deal. You have seen a lot of action on frack­ing and a very ambi­tious tar­get for syn­the­sis gas. 

Speak­ing of nuclear ener­gy, one of American’s top cli­mate sci­en­tists, James Hansen, believes that Chi­na should accel­er­ate the use of nuclear pow­er to achieve CO2 reduc­tions. He pro­pos­es build­ing nuclear pow­er plants at a rapid rate to replace China’s coal pow­er. What do you think of Hansen’s plan?

Chi­na already has a very ambi­tious nuclear tar­get and they are def­i­nite­ly on that route right now. If you’re look­ing at the exist­ing nuclear pow­er plants built in 2014, they’re going to have 8.64 mil­lion kilo­watts of nuclear capac­i­ty just in 2014. In 2017, they’re going to get to 15 mil­lion kilo­watts. That’s a lot. They’re dou­bling their nuclear pow­er.

When you look at the Amer­i­can nuclear indus­try, they haven’t done much in the past 20 years. So com­pared with the West­ern world, Chi­na is push­ing very hard. China’s tar­get right now is ambi­tious enough, I just hope that they can car­ry it out in a safe and secure man­ner. 

You’re an expert on U.S.-China rela­tions. How to you approach the prob­lem of frack­ing and ener­gy from this angle? What is fracking’s role in the inter­na­tion­al rela­tions between Chi­na and US?

“Because Con­gress exempt­ed the oil and gas indus­tries from fed­er­al reg­u­la­tion in 2005, it’s a chal­lenge on the U.S. side to say, ‘You guys should do this or that.’”
In 2009, pres­i­dent Oba­ma and Hu Jing­tao signed an MOU (Mem­o­ran­dum of Under­stand­ing) on U.S. and Chi­na shale gas coop­er­a­tion. Since then, the State Depart­ment in the U.S. has been lead­ing a lot of the effort in terms of shale gas coop­er­a­tion. On the Chi­na side, you have the Nation­al Ener­gy Agen­cy, Min­istry of Resources, and NDRC (Nation­al Devel­op­ment and Reform Com­mis­sion) work­ing togeth­er with the U.S. Depart­ment of Ener­gy, USTDA, etc. on some tech­ni­cal work­shops, reg­u­la­to­ry work­shops, to try to raise the aware­ness about land and water issues. I think shale gas presents an oppor­tu­ni­ty for U.S.-China coop­er­a­tion. 

Dur­ing the frack­ing pan­el at the Asia Soci­ety, one of the pan­elists men­tioned that the U.S. lack of stan­dards and reg­u­la­tion has been export­ed to Chi­na togeth­er with its frack­ing tech­nol­o­gy. How do you think can the two sides coop­er­ate with each oth­er on both cor­po­rate and gov­ern­men­tal lev­el to min­i­mize the harm and enhance the effi­ca­cy? 

Because Con­gress exempt­ed the oil and gas indus­tries from fed­er­al reg­u­la­tion in 2005, it’s a chal­lenge on the U.S. side to say, “You guys should do this or that.” How­ev­er, the Bureau of Ener­gy and Resources in the State Depart­ment is still try­ing to get the reg­u­la­tors togeth­er with the Chi­ne­se to work on stan­dards and effi­cient devel­op­ment of shale gas. Because the U.S. has a decen­tral­ized gov­ern­ment, even though we don’t have the fed­er­al reg­u­la­tion, some states have their own rules and then they have some of the best prac­tices or rec­om­men­da­tions, so they can rec­om­mend to the Chi­na side some of the things that they can do to be more effi­cient. This effi­cien­cy per­spec­tive is more appeal­ing to Chi­na. It’s also in the inter­ests of the oil and gas com­pa­nies to use less water and to occu­py less land to reduce cost.

If you talk with the State Depart­ment, or the Depart­ment of Ener­gy offi­cials, they’re going to tell you that even though U.S. and Chi­na have engage­ment on the nation­al lev­el, the local Chi­ne­se gov­ern­ments have been a lit­tle reluc­tant and guard­ed about their coop­er­a­tion with U.S. On the U.S. gov­ern­ment side, they are still try­ing to fig­ure out the best way to engage with Chi­na on that issue. 

They’re doing some trade del­e­ga­tions right now as we speak. Nine del­e­gates from the Nation­al Ener­gy Admin­is­tra­tion from Chi­na are tour­ing Pitts­burgh, Dal­las, Hous­ton and DC with USTDA (Unit­ed States Trade and Devel­op­ment Agen­cy). They take a more busi­ness and com­mer­cial per­spec­tive because the USTDA’s mis­sion is to put the US com­pa­nies on a lev­el play­ing field in the inter­na­tion­al are­na.

How do you think the grow­ing envi­ron­men­tal­ism at the grass­roots lev­el can affect the polit­i­cal deci­sion-mak­ing process? 

They are actu­al­ly very far from the deci­sion-mak­ing process. The envi­ron­men­tal groups in Chi­na are doing a lot of great work, but they tend to focus on the issues that are more vis­i­ble: air pol­lu­tion, water pol­lu­tion, and food safe­ty. Their focus is not on methane leak­age or car­bon diox­ide because that’s hard to see. 

