By Liu Jianguo, Institute of Energy, China Academy of Macroeconomics Research
At present, energy transition is accelerating while the world is actively responding to climate change. More than 90 economies, including China, Europe, America, Japan, and South Korea, have proposed carbon-neutral goals, playing an obvious demonstration and leading role. Under the "double carbon" (“carbon peak” and “carbon neutrality”) goal, China's energy structure will accelerate the transition, which also puts forward higher requirements for the high-quality development of the chemical industry. The chemical industry shall optimize and adjust technology routes, strengthen R&D and innovation of disruptive technologies, promote low-carbon electrification of energy structure, strengthen coordinated carbon reduction of upstream and downstream industrial chains and product full life cycle, and prevent high-carbon lock-in.
Accelerated adjustment in China's energy demand structure
1. Coal demand will have a rapid decline after reaching its peak plateau
For a long time, coal has been an important backbone for China's economic and social development, and a bedrock and stabilizer for China's energy security. However, as a high-carbon fossil energy, the utilization and development of coal have been subject to strong constraints. During the 13th Five-Year Plan period (2016-2020), under the continuous advancement of the blue sky defense mission and clean heating requirement in northern regions, China adopted measures such as total amount control of regional coal consumption, terminal bulk coal management, coal-to-gas conversion, and total amount control of coal power. As a result, the proportion of coal consumption continues to decline, with a cumulative decrease of 7 percentage points in 2020 compared to 2015.
Recently, in order to ensure the security of energy supply during energy transition, it needs coal to continue to support the basic demand. However, bulk coal consumption will be cleared at an accelerated rate, in the meantime, the demand for coal in power sector is expected to enter a downward path around 2030, and coal-consuming industries such as steel, building materials, etc. will also enter an industrial adjustment stage. Therefore, the national demand for coal will drop sharply in the medium and long term.
2. Oil demand is expected to peak at the end of the 14th Five-Year Plan period (2021-2025)
New energy vehicles have shifted from subsidy-driven to market-driven, and degasification and electrification of transportation have become a general trend. In 2021, the sales volume of new energy vehicles in China reached 3.521 million; in 2022, it surged to 6.887 million, a year-on-year increase of 93.4%, and its market share reached 25.6%, 12.1 percentage points higher than that in 2021. By the end of 2022, the number of new energy vehicles in China reached 13.1 million, accounting for 4.1% of the total number of vehicles (see Figure 1).
Figure 1 Statistics on the sales of new energy vehicles in China in recent years
If the current development momentum could be maintained, the penetration rate of new electric vehicles in China would most likely exceed 50% in 2030, and the de-oilization and electrification of road traffic would accelerate. At present, the energy consumption of road traffic in China accounts for about 80% of the entire transportation. Once the electrification of road traffic is accelerated, it will lay a solid foundation for the de-oilization of traffic. Refined oil is currently the main consumption field of China's oil and with the saturation of refined oil consumption, oil consumption is expected to reach its peak at the end of the 14th Five-Year Plan period (2021-2025).
3. Natural gas will become the latest fossil energy product to reach the demand peak
Natural gas is a high-quality, efficient, green and clean low-carbon energy source,so expanding its utilization is of great significance for effectively controlling air pollution, promoting the optimization of energy structure, improving the level of energy services for urban and rural residents, and actively responding to climate change. In 2022, the apparent consumption of natural gas nationwide was 366.3 billion cubic meters.
In the recent future, although the growth rate of natural gas demand will decrease, its proportion in primary energy consumption may continue to increase, and is expected to exceed 10% in 2025. In the long run, the goal of carbon neutrality will accelerate the process of low-carbon energy, and the peak of natural gas may be accelerated, which is expected to appear around 2035. However, as a low-carbon energy source, natural gas will also be affected by carbon constraints. After emerging energy technologies such as renewable energy and energy storage gradually become mature, natural gas will also be replaced step by step.
4. Renewable energy continues to increase significantly
Over the past period of time, the proportion of non-fossil energy in China's primary energy consumption structure has continued to grow. By the end of 2022, the installed capacity of renewable energy power and nuclear power reached 1.27 billion kilowatts, accounting for 49.5% of China’s total installed capacity. The renewable energy power nationwide reached 2.7 trillion kWh in 2022, accounting for 31.3% of the national capacity and accounting 80.6% of China's new capacity. Now, the renewable energy power has become the mainstream of China's new power capacity. In 2022, the proportion of China's non-fossil energy consumption reached 17.5% of the total, and both the consumption and increment of non-fossil energy ranked first in the world.
