During the last SXSW Eco, I got the chance to learn a little bit more about China’s energy policy, and how decisions being made halfway ‘round the world are mirroring—and impacting—our domestic energy projects and programs. The first part of the presentation I sat in on was led by Michael E. Webber (Assistant professor for the Center for International Energy and Environmental Policy at the University of Texas). Entitled “Energy in Texas: Dirty Polluter and Clean Energy Leader,” Webber began by laying out all the reasons why Texas and China mirror each other in terms of energy generation and demand:
* Texas is the nation’s dominant historic oil and gas provider (source: Texas Railroad Commission).
* Texas is the largest producer in the US of oil (20%), gas (33%), wind (25%), and electricity (10%).
* Texas is the world's third-largest gas producer, after the US and Russia (source: US EIA).
* The average Texan uses about seven times more energy per year than your average Chinese citizen.
* Texas is the world’s seventh-largest emitter. “We’re a big polluter,” said Webber, “there’s no other way to see it.”
“There are billions of people who want to consume energy the way we do,” explained Webber, who went on to note that it’s not clear whether the world has those resources to allow everyone to imitate the US energy consumer.
According to Webber, the main areas of energy consumption for the US are industry, housing, and transportation. In Texas, more than half of energy used is for industrial processes (energy, chemical, and manufacturing). “We are a manufacturing state,” said Webber, “we are the China of the United States—we are its dirty manufacturer.”
But that state also leads the nation in renewable generation. Texas is the world’s sixth-largest wind power producer. This is possible, according to Webber, for two reasons: deregulation and a separate, intrastate grid that allows Texas to incorporate renewables, like wind, more easily than states with an interstate grid system. Texas wind also gets a boost from new transmission lines, with a new project set to be completed in the next three to five years that will double the amount of wind energy in the state—a feat accomplished, in part, through subsidized financing.
“We paid for this by socializing the cost,” explained Webber. “We build these transmission lines, and we will all pay for it,” much in the same that China centralizes its public works financing.
Webber predicts that solar power will follow wind generation in Texas, capitalizing on the advantageous already in place. For example, Texas already has “a lot of cheap flat land with transmission lines already in place,” and there are several gigawatt solar projects already planned for the next decade.
Finally, Texas is also a leader on Smart Grid deployment. Austin energy has already begun implementing an AMI system, with full deployment of smart meters completed in 2010. Overall, Webber said that, according to a recent review by Energy Insights, Texas has earned “the second-highest UtiliQ in the nation.”
Trevor Houser, a partner with the Rhodium Group, took up the cause for China with his presentation, “Texas and China—Unlikely Energy Bedfellows.” Houser began his talk with by establishing China’s energy past in order to set the stage for China’s energy future:
* 1958- industrialization and steel production
* 1978 reform period begins
* By 2000, china only accounted for 10% of global energy demand, rather than the 25% they would have accounted for without reform.
* 2002 energy intensity reverses (reduced by two-thirds over two decades).
Initial estimates assumed that China would continue on the track towards efficiency and demand reduction, but according to Houser, the 2010 the energy demand bump changed all that. There’s now been an 80% correction on prediction of future Chinese energy demand, and this adjustment has had a global impact. While China's current energy problem is based on industry (with resultant steel, cement, copper, paper, and aluminum shortages), China’s “future energy problem” is transportation: it’s estimated that by 2030, there will be 300 million cars in China, contributing to, and exacerbating, urban mobility and energy demand.
China is already working to reverse these trends. With a 15% non-fossil target by 2020, it’s possible that China will add 50% to all its renewable energy and nuclear generation arsenal in the next decade, including the additional of 320 GW of nuclear power. But, according to Houser, even if China gets halfway, their actions will have a global impact on prices and products because, “you can't get that scale of capacity without getting market dominance.”
China will also dominate in coal generation, according to Houser, who predicts that the country will need “billion tons of coal” to continue on its current course of industrial and infrastructure expansion. This could mean that China’s actions may simultaneously drive a drop in the price of clean tech, while also triggering an increase in the price of dirty power. This is already happening with fossil fuels, said Houser. China’s oil demand is exponentially increasing, impacting the amount of oil available to the west. This, in turn, drives up prices, making Arab countries richer. Arab countries are then themselves, using their increased wealth to use more oil, raising prices even higher. According to Houser, it’s anticipated this will happen with coal.
Webber summed up the potential impact of China’s energy policy saying, “China will do more to change US emissions in the next three years than politics.”
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