China’s Geostrategic Priorities Become Clear: Oil not Wind…

China’s offshore wind installations for 2019 and its plans for the end of the decade are catching headlines.

Less well reported, in the United Kingdom at least, is the vastly more significant evidence that China is acting firmly to reduce western influence in the Persian Gulf and thus secure Middle Eastern oil supplies on a scale dwarfing current and probable future wind energy output. China’s offshore wind(ow) dressing should be discounted entirely; Beijing’s engineer bureaucrats know that oil is the key to an energy policy that serves their national interest.

The Global Wind Energy Council (GWEC) has published its Global Offshore Wind Report 2020, and the Guardian has naively reported its main conclusions with enthusiasm: “China poised to power huge growth in global offshore wind energy”.

Installations of offshore wind for 2019 were dominated by Europe and by China, who together account for 6 GW out of a global total of 6.1 GW. China was the largest single installer at 2.4 GW, closely followed by the United Kingdom at 1.8 GW, and then Germany with 1.1 GW.

China now has a total installed capacity of about 6 GW, still behind the United Kingdom’s figure of about 9 GW, but clearly catching up quickly. Indeed, GWEC anticipates that China’s installation rate will continue at between 3 and 6 GW per year throughout the coming decade, delivering an additional 52 GW over that period, and a total approaching 60 GW by 2030.

In European terms that is a very large capacity, roughly equivalent to peak winter load on the UK system for example, but in the Chinese context it is a minor element.

Supposing, very generously, a 50% load factor, that 60 GW of Chinese offshore wind, if it is ever built, would generate some 260 TWh of electrical energy per annum, equivalent to well over 50% of United Kingdom’s total annual electricity generation. China, however, generates over 6,500 TWh of electrical energy per year at present, with about 300 TWh of that, just under 5% currently being obtained from windpower on- and offshore. 

Furthermore, Chinese electricity consumption has increased by nearly 1000% on its 1990 level, and is still rising rapidly, as can be seen clearly in the following chart from the International Energy Agency:

Figure 1: Electricity generation in the People’s Republic of China, 1990-2017. Source: International Energy Agency.

One recent authoritative forecast suggests that China’s electricity demand might top 10,300 TWh in 2030, rising to 12,700 TWh in 2050.

Figure 2: Electricity Demand in China: 2015 (actual) projected to 2050. Source: Michael Meidan, Glimpses of China’s Energy Future (Oxford Institute for Energy Studies: 2019).

The same projection suggests a total of about 1,000 TWh of wind energy onshore and offshore in 2030 wind, comprising about 10% of China’s electricity generation, which is dominated by conventional energy, coal, gas, hydro, and remains so even in 2050.

The Global Wind Energy Council hype collapses into dust as the sunlight of fact falls upon it. Even very rapid growth in Chinese offshore wind capacity, gigantic as it appears in the European mind, will be only slightly better than marking time in the overall context of Chinese growth.

China’s electricity system is and for many years will continue to be firmly ballasted by cheap coal and gas to contain costs and maintain system security. For such a vast and conservatively engineered system 60 GW of offshore wind is an affordable gesture, and emphatically not a high risk, farm-betting, commitment. For other smaller economies and markets the projected growth is very different, and the United Kingdom, for example, is already dangerously over-exposed. China is simply dressing the window.

It is obvious that the government of the People’s Republic has concluded that renewables are not where their country’s interest lies. The engineer bureaucrats of Beijing understand thermodynamics as well as anybody and they are clearly aware that conventional energy is indispensable to their national ambitions and their security, and it is on conventional energy that China’s wolf warrior diplomats are focusing their minds.

In recent weeks it has become known that China has signed an economic co-operation deal with Iran, with China promising $400 billion of infrastructure investment over twenty-five years, presumably in a non-convertible form,  in return for privileged access to Iran’s oil: “Pourquoi le mystérieux traité entre l’Iran et la Chine inquiète tant”, FigaroVox, 28 July 2020; “Defying U.S., China and Iran Near Trade and Military Partnership”New York Times 11 July 2020.

The promised Chinese investment amounts to about $16 billion per year on average, which is close to the historic value of Iran's total annual oil exports of $19 billion per year (OPEC), suggesting that China may become the predominant perhaps even the sole customer of Iranian oil exports.

Iran is heavily dependent on the value of oil exports, which are about 1/4 of all its exports and 4% of total GDP, so for the comparatively trivial sum of $16 billion a year China has acquired a substantial degree of control over the Iranian economy, created an income stream for Chinese state owned construction companies,  and also secured Iranian oil exports for its own use.

Iran has proven reserves of about 200 billion barrels, and it exports about 350 million barrels of crude oil and petroleum products per year. That is approximately 550 TWh of exported oil energy per year, available now, and nearly twice the hoped for output of the 60 GW of offshore wind that China may never in fact build by 2030.

As if this were not enough, in the last few days media in the United States have reported that US security services are currently investigating alarming signs that China may have been assisting the Kingdom of Saudi Arabia in the construction of a nuclear processing plant, presumably for something more than mere cash in return (“U.S. Examines Whether Saudi Nuclear Program Could Lead to Bomb Effort”). As the New York Times puts it:

Saudi Arabia’s work with the Chinese suggests that the Saudis may have now given up on the United States and turned to China instead to begin building the multibillion dollar infrastructure needed to produce nuclear fuel. China has traditionally not insisted on such strict nonproliferation safeguards, and is eager to lock in Saudi oil supplies.

Crown Prince Mohammed bin Salman of Saudi Arabia with President Xi Jinping of China in Beijing in 2019. China is helping the Saudis develop nuclear fuel production ability.Credit...Liu Weibing/Xinhua, via Associated Press

The Iran co-operation pact and the Saudi nuclear project are not the actions of a country that believes the future belongs to renewable energy and that fossil fuels are stranded assets. China’s government knows that oil remains of the first importance, and it aims to seize those valuable resources while the West is distracted by the shiny toys of wind and solar and foolishly thinks fossil fuels are history.

It is depressing to note that neither of these remarkable stories has yet had much coverage in Europe, though the Figaro article, cited above, is a notable exception. Both matters should be front page news, an ice-cold shower of reality for day-dreaming Europeans, dozing Brits. Western political discussion has become so neurotically obsessed with the distal and poorly understood threats of climate change, and is so ignorant of the underlying physical realities of wealth and strategic interest that we have all but completely forgotten what a well-designed, pragmatic and rational energy policy looks like. China’s activities in and around the Persian Gulf are a stern and intimidating reminder.

Dr John Constable: GWPF Energy Editor.