The week in energy: China’s coal-fired outreach

In a speech to an international forum on China’s Belt and Road Initiative in Beijing in April, President Xi Jinping extolled the programme’s environmental credentials. “We need to pursue open, green and clean co-operation,” he said. “The Belt and Road is not an exclusive club; it aims to promote green development. We may launch green infrastructure projects, make green investment and provide green financing to protect the Earth which we all call home.” Environmental groups and academics have argued that the reality is often very different, with “oblique and aspirational statements” about sustainability not matched by the reality of China's international investments.

New coal-fired power plants are a case in point. Of the 399 gigawatts of coal-fired generation capacity under development outside China last year, about a quarter was backed by Chinese financial institutions and corporations, according to the Institute for Energy Economics and Financial Analysis. Over 2014-17, six Chinese banks including the China Development Bank and China Eximbank participated in $25.7bn worth of syndicated loans for electricity projects in BRI countries, of which $10.2bn, 40 per cent, was for coal-fired generation. The four banks that have over the past three years provided the most financing for coal mining and coal power companies are all Chinese, including the Bank of China and the China Construction Bank, according to an analysis from a consortium of environmental campaign groups. The world’s two largest coal plant developers are China’s National Energy Investment Group and the China Huadian Corporation, according to Urgewald, a German group.

The appeal of new coal-fired plants as part of the BRI strategy is straightforward: they are a way of providing badly-needed reliable power supplies in emerging economies, using Chinese expertise and technology. Chinese investment can also fill a gap left as other sources of financing for coal are withdrawn. The World Bank has not financed a coal-fired power plant since 2010, and its private sector arm, the International Finance Corporation, said last year it planned to work more closely with financial intermediaries that “formally commit upfront to reduce or, in some cases, exit all coal investments over a defined period”.

A tribunal decision in Kenya this week, however, showed how a policy of supporting coal around the world can carry risks. Kenya’s National Environment Tribunal revoked the environmental licence for a $2bn project to develop the country’s first coal-fired power plant, which is backed by export credit from the Industrial and Commercial Bank of China. The decision means the project now has to complete a new environmental and social impact assessment before regulators will consider authorising construction. The Lamu coal project’s backers say the 1,050 megawatt plant would increase Kenya’s power supplies by almost 50 per cent, but opponents say it would create unacceptable air and water pollution in the area, as well as adding to the country’s greenhouse gas emissions. 

Kenya is not the only country that has seen resistance to coal developments under the BRI. Pakistan has been a particular focus for Chinese investment in coal power: the country's latest plant to come into service, with Chinese financing and engineering, is the Engro Thar plant, which started operating in March. But even in Pakistan, the future of coal is up for debate. Coal-fired power plants have been facing financial difficulties, and Pakistan’s government in January asked for a new $2bn project to be abandoned. Islamabad is adopting an ambitious plan to raise the share of renewable energy in Pakistan’s power generation mix. As the costs of solar and wind generation and energy storage continue to fall, the case against making further large investments in coal plants will look increasingly compelling. 

The suggestion that the BRI could become a kind of “global Green New Deal” might be optimistic. But in its international investments China will have to respond to the changing realities of energy markets, just like everyone else.

Iran’s oil finds a way

When President Vladimir Putin of Russia and Crown Prince Mohammed bin Salman of Saudi Arabia met at the G20 summit in Osaka, they agreed to extend their pact on curbing oil output for another six to nine months. Their agreement means that the results of the ministerial meeting of Opec and its allies in Vienna on July 1-2 have become a foregone conclusion.

The US attempt to keep Iranian oil off the market, however, appears to be much less straightforward. It seems that the US sanctions imposed following President Donald Trump’s decision to withdraw from the international agreement over Iran’s nuclear programme have cut its oil exports sharply, but not to zero. Earlier this month China received its first delivery of an Iranian oil cargo since the Trump administration in May ended its temporary waivers from the sanctions. Meanwhile, the UK, Germany and France on Friday launched their new payment system for allowing continued trade with Iran. Brian Hook, the US special representative for Iran, has reiterated the administration’s threats to use sanctions against “any illicit purchases of Iranian crude oil”, but the lack of support for Mr Trump’s position in the EU and China means that attempts to find ways to avoid those sanctions are likely to continue.

