The State Council recently held a meeting on renewable energy sources revealed. China will stop the coal chemical projects and grain ethanol fuel projects under construction. It still insists on developing non-food fuel ethanol under the principle that no arable land shall be occupied, no food shall be consumed and no ecological environment shall be damaged. In the context of rising food prices, the policy of fuel ethanol projects being called off is very timely. However, it is somewhat surprising to call a halt to coal chemical projects, mainly coal-to-oil. Officials explained that coal-to-oil projects cost a lot of money, especially very water-intensive, and in the domestic coal-producing areas themselves are very short of water.
Coal-to-oil is more energy in exchange for less energy. This kind of development at any cost is very uneconomical. It is not suitable for large-scale commercialization. Nor is it sustainable. Technologically speaking, there are still many unconquered difficulties. Shenhua’s coal-to-oil project, for example, cost more than $10 billion, but its lifecycle is nowhere in sight.
At the same time, calls for the development of other forms of energy within China are beginning to grow. Some media reports suggest that China is beginning to turn its attention to nuclear energy. The Chinese government has said it will spend $50 billion to build 32 nuclear power plants by 2030.
The premier of the State Council visited Australia, the world’s second-largest producer of uranium, last April. The two sides signed an agreement to supply 20,000 tons of uranium per year to China. Some experts predict that China will have to build more than 300 nuclear power plants by 2050 to meet domestic demand.
It is true that China wants to expand its nuclear energy development, but the construction of 32 nuclear power plants is already part of the medium- and long-term plan for nuclear energy development. As for the claim that more than 300 nuclear power plants will be built, it is also suspected of catching the wind. Not to mention other, only uranium resources, China will be stuck in the development of nuclear power neck. If China really wants to develop nuclear power plants, then the international market price of uranium will also rise to sky-high prices.
It is also worth noting the shift in the attitude of the Renewable Energy Conference towards energy development policy. It happened precisely after Chinese oil companies discovered large amounts of oil and gas resources. Since May 1st of this year, several oil giants have announced major breakthroughs in oil and gas resource exploration: the discovery of the entire high-quality Nanbu oil field in Bohai Bay, the discovery of an entire gas field in Xinjiang, the discovery of an atmospheric field in Sichuan, and the successful discovery of combustible ice in the South China Sea. These new discoveries of traditional oil and gas resources (with the exception of combustible ice) have in turn reinforced the confidence of policymakers in China’s oil and gas reserves.
In fact, the development of coal-to-oil should not be changed at will if it is an integral part of a long-term energy strategy. Analysts at Anbang have made estimates in the past that if coal-to-oil technology, for which there is an international precedent, is adopted to produce fuel oil. After 5 years, China will have a self-sufficient supply capacity of about 40-50 million tons of refined oil products through coal-to-oil projects. This will not only have an influential change on the pattern of China’s oil dependence for energy. It will also significantly change the expectations of international markets regarding China’s oil demand.
China needs to be very cautious in making adjustments to its energy policy in a strategic sense. For coal-to-oil projects that have already invested heavily, it is even more important to look at the long term and make prudent decisions.