Last week, the Center on Global Energy Policy launched its new US-China Energy and Climate Program in Beijing with two workshops, one on the Chinese solar sector and the other on Chinese medium to long-term oil demand. In addition, we held the inaugural meeting of our US-China Program Advisory Board. At the Advisory Board meeting, Honorary Chair Zhang Guobao, former Administrator of the Chinese National Energy Administration, delivered keynote remarks in which he shared his views about how China’s energy sector is changing and the outlook for Chinese coal, oil and renewables. He offered many interesting observations, including that, in his view, "China’s coal consumption has already peaked,” and the need for China to participate in international energy fora like the International Energy Agency in order for them to maintain their “vigor.” As Zhang says in his remarks, he rarely speaks publicly any longer, so we thought his remarks might be of interest to a broader audience. We hope you find them interesting.
former Administrator, Chinese National Energy Administration
US-China Program Advisory Board
Center on Global Energy Policy
June 30, 2016
Respected Professor David Sandalow, dear guests,
It is my honor to attend the inaugural meeting of the US-China Program Advisory Board at Columbia University’s Center on Global Energy Policy.
David is an old friend of mine. When I was serving as director of the National Energy Administration, David was undersecretary of energy at DOE. We had good cooperation, though we sometimes argued. He has worked to promote cooperation between the United States and China. He called me “a tough negotiator,” yet I think I’m actually not.
After David left DOE for Columbia University, I’ve followed his activities closely. As a matter of fact, I get e-mails from the Center on Global Energy Policy at Columbia University almost every day, so I know a bit about his work there. The center has been rather active. Its research has been insightful and relevant to the reality of the energy sector. It has invited many well-known government officials and corporate leaders around the world for speeches. I was there once too, and while walking in the hallway, I noticed many familiar faces on the posters.
There are numerous research institutions around the world, as many as the hairs on a cow. However, much of their research work lacks insight, objectivity and relevance to real problems. Most of them are just echoing others’ voices. This is prevalent among research institutions. Rarely do we see institutions conducting independent research from their creative and unique perspective. The Center on Global Energy Policy is one such institution—that’s why I gladly accepted David’s invitation to serve as honorary chair for this program.
Regardless of how fast the world changes and technologies improve, humankind cannot survive without air, water, food and energy. In this way, the energy industry will remain relevant to humankind for all time. In the past few years, with global economy and energy demand growth slowing and energy supply increasing, the energy market went slack. Price dropped, and investment decreased. The oil price dropped by roughly half. Such changes have been the hot topic in the energy sector for the past few years. However, the demand and supply of oil are witnessing changes lately, and the price is going up again. Although it does take some time for the current stock to be released, we can predict an increase in oil price next year. Originally, I was going to forecast a price increase in the second half of this year, but I thought it would be good to be conservative. When analyzing price trends, the two major variations are still demand and supply. Financial markets and geopolitics play significant roles as well; for example, the recent Brexit led to an increase in oil price.
The rapid development of new forms of energy is a highlight of this era, drawing high levels of attention across the world, as energy consumption contributes to greenhouse gas emissions and climate change. Humankind should endeavor to promote renewable energy development to address climate challenges. From a long-term perspective, renewable energy will inevitably replace fossil fuels, yet in the near term, fossil fuels still play a necessary role, especially to air transportation. I’ve seen new energy airplanes, such as those fueled by solar or batteries, yet they are usually very small. To fuel large passenger planes and vehicles used in war, fossil energy is still needed. In general, fossil fuel will still account for a significant part of global energy mix and will still play an important role for a rather long time to come.
China has become the largest energy producer and consumer, importing as much oil as the United States—roughly seven million barrels a day. As a major stakeholder in the energy arena, it plays a critical role. Without China’s participation, energy-related international affairs would not be as representative. International governance on energy is another interesting topic for studies and research. Although IEA’s new secretary general pays attention to the role of China, the institution as a whole represents mostly oil-importing developed countries—a “club for the rich.” Without further reform, the IEA will lose its vigor.
With its economy slowing down, China’s energy demand growth is also decreasing. The time of 8–9 percent annual growth rate is over. The growth of energy demand in China last year and the first half of this year was very small. The price of coal dropped. So did electricity demand. In the past few decades, China’s power sector focused on meeting the surging demand. Yet in recent years, the focus has become upgrading its energy mix based on technology innovation. However, some investors and policymakers haven’t changed their mentality yet, still initiating and building more coal plants than necessary.
Regarding the peak of coal consumption, experts first forecasted it happening in 2030 and then in 2020. However, in my opinion, China’s coal consumption has already peaked. For energy reform and policy implementation, different stakeholders have different expectations and demands. Where you sit shapes what you think. Research institutions should avoid getting caught in any biased perspectives and try to remain objective in their analysis.
China has achieved very rapid renewable energy development. In terms of technology innovation, China is already a world leader in certain areas, such as coal generation, transmission and transformers. The world, especially the developed countries, should upgrade its impression on China’s energy technology. I’ve seen coal plants in the United States—for example, a few in Indiana. The units I saw were rather small with outdated technologies.
The latest news is Brexit, incurring quite different opinions and heated discussions. In my view, this shows the resurgence of trade protectionism. Globalization—a notion that developed countries used to promote with enthusiasm—seems to have encountered problems. This is also a topic worth the attention of energy researchers.
Of course, there are many topics relevant to energy research. I rarely make appearances in public and talk about energy or economics now. I’m grateful to Mr. David Sandalow, who invited me to speak on these topics and share my humble opinions. They might be controversial—for example, on the timing of China’s coal consumption peak. I welcome comments as well as corrections.
Note: Original delivered in Chinese. Translation by Ding Jianhua.