Renewables to play ‘bigger role' in China's energy landscape in longer run: PetroChina

Renewables are set to play a “bigger role” in the longer run in China’s energy landscape, with such sources already contributing to a sizeable coal-to-gas switch, Yaoyu Zhang, Assistant CEO and Global Head of LNG and New Energies at the company said Oct. 22 at the S&P Global Commodity Insights’ Asia Gas Markets Conference 2024.

Zhang said the widely held belief that coal switching in China has been driven solely by increased gas use was not the case, with about 10%-13% of the coal-fired power generation displacement occurring because of the growth in renewable, which he noted has been quite unprecedented.

“We have seen that over the last few years, the cost of solar and wind has started to fall below the cost of natural gas. I think that severely hindered the large-scale coal-to-gas switch, especially on the end user side,” Zhang said.

"We expect the combined wind and solar power capacity to reach around 1,300 gigawatts by the end of this year, very much meeting the 2030 target, which is 1,200 gigawatts, six years ahead of schedule,” Zhang added.

By 2028, it is estimated that 50% of the electricity power generation would come from renewable sources in China, he continued.

According to Zhang, China is set to see a double-digit year-on-year growth in LNG imports in percentage terms in 2024. In 2023, China imported 71.32 million mt, or 98.4 Bcm, of LNG, up 11.7% year on year, according to customs data.

Reliance on LNG imports has two main ramifications, Zhang said.

China takes gas from multiple sources to meet its burgeoning demand. However, the average cost of LNG imports is much higher than that of domestically produced gas and pipeline imports, he said.

Large scale LNG imports also lead to some vulnerability around supply security as compared to other sources that can be produced locally in China, he said.

In addition, different sectors that consume LNG have different price sensitivity, Zhang said.

“The level of $13-$14/MMBtu is way too high for power generation, particularly in the northern part of China where we have pipeline [gas]. But it may be acceptable in the southern part of China, where we have high-end manufacturing,” he said.

Platts, part of Commodity Insights, assessed the December JKM at $13.416/MMBtu Oct. 22, up by 1.5 cents/MMBtu day on day.

“Also, currently carbon pricing in China remains low. And I think a high carbon price would start to favor gas-fired power over coal on a transitory basis,” he said.

“However, ultimately, I think the higher price of carbon would make renewables even more competitive,” he added.