In brief

Renewable energy supplied more power than coal in the US in April, for the first time ever.

General Electric has said it plans to demolish a large combined-cycle gas-fired power plant it owns in California, only 10 years into its working life, because it is not economically viable. A plant of this type could have been expected to run for 30 years or more.

The Philadelphia Energy Solutions refinery, the largest on the east coast of the US, has been closed, apparently for good, following the huge fire there earlier in the month. Fuels had been produced at the site for more than 150 years.

Iraq’s oil production has surged to all-time highs, putting the country at odds with its fellow members of Opec.

There is a battle in Australia over who can offer demand response services.

Five years after the oil price collapse that began in the summer of 2014, US shale producers are still feeling the pain. 

The European Association of Environmental and Resource Economists is inviting people to sign up in support of its statement on putting a price on carbon, saying it “offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary”.

In Oregon, Republican state senators are returning to the capital, after going into hiding to block an attempt to introduce a cap-and-trade system for greenhouse gas emissions. The state senate requires 20 members for a quorum, and only the 18 Democrats showed up.

Somalia has reached an agreement over unpaid rental fees going back more than a decade, as it seeks to attract international companies to develop its oil and gas resources.

At least 43 people were killed when terraces collapsed at Glencore’s largest copper and cobalt mine in the Democratic Republic of Congo. The dead were said to have been mining illegally at the site.

Tesla is looking at developing its own battery cells, instead of buying them from Panasonic.

The shift to electric cars has been “overhyped”, and by 2025 80 per cent of BMW’s cars will still have internal combustion engines, according to Klaus Fröhlich, an executive and board member of BMW. European consumers do not want them, he added. His remarks broke from the company’s intended messaging: It put out a press release saying it was launching electric models two years ahead of schedule. CleanTechnica interpreted his comments as an admission that BMW’s electric cars “can’t compete with Tesla”.

And finally: The rivalry that pitted Thomas Edison against George Westinghouse and his ally Nikolai Tesla was one of the most dramatic in the history of business, and one of the most momentous for our world today, so it is surprising that the story has not been filmed more often. The troubled production of the latest movie version, The Current War, which is finally scheduled for release in October, means we may have to wait some time for another attempt to tell the story.

Reactions to an earlier edit of the film, shown at the Toronto Film Festival in 2017, were not favourable, but the trailer suggests the recut version could be fun. The depiction of Tesla, though, is unlikely to match the bizarre, wildly fictionalised version in Christopher Nolan’s 2006 film The Prestige. A must-see, if you have not caught it yet.

Other views

Nick Butler — A clean Europe in a dirty world

Neil Hume — The flow of cheap gas hits coal prices

Bruno Oberle — Business as usual not an option for management of tailings dams

Ashley Nunes — Green technology will not save us

David Sheppard — Saudi Arabia puts off the day of reckoning on oil production

Quote of the week

“Stability is definitely in short supply at present. And our agreements with Saudi Arabia and other Opec members undoubtedly strengthen stability.” — President Vladimir Putin of Russia, in his interview with the Financial Times, emphasised the value of the “Opec+” alliance between Opec and leading non-Opec oil producers.

Chart of the week

This comes from Irena, the International Renewable Energy Agency, which this month published its latest review of employment in the industry. The number of jobs worldwide in non-hydro renewables grew again last year, and is up nearly 60 per cent since 2012. (For employment in hydro power, which is shown separately, the estimates have been revised.) One notable point in the data are how China dominates global employment. It accounted for about 4.1m jobs in renewable energy last year, about 37 per cent of the global total. China also has more than five times as many jobs in renewables as India, although its population is less than 4 per cent higher.