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ICYMI: China’s biggest coal company is grabbing at the opportunity to build out more fossil fuel power plants before 2025 – running in contrast to the country’s climate goals of reducing emissions by 2030 and becoming carbon-neutral by 2060.
China Shenhua Energy Co.’s General Manager Xu Mingjun said at a briefing Friday that the company is reviewing previously postponed projects to see which can be revived, and will be restoring existing coal and gas plants. The energy company currently has 11.75 GW of coal and gas generation under construction, and expects to put the new projects into operation by 2025.
“As the country’s latest round of power system optimization progresses, the company is seizing the window of opportunity for thermal power development,” Xu said, according to Bloomberg.
Beefing up energy supply: China has faced a series of power shortages in the past two years due to a grab-bag of factors, including long-running structural problems, blistering heat waves, and drought—which dried up some rivers completely, forcing leaders in the the Sichuan and Chongqing provinces to halt operations at hundreds of factories that rely heavily on hydroelectric power. (Sichuan, for its part, receives 80% of its power from hydroelectric dams.) Now, some officials see the further expansion of coal as a means of bolstering energy security at a vulnerable time.
China’s total approved coal generation currently stands at 152 GW, including at least 50 GW approved in the first half of 2023 alone. The country has been rapidly increasing its permitting and construction of new projects since 2022, permitting two new coal power plants per week last year – reaching the highest level since 2015. China’s project construction is six times as large as that in all of the rest of the world’s combined, according to the Centre for Research on Energy and Clean Air.
The contradiction: China has promised to begin reducing its carbon emissions by 2030 at the latest, and achieve carbon neutrality by 2060. China’s outlined timeline could allow the country to build out more polluting plants over the rest of the decade, although Chinese officials have countered that coal is transitioning to become a supporting player rather than the primary focus as the country develops its renewable energy sector.
Looking ahead: As countries are looking to gather for the global climate summit, known as COP28, in Dubai at the end of November, expect for China to be in the hot seat being questioned on how they plan to reach their climate goals while shoring up their fossil fuel plants.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
TREASURY’S VAN NOSTRAND SAYS OIL PRICE CAP IS STILL WORKING: Treasury’s acting assistant secretary for economic policy Eric Van Nostrand said this weekend that the G-7-led Russian oil price cap is delivering on its intended goals—even as Urals prices continue to soar, and as the EU quietly increases its purchases of Russian supplies.
“Nine months into implementation, the cap is working,” Van Nostrand said in an interview Sunday, adding that any reported breaches will be further investigated by U.S. and EU enforcement agencies.
“We don’t measure its success just by how many molecules of oil travel under the cap specifically,” Van Nostrand said, adding that they measure success by if it allows other global buyers to negotiate discounts for Russian fossil fuels.
“We view it as a market mechanism for changing the oil market’s incentives,” he added.
Prices for Russia’s flagship Urals crude spiked to levels well above the cap for the past two months. Urals benchmark prices stood at an average $74 per barrel in August—significantly higher than the G-7 cap of $60 per barrel, and threatening to pad Russia’s coffers further.
Russian President Vladimir Putin signed into law this summer new tax code amendments intended to narrow the discount of Urals crude prices relative to Brent prices, and raised oil export duty to $21.40 per ton—up more than 25% compared to the previous month, and the highest price all year.
Other complications have emerged: Recent reports and trading data show that the EU has ramped up purchases of Russian oil refined by India and China and sent back to the bloc (as well as Russian LNG). The increase has sparked criticism from some, who argue that the EU’s actions directly contradict the bloc’s eight Russian sanctions packages passed last year.
Those sanctions do not require the EU to ban Russian gas imports until 2027, though deepening their economic ties with Moscow threatens further harm if the Kremlin were to throttle or completely shop shipments without warning, as it did with Nord Stream 1 piped gas deliveries last summer.
FRAGILE LNG MARKET THREATENS A RETURN TO COAL: LNG markets remain volatile to major price swings, supply concerns, and a near-term reshaping of global markets that could threaten a return to coal in some countries, the heads of several gas majors warned today in Singapore.
