China could decarbonize faster with cheaper Russian gas
As Europe increasingly eschews Russian gas and oil, China stands to benefit both from cheaper Russian gas imports and as a leading supplier of renewable energy, battery storage systems and other technologies Europe needs to kick its energy transition into high gear, analysts say.
However, it is essential to monitor whether China is using Russian gas to further accelerate the decarbonization of its own electricity sector. So far, the country has moved little away from coal, building more new coal-fired power plants in 2021 than in 2016.
China’s energy transition could ultimately be facilitated by cheaper gas imports that would help drive manufacturing away from coal-fired power, particularly the manufacturing used to make the products needed to decarbonize. This could shield them from the full brunt of future carbon border taxes, such as the EU’s proposed Carbon Border Adjustment Mechanism (CBAM).
However, locking ourselves into a longer-term reliance on cheap hydrocarbons has the potential to delay the peak of China’s greenhouse gas emissions in 2030 and pave the way to zero. net by 2060 a longer and slower lag down from this peak.
“There are a lot of indications that China wants to accelerate its transition,” said Gavin Thompson, vice president of energy for Asia-Pacific at research consultancy Wood Mackenzie. Energy monitor. “The question is when will that happen, and for policy makers this is really a pivotal moment.”
In early February, just before the Ukraine crisis, China and Russia agreed a 30-year gas supply deal through a new pipeline pumping ten billion cubic meters a year from Siberia to the Far East. Russian and as far as northwest China. , with the project expected to begin supplying gas in about three years.
This pipeline is not currently connected to the same pipelines that supply gas to Europe, so Russia could not play Europe against China when it comes to price negotiations. This gives China an advantage in negotiations for cheaper gas prices for the next decade if tensions between Europe and Russia persist.
“Russia’s isolation from Europe will make it easier for China to obtain favorable conditions for its own energy needs,” said Filip Medunic, lead coordinator of the Strengthening Europe Against economic coercion at the European Council on Foreign Relations.
“Europe is in the process of fundamentally rethinking its energy policy,” he says. “China is most likely monitoring developments closely.”
While China has huge energy demand and is currently supplied by a gas pipeline from Gazprom’s Power Siberia pipeline, the newly agreed second gas pipeline is still in the planning stages, Medunic says, and does not tap into the same gas resources as China. ‘Europe. While the new pipeline could eventually connect to Russia’s internal gas networks that supply Europe, any connection would be a decade or more away.
“A major redirection of flows of the magnitude of consumption from Europe seems technically unlikely in the short to medium term,” he says.
China has already embarked on a “gas rush” since 2015 to help decarbonise industry and reduce coal consumption, partly through the development of domestic shale gas, and partly through new imports. gas pipelines from Russia and increased LNG import capacity, Michael Bradshaw, professor of global energy sciences at Warwick Business School, says Energy monitor.
While cheaper gas may be in sight for China, LNG supplies could tighten.
“It is true that if events in Europe increase gas prices and pull LNG strongly, then it will be more expensive for China to secure LNG, if it needs it,” Bradshaw said. “But it also encourages the expansion of pipeline imports from Russia as an alternative to LNG, for which they must compete, and some of which are vulnerable to maritime choke points such as the Straits of Hormuz and Malacca.”
walk on gas
“The more gas China has, the faster it can do it [low-carbon] transition,” says Tom Marzec-Manser, head of gas analysis at market analyst ICIS. “If the transition and Europe’s rejection of Russian gas play a role in China’s gas price position, it puts China in a negotiating position and they can buy that gas relatively cheaply, which will help energy transition in China.
In addition to shifting more manufacturing to gas and moving away from coal-fired power, cheaper gas could also ease the transition to hydrogen, according to Thompson.
“China will not only have to do what it is doing now, which is to decarbonize its power sector through renewables and expand the use of batteries, but it will also have to invest aggressively in hydrogen – low-carbon hydrogen – to decarbonize the hardest-to-reduce sectors,” he says. “This includes blending hydrogen and natural gas [for heating]co-fuel hydrogen in natural gas-fired power plants and co-fuel ammonia in coal-fired power plants.
Thompson sees additional potential with China investing in both blue and green hydrogen, as well as carbon capture technologies to capture hydrogen through coal gasification; much of this could be assisted by gas in the transition.
“The alternative to [accelerated decarbonisation] does not happen and that China continues to be heavily dependent on hydrocarbons – continues to import large volumes of hydrocarbons – is not a pleasant picture,” he says. “He sees emissions continuing to rise, peaking around 2030 but only slowly declining thereafter.”
The challenges Europe faces if it completely cuts off Russian energy supplies are great, like shifting into sixth gear in a five-speed car, Marzec-Manser believes.
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“This [an accelerated energy transition] was already a daunting task,” he says. This means that if Europe wants to deploy more wind turbines, solar panels and battery storage technologies, it will have to build on the already existing dominance of Chinese manufacturing for these technologies, he says.
With China producing around 70% of all solar panels, around 50% of wind turbines and around 85% of lithium-ion batteries, it stands to reason that Europe could rely heavily on China in the short term to fill the gaps. of a change of direction. Russian energy.
Europe will also likely seek to increase its own production of these products as part of the promised green investments, so for China to be competitive it will have to produce them with a smaller carbon footprint or come up against CBAM.
“[China] helps produce what you need to decarbonize,” Thompson said. “The challenge for Europe is that if all your economic benefits go to China, your green deals are less attractive because you’re not creating the jobs and investment opportunities politicians are betting on.”