Based on my research and the annual Canada-China Energy & Environment Forum I have organized since 2004, eight specific factors explain China’s renewed interests in investing in the Canadian energy sector.

First, the Harper Conservative government changed its hardline policies toward China from early 2009 onward, and repeatedly assured Beijing that Canada welcomes Chinese investment. Such a policy shift is significant since China does not like to do business with politically unfriendly countries, be they democracies or dictatorships. There is a clear, well-documented correlation between Canada’s overall relations with China and the levels of Chinese investment in Canada: Chinese firms did not invest in the Canadian energy sector after the newly elected Conservatives removed China from its foreign-policy priority list. But since late 2009, Chinese money has flowed into Canada with the resumption of Canada-China summit diplomacy and an improved overall political relationship.

Second, the North American stock market has been low since the 2008 economic crisis, presenting buying opportunities for cash-rich Chinese firms and selling pressures for cash-strapped Canadian companies. Take Sinopec’s $2.2-billion purchase of Daylight Energy, the first 100% takeover of a North American energy firm by a Chinese oil company. The offer was $10.08 per share, more than double Daylight’s closing price of $4.59 prior to the announcement. While Daylight shareholders are happy with the generous offer, Sinopec looks for future growth beyond the total it put down. Another case is the nearly bankrupt Opti Canada Ltd., which was bought out by the third-largest Chinese energy company, China National Offshore Oil Corp. Opti was financially bailed out while CNOOC entered a joint-venture arrangement with Nexen Energy to keep the Long Lake project going.

See also, “China in Canada, part 2: Four misconceptions about China.”

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Post tags: Canada, energy demand, overseas investment
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Construction slowed following the tsunami, to allow for design adjustments and “stricter construction requirement for endurance concerns”, the Xinhua news agency said, citing remarks by Wang Binghua, board chairman of the State Nuclear Power Technology Corporation (SNPTC) on Saturday.

The tsunami badly damaged reactors in Japan and led to questions over the safety of China’s ambitious nuclear plans. China plans to start building new capacity almost equal to Japan’s entire nuclear power sector by 2015, to reduce its dependence on coal.

Wang said an optimized construction schedule would allow the No.1 unit of the Sanmen nuclear power plant, in east China’s Zhejiang province to begin operation in 2013.

The AP1000, a water pressurized reactor, began construction in 2009, and it is the world’s first reactor that was built according to the US-based company Westinghouse’s design. The Times of India adds:

Wang also attributed the delays to Westinghouse’s design adjustments during construction and a stricter construction requirement for endurance concerns.

Simultaneously, China has rolled out its advanced 1,000-megawatt pressurised water nuclear power reactor, ACPR-1000 which could allow it to export technology to other countries, including Pakistan, without the constraints of Intellectual Property Rights (IPR) issues.

The reactor was “independently” developed by China Guangdong Nuclear Power Corporation, with full IPR and made its debut at the 13th China Hi-Tech Fair in southern city of Shenzhen, state-run People’s Daily reported recently.

China currently has 13 nuclear power plants with varied capacities and constructing 27 others, mostly with 1000mw capacity, made with US, French and Japanese technologies.

See also China may approve nuclear project after revising saftey reviews.

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Post tags: carbon emissions, energy demand, nuclear, nuclear energy
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The 2011-2015 nuclear safety plan, which covers rules from reactors to uranium mining, is a prelude to China’s widely anticipated nuclear development plan, which is currently being drafted.

The global nuclear industry is eager to see whether Beijing will adjust its 2020 nuclear capacity targets.

China originally planned to increase its nuclear capacity to over 80 gigawatts by 2020, up from 10.9 gigawatts at the end 2010, but fears about safety standards in the wake of Japan’s nuclear accident forced Beijing to revise the plans.

Beijing has since launched a nationwide inspection of all nuclear sites, including reactors in operation and those under construction, and is drawing up new industry guidelines.

While plans resume, the Ministry of Environmental Protection claims that there will be new safety regulations and other minor changes in the new draft that will be submitted for approval. Business Week adds:

The environmental protection ministry said in a statement on its website Dec. 12 that the new nuclear power safety regulation is ready and a draft would be submitted to the State Council after minor adjustments. The regulation outlines rules and goals for nuclear safety by 2020, the ministry said.

“The central government has its own pace to process the matter,” said Steven Lau, first deputy general manager of Daya Bay Nuclear Power Operations and Management Co. “The new safety standards will be in place for decades to come, so it’s worth taking a longer time to figure everything out.”

China will limit the number of reactors to be built on the coast, the State Oceanic Administration said on April 7. The country, constructing more reactors than any other nation, has at least 14 atomic units in operation, according to data from the World Nuclear Association.

