The following interview with Wang Tao [1] was carried out at the Carnegie – Tsinghua Center, Beijing, China, on December 3, 2013 by Patrick Renz and Frauke Heidemann. The main focus of the interview was on the potential for electric cars in China as well as on China’s energy security and the impact of U.S. shale gas production. All footnotes are remarks by Patrick Renz and Frauke Heidemann, aimed at giving some additional background knowledge and especially giving the links to the cited documents so that the reader can follow up on these issues easily.
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. Electric Vehicles in China
You wrote in your policy outlook [2] that electric vehicles lead to a reduced reliance on foreign oil imports for China. How do you believe that a shift towards more electric vehicles would impact the need for gas imports due to the increasing natural gas usage instead of coal for electricity generation?
It is actually more about the use of electricity to replace oil because the oil imports in China are mostly car-driven. I think if we can replace increasing transportation demand with electricity and this will help China to reduce the reliance on oil. In terms of electricity generation we have so many different sources, we have natural gas, but more importantly people always believe that there is a huge potential using renewables, sometimes it also helps very well with the electric vehicles because then it can also work together as one system instead of separate systems to manage the load of electricity grid. You are however also right. China is already seeing increasing pressure on the coal consumption because of the related pollution. So there is an increasing demand to use gas for electricity in the future. There may be a transfer towards a pressure for more power from gas, but I don’t think that is a very big concern. We always hope the electricity used by electric vehicles will come primarily from renewables and as far as I know some people even did the calculation, that if 10 percent or more of vehicles in China changed to electric vehicles it is still very small compared to the other consumptions and therefore not a big concern.
Do you think implementing electric cars would make more sense in cities that already generate their electricity from renewables or is the impact on the actual electricity consumption of the city if you would e.g. transform the taxi fleets into electric cars not that big?
I think for electric vehicles the most important thing is to get the market to start off, to be able to lower the price and push for higher and better innovations. I don’t think it matters that much if the electricity at the moment is coming either from coal or from hydro or other renewables. First of all, the total consumption is still too small because of the scale and secondly, in the worst situation by switching to electric vehicles you are actually switching pollution from areas very close to the population to somewhere very far from it. So even if you are using coal, the pollutant could be very easily be treated or removed from the coal-fired power plants and it is dispersed outside. The impact to human health is largely reduced. So I don’t think it is a big concern. The most important thing is to use the right sectors and right approach and try to build a business model to help electric vehicles becoming a much more popular choice in mega-cities like Beijing, and combing it with power from renewable would be the next step.
Speaking about how to implement a model of an increasing electric vehicle use in a city like Beijing, how do you evaluate the problem of providing charging poles especially in private housing if private consumers want to make the choice to acquire electric cars?
On this I think I have a slightly different opinion from many people, especially from people in the industry. Many people want to sell their cars to private consumers and say it is a problem. That is right because most consumers coming to them worry about this but it is not the biggest group of potential consumers, as also suggested in my report. Sectors much less constrained by problems of charging poles facilities like taxi fleets, official cars and distribution networks are the prior consumers for now. They all have their own space; they can quite easily use their own space to install charging poles. As for official buildings, distribution networks and taxi companies – they own their own buildings so they can get the safety issues through to install the facilities. The only problem is there are private consumers who face very strong constraints by either whoever runs their house or looks after the security issues in residential areas. Sometimes they can refuse to install the charging poles for security reasons such as fire risks, but this could be solved as well, it just needs some support from the government. The role private consumers play at the moment is very small, in Beijing the private market is not going to kick-off in the next two to three years. Those who are trying to buy electric vehicles in China are usually rich people and they have much more space, so this issue is of less concern to them.
We also spoke about this to Gal Luft and his answer was that electric cars are not a good idea as they run on coal. What would according to him make sense for China is to invest in flexible fuel technology. He sees this as a better solution than electric cars. Brazil was for him the example of an increased use of this technology. [3]
First of all, biofuel is not going to be an easy option for China as we have huge land restraints and certainly the current biofuel technology does not guarantee its sustainability. If you would use natural gas, you probably would have lower efficiencies. In general this is not going to give you improvements in terms of air quality or energy security because neither oil nor natural gas is abundant in China so we would be causing more problems by this. There are other kinds of flexible fuels, you can use oil and electricity. Like the Toyota Prius with the plug-in system that is in-between and is going to transfer into the hybrid but the ultimate solution would be fully electric cars. China is also still pushing for this development but is giving priority to electric vehicles.
