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  July 19th, 2016 | Written by

China’s Changing Energy Picture

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  • In recent years, China's focus has become upgrading its energy mix based on technology innovation.
  • China has become the world's largest energy producer and consumer, importing as much oil as the U.S.
  • “We can predict an increase in oil price next year.”

Some experts have forecast a peak in Chinese coal consumption for 2030. Other say it will come sooner, in 2020.

But in the opinion of one expert on energy consumption in China, the country’s coal consumption has already peaked.

That was the view articulated by Zhang Guobao, the former administrator of China’s National Energy Administration, at a meeting held by Columbia University’s Center on Global Energy Policy in Beijing on June 30.

“In the past few decades, China’s power sector focused on meeting the surging demand,” said Zhang. “Yet in recent years, the focus has become upgrading its energy mix based on technology innovation. However, some investors and policymakers haven’t changed their mentality yet, still initiating and building more coal plants than necessary.”

China has become the largest energy producer and consumer, Zhang noted, importing as much oil as the United States—roughly seven million barrels a day. “The demand and supply of oil are witnessing changes lately, and the price is going up again,” he said. “Although it does take some time for the current stock to be released, we can predict an increase in oil price next year.”

Although demand and supply are still the fundamental drivers of oil prices, geopolitics can also play a significant roles. “For example,” said Zhang, “the recent Brexit led to an increase in oil price.”

Zhang predicted that in the long term perspective, renewable energy will inevitably replace some fossil fuel consumption, but that the near term, “fossil fuels still play a necessary role.” “ In general, fossil fuels will still account for a significant part of global energy mix and will still play an important role for a rather long time to come,” he said.

China has achieved rapid renewable energy development, according to Zhang. “In terms of technology innovation,” he said, “China is already a world leader in certain areas, such as coal generation, transmission, and transformers. The world, especially the developed countries, should upgrade its impression on China’s energy technology.”

With its economy slowing down, China’s energy demand growth is also decreasing. “The time of eight to nine percent annual growth rates is over,” said Zhang. “The growth of energy demand in China last year and the first half of this year was very small. The price of coal dropped. So did electricity demand.”

Brexit has not only influenced the price of oil, it holds a cautionary tale for international trade in general, Zhang warned. “In my view, this shows the resurgence of trade protectionism,” he said. Globalization—a notion that developed countries used to promote with enthusiasm—seems to have encountered problems.”