China’s National Nuclear Safety Administration, a department of the environmental protection ministry, will increase the strength of its staff, including inspectors, to more than 1,000 from about 300. The U.S. Nuclear Regulatory Commission has almost 4,000 people overseeing 104 reactors, according to its website.

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Post tags: carbon emissions, energy demand, nuclear, nuclear energy
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In China, where fully half the world’s new buildings are erected each year, the reason the government is interested in squeezing energy demand is simple. It’s not just altruism or global ecological goodwill. As China continues to urbanize at a breakneck pace, moving a projected 350 million people from rural areas into cities over the next 20 years and erecting the floor-space equivalent of two New York Cities every year, its energy demand is rising worryingly quickly — up 12 percent from just last year. Feeding that demand is not easy, and many cities in China continue to experience rolling brownouts (the situation was exacerbated during this summer’s drought, when diminished river flows shrunk the available energy from hydropower).

Beijing knows there’s no silver bullet. That’s why it’s investing heavily in both dirty coal and clean energy and, increasingly, in energy efficiency. The operation of buildings in China — which includes heating, air-conditioning, and electricity — accounts for 25 to 27 percent of the country’s annual energy consumption, according to the Natural Resources Defense Council, which maintains an office in Beijing. China’s own Ministry of Housing and Urban-Rural Development (MOHURD) projects that energy use associated with buildings will rise 70 percent by 2020, unless greener building practices become the norm. That’s why Beijing’s most recent five-year plan takes a page from Jimmy Carter’s enthusiasm for low thermostat levels and his infamous “put on a sweater!” campaign (heck, no one has to worry about winning re-election here).

More specifically, China’s five-year plan shows a special interest in the concept of building energy use and “green buildings,” a notion born in America during the 1970s oil embargo. On June 15, MOHURD’s director of building energy-efficiency, Hao Bin, announced that Beijing is finalizing a national energy-labeling system for new building construction. As he told conference attendees at the Global Green Building Conference in Shanghai, the government is also evaluating plans to subsidize certain kinds of energy-efficient building materials. Already it’s funding a number of research and demonstration projects.

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As of Sunday, 4 medium-size reservoirs and 1,388 small reservoirs in Hubei had dropped below the allowable discharge levels for irrigation, the official Xinhua News Agency reported, citing the director of the reservoir management office for the Hubei Provincial Water Resources Department. One-fourth of all small reservoirs had what officials called “dead water” remaining, which could be pumped for use only in an emergency.

The drought adds to concerns over the effect that a gargantuan water-diversion project will have on the central provinces of China. The project, called the South-North Water Diversion, is supposed to move water from the Yangtze and its tributaries north to Beijing along a canal, and to Tianjin along an eastern route.

Both routes are supposed to be fully operational within the next couple of years. Criticism of the project has become widespread, and many people along the Yangtze and in the south say precious water resources should not be sent north, where there has been a chronic water shortage.

The water shortage is also affecting energy output as hydropower projects are slowing production. From the Time blog:

Authorities are warning that manufacturers in booming industrial regions west of Shanghai may face even tighter power rationing as demand surges in the peak summer months as electricity generators curb output due to rising costs for coal and oil. (Watch “America Wants in on China’s Clean Energy Biz.”)

Though summer rains may eventually relieve the drought, with even the powerful Yangtze river running too low for shipping in some stretches, China appears to be hitting limits to its growth in a resource scarce-environment. The power crunch comes at time when worries over inflation make rising energy costs and crop failures less welcome than ever.

The industry group China Electricity Council has estimated a power shortfall of 30 million kilowatts in the summer. That is only 3 percent of China’s generating capacity, but the shortages are concentrated in key manufacturing regions such as Zhejiang and Jiangsu, near Shanghai.

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Post tags: drought, energy crisis, energy demand, hydroelectric power, Yangtze River
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[Is] this a real threat? Or is it just sabre-rattling by power companies keen to secure from the authorities increase in state-controlled electricity prices to compensate for rising world coal costs? It’s probably just talk, but nobody can be quite sure.

During the hot summer months ahead, China’s power producers are going to get squeezed by record prices for thermal coal. Because electricity prices, which are set by the state, haven’t risen, thermal power stations are increasingly being run at a loss.

According to analyst Nate Taplin at Gavekal Dragonomics, a financial services firm, China’s thermal power plants lost Rmb33bn last year because of this price squeeze and are reluctant to continue producing power at a loss. As he explains in a recent note:

The problem is not that China produces too little electricity. The warnings of blackouts are instead best understood as a form of blackmail: power producers want the government to raise the prices they get for electricity ….

Taplin predicts private manufacturers may start drawing electricity from diesel generators as rationing becomes more widespread. “Without price hikes to address the structural problem, outages will probably be significant and lead to a bump in diesel demand,” he writes.

