China sets 15% non-fossil energy consumption target by 2020

By Yu Yun Feng and Pearl Bantillo

SINGAPORE (ICIS)–China has set a 15% minimum target for the share of non-fossil energy to its overall consumption by 2020, while pledging to invest yuan (CNY) 2,500bn ($364bn) in the renewable energy sector, based on the country’s economic blueprint for the next five years.

The proposed investment underscores China’s goal of minimizing reliance on coal as its main energy source, as laid out in its 13th five-year plan (2016-2020), which was released on 5 January.

Natural gas is targeted to have a 10% share of China’s energy pie, while coal’s share to overall energy consumption should fall below 58% by the end of the decade, according to the blueprint.

China’s overall energy consumption will be capped at 5bn tonnes/year of standard coal in 2020, up from 4.3bn tonnes in 2015. This meant a smaller growth of 2.5% in average usage in the next five years compared with 3.6% in the 2011-2015 period.

By 2020, non-fossil fuels and natural gas will account for more than 68% of the total expected increase in energy consumption, NEA (National Energy Administration) deputy head Li Yangzhe had said at a press conference in early January.

China will have an installed hydropower capacity of 380m kilowatt (kW); wind power capacity exceeding 210m kW; solar power capacity of more than 110m kW; and geothermal heating supply of up to 42m tonnes of standard coal equivalent, based on China’s 13th Five-Year Development Plan for Renewable Energy released on 10 December 2016.

The plan further stated that energy intensity – the energy consumption per unit of GDP – would be cut by 15%, while carbon emissions per unit of GDP would drop by 18% from 2015 levels.

Over 2016-2020, carbon dioxide emission would be reduced by 1.4bn tonnes, sulfur dioxide emission would be reduced by 10m tonnes, and nitrogen oxide emission would be cut by 4.3m tonnes, Li said.

China, which ratified Paris Agreement on climate change in September 2016, will continue to pursue construction of coal-to-oil and coal-to-gas demonstration plants as it develops ways to utilize its abundant coal reserves in a cleaner way, while guaranteeing energy security.

The country, which is the world’s second-biggest economy and a major oil consumer, is a net importer of crude oil. Its total crude imports in 2016 stood at 381.0m tonnes.

By 2020, China aims to increase its primary energy production to about 4bn tonnes/year of standard coal equivalent, including 3.9bn tonnes of coal; 200m tonnes of crude; 220 billion cubic metres (bcm) of natural gas; and 750m tonnes of standard coal equivalent of non-fossil energy. The country’s installed power generation capacity will reach about 2bn kilowatts (KW) by 2020.

Energy consultancy firm Wood Mackenzie expects China’s domestic oil production to be in the range of 3.5m-3.6m bbl/day by 2020.

“We note that the oil and gas production targets have always been ‘expected/predictive’, whereas, for example, the targets on the share of renewables in total energy consumption are ‘mandatory’ targets, and hence an indication that they carry greater weight,” Wood Mackenzie consultant for upstream oil and gas Wang Yu Shuang said in a recent note.

Wang noted that in the new five-year plan drawn up by the Chinese government, there appears to be less emphasis in hitting its oil and gas production goals.

“We see continued strong growth in domestic gas production through to 2020 within China. But, we don’t see any large greenfield oil developments coming stream by 2020,” said Angus Rodger, research director for upstream oil and gas at Wood Mackenzie.

Rodger said that Wood Mackenzie is forecast a continued decline in China’s oil output given the maturity of the country’s main oilfields such as Daqing and Shengli.

“The main factor that would change this outlook is if current government strategy changed and Beijing sought to push the big three NOCs [National Oil Companies] into increasing/restarting production from marginal fields,” Rodger said.

($1 = CNY6.87)