They can, how­ev­er, play a more impor­tant role in the future. The new­ly revised Envi­ron­men­tal Pro­tec­tion Law, which was revised after 25 years for the first time after its pro­mul­ga­tion, gives the­se civil soci­ety orga­ni­za­tions a stand­ing to ini­ti­ate pub­lic inter­est lit­i­ga­tion, so we’ll see how that plays out. In a lot of cas­es, even though they are allowed to bring a case to the court, the court will not accept it, or the court could still be biased because the court answers to the gov­ern­ment at the same lev­el. There’s a lim­it to what they can do.

Do you think frack­ing has been mis­rep­re­sent­ed by the mass media? 

I would say that it’s var­ied. I don’t think it is mis­rep­re­sent­ed in the U.S. because you see both sides of the debate. On the one hand, you have Josh Fox, the direc­tor of the Gasland movies, who is lead­ing the anti-frack­ing move­ment. And he is right, because, even though the envi­ron­men­tal dam­age of frack­ing is mod­er­ate com­pared with oth­er large-scale indus­tri­al move­ment, espe­cial­ly com­pared with syn­the­sis gas in Chi­na, for the local com­mu­ni­ties, the impact is very direct and sig­nif­i­cant. But on the oth­er hand, there are a lot of reports, espe­cial­ly on the com­mer­cial and busi­ness side, which ana­lyze the role of shale gas in bring­ing down the U.S. nat­u­ral gas prices, and large­ly con­tribute to what is going to be North Amer­i­can ener­gy inde­pen­dence.

That’s a huge deal. North Amer­i­can ener­gy inde­pen­dence can mean so much. The U.S. may revert the ban on crude oil export now. That’s almost unthink­able 30 years ago. The shale gas and oil abun­dance is real­ly lead­ing a rev­o­lu­tion and is mak­ing peo­ple rethink our secu­ri­ty strat­e­gy. If North Amer­i­ca is going to be ener­gy inde­pen­dent, do we still have to send ships to the Mid­dle East? Do we still have the respon­si­bil­i­ty to pro­tect all the­se sea lanes? Of course the answer is yes because the Unit­ed States is still tied to the glob­al oil mar­ket, but it just shows you that there are a lot of peo­ple trum­pet­ing the ben­e­fits of frack­ing. I don’t think the debate is one-sid­ed. I think there’s a very healthy debate here.

How about in Chi­na?

In Chi­na it’s very new and it’s bare­ly going on. When you actu­al­ly com­pare the num­bers, Chi­na only drilled a cou­ple hun­dred wells, where­as the U.S., they drill thou­sands every year. So it’s at a very dif­fer­ent scale. That’s why I think the media or even the intel­lec­tu­als there are just try­ing to fig­ure out exact­ly what’s going on, and what a good esti­mate of the reserve is. There isn’t even a very accu­rate esti­ma­tion of China’s shale gas reserve. Of course accord­ing to the EIA (U.S. Ener­gy Infor­ma­tion Admin­is­tra­tion), China’s shale gas reserve is num­ber one in the world. But USGS (U.S. Geo­log­i­cal Sur­vey) dis­agrees with the EIA’s esti­ma­tion, they think that EIA over­es­ti­mat­ed China’s shale poten­tial, and their method­ol­o­gy was incor­rect. So right now we don’t even know how much shale is out there and how much is recov­er­able. But with more com­pa­nies engag­ing in this field, they can make pro­gress on this front.

You’ve men­tioned some prob­lems that Chi­na has with frack­ing, what is the next step for the Chi­ne­se gov­ern­ment to address the­se issues?

They actu­al­ly just came out with a tech­ni­cal stan­dard for assess­ing shale gas. I think it’s real­ly impor­tant to roll out envi­ron­men­tal stan­dards or a guide­line, includ­ing water and land man­age­ment, waste­water treat­ment and trans­porta­tion, and methane leak­age mit­i­ga­tion. There’s also the infra­struc­ture issue: roads, pipeli­nes that are nec­es­sary for the devel­op­ment of shale gas. CNPC (Chi­na Nation­al Petro­le­um Cor­po­ra­tion) is build­ing the first shale gas pipeline from Changn­ing to Yun­nan and the first seg­ment of that is already fin­ished. It’s also very impor­tant to have trans­paren­cy, and full dis­clo­sure of the envi­ron­men­tal and social impacts of the­se projects. The local com­mu­ni­ties should be more involved, and if they were to be real­lo­cat­ed, they should be prop­er­ly com­pen­sat­ed. That has been a prob­lem with a lot of China’s large-scale projects, such as the Three Gorges Dam. I think the envi­ron­men­tal, infra­struc­ture and local com­mu­ni­ty issues should be addressed.

What ener­gy future do you think would be best for the Chi­ne­se peo­ple? 