Warnings of power shortages were reported by Reuters last week:

Liu Tienan, the head of the energy administration, said supplies of coal, oil, natural gas and power in the first quarter had been steady, the official Xinhua news agency reported late on Monday. But Liu warned the peak summer season was likely to bring strains.

“Owing to excessively heady demand, even with production and supply growth in the double digits, supplies of coal, power and oil in some regions are still tightening, and future trends give no grounds for optimism,” Liu told an official meeting on Monday, according to Xinhua ….

Liu’s comments echoed a warning from the National Energy Administration last week, when it said power demand would grow faster than it previously thought.

The central provinces of Hunan, Jiangxi and Chongqing have introduced power use curbs since March, and Hubei province is also likely to impose restrictions, with low coal stocks at power plants and low water levels for hydropower generation.

China Daily, meanwhile, reported similar measures in Zhejiang, which has become reliant on electricity from neighbouring provinces to meet industrial energy demands.

Dai Yan, deputy director of the electricity dispatching center at the Zhejiang branch of the National Grid, said the province is facing severe shortages. Dai said Zhejiang has been buying electricity from neighboring provinces since the start of the year to quench its thirst.

“The demand for electricity intensified after Spring Festival and the shortage has been about 2 to 3 million kilowatts each day,” Dai was quoted as saying by China National Radio. “We have bought all of the available electricity from other provinces.”

He said more than 10 million kilowatt-hours of electricity was being sucked in from neighboring provinces each day in a bid to meet the demands of the province.

The provincial government has been trying to deal with the problem and has been rationing electrical power since early this year.

During the first quarter of the year, more than 500,000 enterprises in the province were operating according to a rotating electricity supply schedule ….

In some energy-hungry industries – such as chemical and non-ferrous metal manufacturing – demand has shot up by as much as 20 percent compared to last year.

A recent study from the Lawrence Berkeley National Lab, cited in the beyondbrics post, predicts with relative optimism that China’s energy demands will start to level off in 15 years, but even so will not peak until mid-century.

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Post tags: Chongqing, coal burning power, electricity, energy demand, Hubei, Hunan, hydropower projects, Jiangxi, power shortages, Zhejiang
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The LBNL forecast is the first such survey that attempts to come to grips not only with China’s energy and resource needs during the current era of rapid development, but also attempts to pinpoint when that era will end. “Most conventional forecasting techniques use a process that assumes the future is going to look like the past—they establish certain relationships between energy and economic activity, and project forward what will be energy uses in the future,” explains LBNL staff scientist and report co-author David Fridley. (He is referring specifically to energy forecasts by the International Energy Agency (IEA) and two scenarios prepared by the Energy Research Institute (ERI), a Beijing think tank affiliated with the Chinese government.) Yet the relationship between economic growth and energy demand is not just a straight line. “Nothing can grow exponentially forever.”

Current thinking says China’s energy demand will only go up and up throughout this century. The LBNL report, however, projects that after rising steeply for the next 15 years, China’s energy growth curve will bend and begin to plateau; demand will then peak by 2050 at between 4.5 billion and 5.5 billion tons coal equivalent (depending on the government’s success implementing various energy efficiency targets). That is considerably less than the amount if you simply extended other surveys forward. The report forecasts that energy use per person in China will rise to about 40 percent of what Americans consume.

The insights underlying the LBNL forecast are simple. First, the study simply extends further into the future than many forecasts. (The International Energy Agency’s most recent “World Energy Outlook” only looks to 2035 and shows no sign of China’s energy demand beginning to level off.) Second, their research takes account of what China Energy Group director Mark Levine calls “saturation points.” That is the point at which energy demand in a given sector levels off. In a country where still more than half the population is rural, many people have yet to purchase even basic appliances. “But once you have a refrigerator, you don’t need another,” he says. The concept is simple, but actually integrating it into forecasting requires looking at the dynamics of each sector, and gathering data that can be hard to come by in China. “What makes our model unusual is that we actually account for the specific number and size of refrigerators, televisions, air-conditioners, and more per household,” he says. “If you don’t do that, you can’t know there’s a saturation point.”

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The forecasts, particularly for China, contradict widespread predictions that China’s energy use and emissions would continue to soar until at least mid-century. Still, both forecasts indicate that greenhouse gas emissions will remain far above the level that most climatologists say is needed to avert major disruptions from global warming.

The China study, conducted by the Lawrence Berkeley National Laboratory in California, forecasts that China’s booming economy and energy use will peak around 2030 to 2035, and then level off afterwards as the demands of increasingly affluent Chinese consumers for goods also reach a peak in the 2030s. The rise of nuclear power, coupled with aggressive energy efficiency policies and the spread of renewable energy technologies and electric cars, will help soften demand for fossil fuels even as the Chinese economy grows, the report said.