China's wind power and photovoltaic power have basically achieved grid parity, and the installed capacity will continue to increase significantly. By 2025, new non-fossil energy power will account for more than 70% of all new capacity. In 2030, the proportion of new non-fossil energy power will exceed 100%, that is to say, all new electricity demand will be met by non-fossil energy power, and at the same time, it will also replace a part of the installed capacity generated by fossil energy power.
The green and low-carbon development path of the chemical industry under the "double carbon" goal
1. Optimizing and adjusting the technical routes
The "double carbon" goal puts forward higher requirements for the high-quality development of the chemical industry. It is necessary to strictly control the construction of new petrochemical projects, greatly raise the requirements for energy-saving, environmental protection and low-carbon development of new projects, and promote the high-end and characteristic development of end products; optimize the production process and technology route, strengthen the coordinated development of upstream and downstream industries, and achieve coupling efficiency in terms of mutual supply of raw materials, utilization of green hydrogen, and optimization of power and thermal structures; accelerate the diversified development of raw materials, increase the proportion and technology of petrochemical products produced from biomass raw materials, and moderately develop imported light hydrocarbon cracking to ethylene and propane dehydrogenation to propylene in coastal areas; strictly restrict the construction of projects such as coal-to-olefins and coal-to-ethylene glycol to prevent high-carbon lock-in.
2. Strengthen R&D and innovation of disruptive technologies
High-end chemical products are an important foundation for China's development of emerging industries of strategic importance, and there is a great development space in the process of achieving carbon peaking and carbon neutrality. Petrochemical enterprises should speed up the optimization of product structure, vigorously develop high-end new chemical materials, special and fine chemical products, etc.; increase investment in research and development of organic chemical products with low-carbon and zero-carbon emission, develop high-end chemical products based on green hydrogen, develop bio-based degradable plastics, bio-based chemical products, etc.; strengthen the R&D in the production, storage and transportation of green hydrogen, direct cracking of crude oil to olefins, biochemical industry, resource utilization of carbon dioxide, new degradable materials, 3D printing materials, bionic materials, etc.; focus on the development of new products and technologies in engineering plastics, high-end polyolefin materials, special synthetic rubber and other fields to achieve high-end development.
3. Promoting low-carbon and electrification transformation of the energy structure
Chemical enterprises can improve their clean energy consumption capacity through electrification transformation and direct power supply of renewable energy. The first is to accelerate the transformation of large-scale machine pumps driven by steam turbine from steam-driven to electric-driven, and gradually apply electric boilers, electric furnaces, heat pumps and other technologies to reduce coal consumption and increase the electrification. The second is to steadily promote the gradual transformation of factory-owned cogeneration power unit into pure heating, and increase the proportion of purchased electricity, especially the renewable energy. In the actual transformation, considering that cogeneration and steam balance can be implemented in steps, it can firstly transform the internal pure condensing and extraction condensing turbines into electric-driven. Afterwards, it should fully apply the electric-driven turbines and transform the factory-owned cogeneration power unit into pure heating unit. The third is to actively promote energy conservation and carbon reduction in public works, develop technologies such as combined heat and power, long-distance heating, speed up the cooperation and development of high-temperature gas-cooled reactor projects where possible, and deeply tap the potential of waste heat of internal process and combined heat and power units to meet enterprises and individuals’ heating demand in surrounding parks and towns.
4. Strengthen the coordinated carbon reduction of upstream and downstream industrial chains and product full life cycle
At present, China's plastic recycling rate is less than 20%, and in the future, the high-quality recycling rate is expected to increase to more than 50%, creating hundreds of billions of RMB output value and profit growth space, and reducing hundreds of millions of tons’ carbon emissions every year. The first is to develop green petrochemical products with high quality and durability to lead the high-level recycling of the whole society, increase investment in research and development of high-efficiency sorting technology and chemical recycling technology for waste plastics, and promote the technology development of polymer design, biodegradation under complete conditions, and alternative raw material of plastic. The second is to actively build a resource recycling system for recycled plastics, expand the market application channels for recycled raw materials, achieve high-value recycling of recycled plastic industry from the recycling to the market, and promote the large-scale, standardized, and low-carbon utilization of recycled plastic resources. The third is to actively utilize international resources and markets, optimize the import and export structure of plastic raw materials and products; actively expand the diversified channels of raw materials, reduce the products export of low-quality, low-value-added, and high-emission, and increase the export of high-value-added and high-tech content.