Spot LNG supplies are expected to be limited through at least 2025, industry officials said, which could worsen quickly if the EU does not experience the same mild winter it did last year.
“We have all of the right factors in place, but the price is very sensitive,” Uniper CEO Michael Lewis said today at the Gastech industry conference. “The price elasticity has changed. It is volatile, and the situation is potentially fragile,” he said.
Since LNG contracts are traditionally secured for 10- or-20-year periods, the EU has relied primarily on spot LNG imports to replace Russian fossil fuels. Currently, its storage tanks are filled to more than 90% capacity—but colder weather would drive up demand, and prices significantly, officials warned.
Despite the fact that EU gas storage tanks are filled to more than 90% capacity, a normal winter could prove to be a “very difficult time for some of the Europeans, like Germany and other countries,” Chevron’s global gas business director Freeman Shahee said today.
Any demand recovery from China would also drastically upend conditions and threaten a supply crisis “I think we’re all expecting them to wake up, and when they wake up,” Shahee said of China. “It will be quite rapid. It just hasn’t happened at that scale [yet].”
Added price pressure could also deter some Asian buyers, who might opt to swap out pricey LNG for coal, the world’s dirtiest fossil fuel. “You’re going to continue to see in Pakistan, to some extent India, to some extent China [they’ll] make choices not to take in LNG at these prices, and they’ll use other fuels,” Vitol CEO Russell Hardy told reporters.
“There isn’t quite enough LNG to go around still, and if any of the possible negative side events of weather or supply disruptions do occur this winter, the volatility will return,” he added.
WTI HITS $87, HIGHEST SINCE NOVEMBER: West Texas Intermediate reached more than $87 a barrel, the highest price for crude oil since last November, following the news that Saudi Arabia and Russia announced a fresh extension to their voluntary production cut until the end of the year.
As Nancy reports, oil prices jumped on Tuesday after the dual announcement, with futures rising an average of roughly 2%. WTI October futures rose as much as $1.88, or approximately 2%. Brent crude has also increased as high as $90.72, or around 2% as well.
On Tuesday, Saudi Arabia announced that it would extend its voluntary production cut of 1 million barrels per day, putting Saudi crude output near 9 million barrels per day over October, November, and December. The reduction will be reviewed on a monthly basis to consider whether to deepen the cut or increase production.
Another OPEC+ member, Russia, is also prolonging its voluntary cuts through the end of the year to “maintain stability and balance” on oil markets, Deputy Prime Minister Alexander Novak said on Tuesday. Russia has previously said it would voluntarily cut oil exports by 500,000 barrels per day in August and by 300,000 bpd in September. The country will also be reducing its oil production by 500,000 barrels per day until the end of 2024. Read more here.
COP28 PRESIDENT: WORLD IS LOSING ITS RACE TO MEET CLIMATE GOALS: The world is losing its race to meet its goals on climate change, the head of this year’s COP28 summit warned this morning, just three days before the United Nations is slated to publish its first “global stocktake” to measure nations’ progress in fighting climate change.
“We are not delivering the results that we need in the time that we need them,” COP28 president Sultan Al Jaber said today, speaking at the Africa Climate Summit in Nairobi.
The U.S. and Germany each announced new investments this week to help fund sustainable energy project development in Africa, which is suffering some of the most severe effects of climate change. Earlier today, the UAE pledged $4.5 billion to accelerate Africa’s clean energy projects, including 15 GW of clean power by 2030. (Currently, Africa has a total of 60 GW installed capacity).
African officials are pushing for a reform of global financial structures that would unlock at least $500 billion in climate finance funds to vulnerable countries, something they plan to make a key focus during the upcoming COP28 summit.
The Rundown
Bloomberg Hottest September since 1938 awaits G-20 leaders in Delhi
Politico EU Von der Leyen pitches carbon pricing as key climate tool for Africa
American Journal of Transportation One ship in Panama Canal paid $2.4 million to skip the line