The report does not say energy use will decrease, only that it will stabilize and increase much less. The report, done over the last four years, is surprising for those who assumed China’s growth would cause unlimited demand for energy. From Lawrence Berkeley National Laboratory News Center:

Berkeley Lab researchers Nan Zhou, David Fridley, Michael McNeil, Nina Zheng, and Jing Ke co-authored the report with Levine. Their study is a “scenario analysis” that forecasts two possible energy futures for China, one an “accelerated improvement scenario” that assumes success for a very aggressive effort to improve energy efficiency, the other a more conservative “continued improvement scenario” that meets less ambitious targets. Yet both of these scenarios, at a different pace, show similar moderation effects and a flattening of energy consumption well before 2050.

Under the more aggressive scenario, energy consumption begins to flatten in 2025, just 14 years from now. The more conservative scenario sees energy consumption rates beginning to taper in 2030. By the mid-century mark, energy consumption under the “accelerated improvement scenario” will be 20 percent below that of the other.

Scenario analysis is also used in more conventional forecasts, but these are typically based on macroeconomic variables such as gross domestic product and population growth. Such scenarios are developed “without reference to saturation, efficiency, or usage of energy-using devices, e.g., air conditioners,’’ says the Berkeley Lab report. “For energy analysts and policymakers, this is a serious omission, in some cases calling into question the very meaning of the scenarios.’’

The new Berkeley Lab forecast also uses the two scenarios to examine CO₂ emissions anticipated through 2050. Under the more aggressive scenario, China’s emissions of the greenhouse gas are predicted to peak in 2027 at 9.7 billion metric tons. From then on, they will fall significantly, to about 7 billion metric tons by 2050. Under the more conservative scenario, CO₂ emissions will reach a plateau of 12 billion metric tons by 2033, and then trail down to 11 billion metric tons at mid-century.

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State Grid Corp. of China, the country’s top electricity distributor, hopes to get around this impasse by building what it calls a “strong, smart grid.” After two years of testing its grid plan, the company is now throttling up to full-speed implementation.

The hope is to rescue renewable energy, especially wind power, from a technical bottleneck. Additionally, a smarter power grid would create demand that could give China a better position in the lucrative and highly competitive global smart grid component manufacturing race. Finally, it would also help reduce the nation’s transportation emissions by developing a nationwide electric vehicle charging network.s

Since Chinese leaders have yet to regulate this nascent sector, it is State Grid that will make the decisions for national grid development. The result of its ongoing grid plan will not only affect its more than 1 billion customers in China, but also be felt by the outside world.

The overarching goal for the more advanced transmission network, according to the company, is to reduce enough carbon emissions to help China achieve at least 20 percent of its targeted emission cuts.

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The recently ratified 12th FYP contains binding targets to have non-fossil fuels account for 11.4 percent of China’s primary energy mix and for a carbon intensity reduction of 17 percent by 2015. Those goals are likely to be reached only by meaningfully expanding nuclear power because renewables alone (including hydro) are unlikely to be sufficient in offsetting coal and meeting the plan’s objective. Nuclear capacity is expected to quadruple from the current 10.8GW to around 40GW by 2015. The State Council has reportedly already approved 34 plants totaling 36.9GW, with work on 25 of those projects (totaling 27.7GW) having already started. Even if the new regulatory review delays construction of the remaining nine projects on the drawing board, China’s nuclear power capacity would eventually still be just shy of 40GW.

The support for nuclear energy reflects the political strength of its champions in the Chinese government. Top energy officials, such as former National Energy Administration (NEA) head Zhang Guobao and current NEA chief Liu Tienan, have publicly stated in recent days that China needs to develop its nuclear industry, with safety as a prerequisite. Other officials from the environment ministry, which has a hand in managing the nuclear sector, have also argued that China needs nuclear power to ensure energy security amid growing demand. Indeed, energy security and clean development have been invoked as compelling arguments. The head of the China National Nuclear Corp., one of the country’s two nuclear giants, recently pointed to data indicating that China’s existing nuclear capacity reduced annual emissions (67 million tons less of CO2 and 250,000 tons less of SO2) compared to equivalent coal-fired capacity.

Even if China continues with its nuclear energy program, it needs to pay close attention to safety issues. As early as 2009, there were worries that China’s nuclear program was expanding too rapidly. From Reuters:

China will face safety issues and environmental hazards involving nuclear waste disposal if the nuclear power sector is expanded too fast, the country’s nuclear safety chief said on Monday.

China, the world’s second-largest user of fuel and electricity after the United States, plans to quadruple its nuclear power capacity in the next decade to about 40 gigawatts, fast-tracking from an embryonic stage in the last three decades when a total of less than 10 GW was built.

“At the current stage, if we are not fully aware of the sector’s over-rapid expansions, it will threaten construction quality and operation safety of nuclear power plants,” Li Ganjie, director of National Nuclear Safety Administration, told the International Ministerial Conference on Nuclear Energy.

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