Cleaning up Its Act: How China Can Convert to More Environmentally Friendly EnergyPublished: May 14, 2008 in Knowledge@Wharton
If China doesn't take steps to prevent it, a big black cloud may soon engulf its economic boom. The country is growing at a torrid rate, but pollution from its hard-chugging industrial engine is expanding even faster, according to energy experts at the recent 2008 Wharton China Business Conference.
"China has passed the U.S. as the world's largest emitter of carbon dioxide," the main contributor to global warming, said Mike McElwrath, chief executive of Houston-based Far East Energy and a former assistant U.S. energy secretary, noting that "20 of the 30 most polluted cities in the world are in China. One third of China experienced acid rain last year. I once was one of those people who questioned the science behind global warming. But as China and India emerge economically, if the current science is anywhere near correct, we'll have quite a problem."
Pollution aside, energy presents a hefty challenge for China. Simply put, the country doesn't have enough of it, said McElwrath and other experts who came to Wharton. "Twenty-one of 34 provinces experienced electricity shortages in 2004," he said. "China will need to add a total of 1,300 additional gigawatts by 2025." According to Bloomberg News, China currently has about 800 gigawatts of electric capacity. "If coal provides 70% to 80% of that power, what this implies for air quality and global warming is surreal," McElwrath warned.
The Dirtiest of the Fossil Fuels
China now derives about three-fourths of its electricity from burning coal, and it has rapidly constructed new coal-fired plants to keep pace with burgeoning power demand. In 2006, the country "brought online about as much coal-power capacity each week as the United States and India together did over the entire year," according to the Worldwatch Institute, a nonprofit research group specializing in environmental issues. Put another way, China added the equivalent of two large coal-fired plants a week.
Coal is the dirtiest of the three major fossil fuels, emitting more carbon dioxide and other pollutants when burned than oil or natural gas. China lacks substantial oil and gas reserves, at least in light of its enormous appetite for energy. "The country is already second in the world in oil consumption," behind the U.S., McElwrath pointed out. "Its consumption grew at 5.5% last year, and oil demand will continue to grow rapidly."
But for now, it's mainly smoky, sooty coal fires that are clouding China's economic and environmental future. "With annual growth of 9% to 10%, coal utilization will soon approach 10 billion tons a year," McElwrath predicted. The country now consumes about 2.5 billion tons a year. "If China maintains the energy supply it needs, using coal, it will be unbearable environmentally. If it doesn't maintain that supply, it will see a drop in economic growth."
Although China has substantial coal supplies of its own -- it sits on the world's third largest reserves, behind the United States and Russia -- its demand has risen so fast that, in 2007, it became a net importer for the first time, according to Bloomberg. Moreover, coal consumption will probably continue to increase for at least the next two decades, McElwrath said. China hasn't dialed back its ambitious economic growth goals, and it has a population of 1.3 billion people. At present, no other source of energy can satisfy its needs.
Chinese leaders have said that they aim to decrease energy consumption even as their country's boom continues. McElwrath doubts that they can reach that goal. "What's the feasibility of growing GDP at [an average of] 7.5% a year and decreasing energy consumption? Unlikely. It's difficult for China to fuel its growth and demand for energy as it is, much less without increasing pollution. Continuing 7.5% annual growth will likely entail a 300% increase in coal utilization."
That would create an environmental nightmare, darkening the skies of even more Chinese cities and poisoning the country's already polluted urban air. "There's no way that this is survivable for China environmentally," McElwrath noted. But that nightmare may hold the key to a cleaner future.
Chinese leaders, while they have so far focused on increasing economic growth and pulling their country up from poverty, acknowledge the health dangers of pollution and have begun to consider ways of bringing cleaner energy. One promising method is capturing the pollutants released when coal burns. Earlier this year, research institutes in China and Australia teamed up to build a pilot plant in China to test such a technology. The Australian group said that the method had the potential to reduce carbon emissions from coal-burning plants by 85%.
