The latest spike in natural gas and electricity prices in China was caused by lower global LNG production and fast-growing energy demand as the Asian powerhouse was the first country to emerge from the Covid-19 pandemic, the International Energy Agency (IEA) said. But analysts are critical when it comes to Beijing’s ambitions to curb CO2 emissions as this would require massive green energy investment.
Coal is still king in China's energy mix so far, but things are about to change. Today, over 60% of the country’s electricity and heat generation is derived from coal-fired power stations. Natural gas demand has seen a brisk rise since 2015, largely thanks to strong policy support particularly in the electric power sector.
But China still relies heavily on imports, which met over 70% of its consumption of oil and 45% of gas in 2020. Hence, the latest rise in global oil and gas prices directly translates into soaring energy costs for China’s state-owned importers: CNPC, Sinopec and PetroChina.
Among the reasons for the spike in European gas prices are a strong economic rebound following a long and cold winter that drained stockpiles, tighter-than-expected gas supply, and other weather-related factors including lower-than-usual availability of wind energy in recent weeks, IEA analysts specified.
“Broader global gas market dynamics have also had an effect, including strong cold spells in East Asia and North America in the first quarter of this year followed by heat-waves in Asia and drought in various regions. Meanwhile, unplanned outages and delayed maintenance have cut into LNG production,” added the statement signed by Executive Director Fatih Birol. “Recent increases in global natural gas prices are the result of multiple factors, and it is inaccurate and misleading to lay the responsibility at the door of the clean-energy transition,” he argued.
Winter 2021-22: a ‘stress test’ for the system
However, the IEA’s latest statement on global LNG and gas price rises omits any hint that the anti-hydrocarbon and poor gas storage policies of most European Union governments and those of the UK government may have partially caused current shortages in natural gas supply. Still, the IEA head said he believes only that the coming winter would be a “stress test” for the system. “Going forward, the European gas market could well face further stress tests from unplanned outages and sharp cold spells, especially if they occur late in the winter,” said Birol.
China, meanwhile, is seen to have “a clear pathway” to build a more sustainable, secure and inclusive energy future even as it remained the world's largest carbon emitter, IEA analysts commented. “China's remarkable economic growth over the past four decades has lifted hundreds of millions of people out of poverty and made China a leader in many industries, but it is now accounting for one-third of global CO2 emissions,” the agency’s latest country report states.
Ambitious goals require massive investment
Today, China's emission of 33.3% of the global total compares with the less than 1%t of global emissions blamed on nations like France and the UK. Going forwards, China is aiming to reach a peak in its CO2 emissions before 2030 and carbon neutrality before 2060.
Though IEA analysts are convinced that “China has the means to achieve these goals and even accelerate its clean energy transition further, they caution that realizing these goals would mean Beijing would have to incentivize or partially fund a massive expansion of the use of green energy sources like solar, wind power and hydrogen. Major improvements in energy efficiency would also be required, as well as lower emissions from China’s existing stock of fossil-fuel power plants and industrial facilities.
“With its strong track record in clean energy technologies, China has the capabilities to accomplish an accelerated transition that would put its CO2 emissions into marked decline after 2025, falling to almost 20% below their current level by 2030,” IEA analysts concluded.