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. Energy Security
You mentioned the concept of China’s energy security. How do you define it?
Many people have different ideas on this. In general, there have to be several elements: first of all availability, then you need affordability and resilience to resist to shocks. So far, these are the elements of my consideration of China’s energy security.
Which one of those three do you see as the biggest concern for China?
I think at the moment there is big concern about availability. As the cost is already increasing we will have to face the affordability problem pretty soon. And at the moment China is not really having strong capacities against shocks so resilience is something we would like to build in the future.
When you speak about affordability, do you believe that unconventional fossil fuels could have a positive impact on the price structure or do you think this is not going to happen, as OPEC will dictate the price anyway?
It really depends. Do you think the unconventional oil and gas is going to make the price cheaper or more expensive? This is a question many people can’t answer. At the moment, shale gas has driven down the price of gas but has not yet shown an impact on the international gas market. America alone is now enjoying the cheap price. People talk about it maybe influencing the price in the future. But even for shale gas itself the price still rebounced back because the cost is increasing when you have to continue to drill into the field. People also argue that shale gas was undervalued before and that the cost will increase and it is already increasing in the U.S. Unconventional oil will require more cost to be extracted and is still very expensive. I don’t see that this will have a big impact on the conventional oil price and it can only work for most unconventional oil development if the price is high enough. I hope we will never use it but with conventional oil becoming increasingly scarce I believe that we have either have to use new energies or otherwise people will start to use unconventionals, that impose a huge risk to the environment and climate change.
How do you see the potential for China? There are issues like the technologies but also the water shortage, which seem to be the reasons why China might not be able to fully develop its shale gas resources.
People are now talking about the energy-water nexus. But food also belongs in there. Food, water and energy are the three basic things people need for life and they affect each other. In China, the food sector uses most of the water and also drilling water is a very energy intensive sector. In terms of agricultural productions we use a lot of fertilizer and fertilizers are energy intensive and at the same time emit a huge amount of green house gases and affect the water scarcity in North China. It is a very interdependent system and we have to find a way to not over address one sector and cause more problems in another. There are already some cases such as hydropower: it is reducing greenhouse gas emissions but increasing water scarcity downstream. Some of the plants are supposed to help agricultural productions because they can provide the irrigation water when river is running low. So which one of the sectors do you give a higher priority and how do you create a balance? These are difficult questions to answer and many people are currently doing research on this, using China as an example.
Erica Downs wrote in her thesis in 2004 “China’s Energy Security” [4] that in China there is competition between economic nationalists with a more national security objective and economic liberals with more of a market objective. Today, do you still see that there is a division in China between both camps concerning energy security?
I am not quite aware of that debate but I don’t think there is such a huge difference as those two still have different angles and require different elements. But to many extents they also require the same things: stable environment and secure sea-lanes. National security in China today encompasses so many different things. Energy security is one element for sure, it is a big part of national security while energy itself will also affect the economic growth and is internationally market driven. So for example when we talk about China sending the navy to guard the trade routes to Africa around Somalia that is to protect our economic activities and it is also part of our national security considerations. And as 80% of Chinese oil and even more of our trade comes through those sea-lanes, this is of course a big part of both national security and market considerations. It affects China’s economic growth and development.
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Thank you very much for the interview.
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[1] More about Wang Tao at: http://carnegieendowment.org/experts/?fa=681.
[2] Wang Tao, “Recharging Electric Vehicle Policy”, Global Times, September 13, 2013: http://carnegietsinghua.org/2013/09/13/recharging-electric-vehicle-policy/gqn8.
[3] More on Gal Luft’s ideas about flex-fuel vehicles in our interview with him from November 7, 2013.
[4] The discussions and similarities between both economic nationalists and economic liberals are described in Erica S. Downs PhD Dissertation (China’s Energy Security/2004) from Princeton University.
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