Another technology under consideration is coal gasification, which transforms coal into a synthetic fuel, known as syngas, which burns as cleanly as natural gas. "Coal gasification has the potential to squelch power plants' emission of soot and smog, and also to decrease China's growing dependence on imported oil," according to a report from the Massachusetts Institute of Technology. "It could even help control emissions of carbon dioxide, which is more easily captured from syngas plants than from conventional coal-fired plants."
McElwrath, for his part, argued that the only realistic long-term solution to China's energy needs and polluted skies is to ditch coal. The best alternative: "Nuclear, nuclear, nuclear: The only thing that will legitimately replace coal will be for China to aggressively build nuclear plants." No other means of generation can deliver the massive amount of power that China needs soon enough, he stated.
That's not to say that renewable sources like hydroelectricity, wind power, solar and biofuels won't have a place in China's energy portfolio, he added. Chinese leaders have laid out ambitious plans for rolling out renewable energy. Their goal is to derive 15% of their electricity from renewable sources by 2020. "Hydro would be 80% of that," McElwrath said. Currently, China gets less than 10% of its electricity from renewables, and most of that comes from hydroelectric plants.
In at least one renewable field -- solar-thermal water-heating -- China already has made signficant progress, according to Andy Goldstein, China-based market development manager for Apricus Solar. "China accounts for 70% of the world's solar-thermal market," he noted, adding that "90% of the hot water produced at Beijing Olympic sites will be with solar-thermal." Unlike conventional systems, solar-thermal ones use glass tubes, instead of silicon panels, to collect sunlight. Solar-thermal systems have existed for about 20 years, but until recently, their tubes cost more to manufacture than the more common slabs of silicon. Lately, however, technological advances have made them cheaper. Mounted on a roof, one of the systems looks vaguely like a giant vibraphone. Apricus makes its solar collectors in Nanjing, China.
The traditional solar sector is also growing smartly in China -- but notas a major source of electricity. Instead, it's becoming one of the many industries for which China is a key manufacturer. "China is one of the largest producers of solar cells for export," said Lou Schwartz, publisher of the China Renewable Energy and Sustainable Development Report. "At least eight Chinese solar companies have gone public." Among them are SunTech, which listed its shares on Nasdaq in 2005. It's the world's third-largest maker of solar cells.
Biofuels may also offer a cleaner future for China, said Frank Zhang, a lawyer in the Beijing office of Dewey & LeBoeuf. As a vast country with a large agricultural sector, China can easily grow the crops that provide the "feedstocks" for biofuel production. These include grains, sugar cane, beets and various grasses and even trees. A feedstock that China will likely shun is corn, Zhang noted. Chinese consumers fear that food prices are rising on account of greater production of corn-based ethanol. "China is considering not encouraging companies to make corn-based ethanol," Zhang said. "In 2006, the government suspended approval of new investments in grain-based ethanol projects." (Corn-based ethanol has also stirred controversy in the United States, where critics say that it's contributing to higher food prices and that its production requires more oil than is saved by its use as a fuel.)
On top of the rest of China's energy challenges, the infrastructure that supports the power industry is straining under the demands put on it. The country, for example, hardly has enough railroad capacity to transport all of the coal that its power plants and factories burn. What it does have can be rickety. "The snow disaster during the Chinese New Year showed the fragility of the system," said Schwartz. "The snow disrupted the system so much that key industries were ordered to shut down." In January, heavy snow and ice storms paralyzed the country's transportation network and caused widespread power outages. News reports from China called it the worst winter weather in 50 years.
All in all, energy -- the supply, the sources and the resulting pollutants -- may soon stymie Chinese economic progress unless officials there hammer out a practical national energy policy, McElwrath said. "My message to China is, 'Get real. Move rapidly to the cleaner end of the fossil fuel spectrum. Coal will continue to be in use for awhile, but nuclear has to come into play, and the country must conserve as much as they can. China will also need realistic application of renewables and strict enforcement of environmental laws."
What's really needed "in China and in the rest of the world," McElwrath said, "is a realistic approach to energy policy. There are no magic solutions."