(Laughs.) That’s a huge ques­tion. I’m a total envi­ron­men­tal­ist, so I am absolute­ly biased on this front. I will dou­ble down on renew­ables. Chi­na is invest­ing more than any oth­er coun­try in renew­ables, so I need to give cred­it where cred­it is due. Chi­na has very ambi­tious renew­able tar­gets. I hope that Chi­na some­day can achieve 50% renew­ables in the elec­tric­i­ty sec­tor. That would be great pro­gress. I hope that Chi­na can phase out all sub­si­dies, for fos­sil fuel and renew­ables, and levy a car­bon tax. This would put it on a tra­jec­to­ry to reach sig­nif­i­cant car­bon emis­sion reduc­tion. Right now we are see­ing a lot of antic­i­pa­tion of the 13th 5-year plan to see whether it’s pos­si­ble to have a car­bon emis­sions cap. That would be a very impor­tant step. I am root­ing for renew­ables, not big on shale gas. 

In your opin­ion, is it more impor­tant to change our ener­gy sup­ply or our ener­gy demand?

The first thing to change the ener­gy demand would be to take ener­gy effi­cien­cy mea­sures. I think ener­gy effi­cien­cy is def­i­nite­ly a pri­or­i­ty – we call it low hang­ing fruit. Let’s take your aver­age home as an exam­ple: if we are using elec­tric­i­ty inef­fi­cient­ly, like putting air con­di­tion­ers on when all the win­dows are open, you are gen­er­at­ing a lot of demand. The util­i­ties might have to build a new pow­er plant just to meet the demand col­lec­tive­ly gen­er­at­ed by the tens of thou­sands of homes they serve, but still the res­i­dents are going to com­plain when the pow­er goes out and say, “Damn util­i­ties, black out again.” It’s what you see in the sum­mer peak hours. If we can use ener­gy more effi­cient­ly, and our build­ings can meet effi­cien­cy stan­dards, and our sys­tem is more intel­li­gent, then we don’t even have to build new pow­er plants. We can just use our exist­ing pow­er plants to han­dle the demand and dis­patch pow­er to when and where need­ed. That would be a bet­ter way to do it. There’s also the issue of water usage in all the pow­er gen­er­a­tion. Chi­na just doesn’t have that much water. 

In the frack­ing pan­el, one of the pan­elists said that China’s solar pan­els have the most com­pet­i­tive prices in the glob­al mar­ket but most of them end up on Amer­i­can roofs. What do you think of this? 

This trend has been grad­u­al­ly revers­ing, as the anti-dump­ing tar­iffs increased the price of Chi­ne­se solar pan­els. The wave of WTO cas­es made Chi­na com­mit to expand­ing their domes­tic mar­ket, which I think is very impor­tant. They com­mit­ted to some very aggres­sive dis­trib­u­tive gen­er­a­tion tar­gets in Chi­na. Orig­i­nal­ly the tar­get for 2014 was 21 gigawatt, which now has been revised to 35 gigawatt pho­to­voltaics by 2015. I think it makes Chi­na more com­pet­i­tive and it also ben­e­fits the envi­ron­ment and the peo­ple.

What do you think pre­vents fur­ther devel­op­ment of renew­able ener­gy such as solar and wind in Chi­na? 

We have seen the reverse of the nation­al “Gold­en Sun” solar sub­si­dies project that led to an indus­tri­al con­sol­i­da­tion where lots of com­pa­nies went bank­rupt a cou­ple of years ago. I think for pri­vate com­pa­nies, they real­ly need pol­i­cy con­sis­ten­cy. For solar to flour­ish, they would need to tack­le the financ­ing issue. Uncer­tain­ties in return and inex­pe­ri­ence in the renew­able sec­tor make banks very reluc­tant to lend to solar com­pa­nies.

For wind, it is a lit­tle bit dif­fer­ent. Wind in Chi­na has been gov­ern­ment dri­ven where­as the solar indus­try has been more pri­vate com­pa­ny dri­ven. In the pre­vi­ous years we have been hear­ing a lot about wind over­ca­pac­i­ty, and wind projects that are not con­nect­ed to the grid. Most of them are con­nect­ed to the grid right now, but this high­lights the need for inte­grat­ed sys­tem plan­ning. And the oth­er thing is the fos­sil fuel sub­si­dies. That needs to stop. Even if they can­cel all the renew­able sub­si­dies, that’s fine.

But they need to can­cel all the fos­sil fuel sub­si­dies so that every kind of ener­gy is on a lev­el-play­ing field and they also need to take into con­sid­er­a­tion the social cost of car­bon. Put a price on car­bon, or do car­bon trad­ing. But if the cost of car­bon is not cor­rect­ly account­ed for, the mar­ket isn’t able to do its job.

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About Jingwen Tong

Jingwen (Clare) Tong joined the Blavatnik School of Government at Oxford with a B.A. in English Language and Literature from Beijing Foreign Studies University. When she was a visiting student at Barnard College of Columbia University in 2014, she worked for City Atlas as a reporter, featuring the New Yorkers' contributions of leading a sustainable city. Following her return to Beijing, Ms. Tong set up Beijing City Atlas, a parallel environmental online publication which focuses on educating the Chinese public by delivering bilingual articles about energy efficiency and sustainable development. In the future, Ms. Tong aspires to build on her MPP experience at Oxford to create a transnational network for a more sustainable China, in terms of both the environment and gender equality.