In Part 1, I explained how quickly China’s solar and wind industry have scaled up leading to carbon likely peaking last year.
Its’s quite clear that China’s power grid is undergoing massive transitions to low carbon tech. However, electricity is not the only place that need to be de-carbonized. China continues to import large amount of crude
11.4m bpd of crude import & 1m+ bpd of refined oil export → 10m bpd import needed for domestic demands (possibly lower if we account for crude going into SPR over past few years). Aside from crude, China also imports large amount of Natural Gas
They imported over 170 bcm of NG through pipeline and LNG last year. 44% of NG were imported. China is only self sufficient for 25-30% of crude needs.
Based on my calculation, China spends over $300B per year on crude and natural gas. Very little of this is used for electricity generation. Most of this is used for transportation, industries, petrochemicals and heating. How well is China actually moving toward reducing carbon footprint from oil and natural gas?
Well, China’s movement in electrifying passenger vehicle is well known. I expect over 40% of PVs this year will be NEVs. NEV market penetration may reach over 50% in a month later this year. That will lead to significant less gasoline usage. It’s likely we will have minimal ICE car sales in 5 years. That will lead to a collapse in gasoline demand since people will increasingly dump their ICE cars to follow the EV usage trend.
Commercial vehicle sector is also electrifying, but at a slower pace. City buses are mostly already electrified. Here is a chart of bus sales from past year. BYD (which only produces electric buses) was number #2 in overall bus sales. I figure overall BEV penetration is probably over 50%.
Unfortunately, coaches and trucks aren’t electrifying as quickly. BYD is not a factor in these markets at all. In trucking, BYD is just making a concerted effort now with T5DM. It’s not a factor in heavy duty trucks where just 34.2k out of 910k are NEVs. Or even light trucks where just 46.8k out of over 1.2 million are NEVs. Much of the decarbonizing in the past year is the transition from diesel to CNG fuel trucks. I do believe that as tech continue to develop & battery cost continue to come down, NEVs will become more attractive in trucking/tractor segment. Commercial vehicles are likely 5 years behind passenger vehicles in electrification. We will also likely to see good number of fuel cell vehicles here.
Electrifying commercial vehicles is important since emissions from this segment is probably 50 to 100% of emissions from the much larger passenger vehicles segment.
Beyond that, forklift, AGVs, mining trucks, construction vehicles are all electrifying based on many of the recently announced projects.
This only tells us that vehicle electrification is on track. Gasoline and diesel usage will come down. What about industrial usage or petrochemicals or shipping? For that, we will have to look at Hydrogen. I will explore that next.
Thank you for your great insights always
Extremely insightful , thank you! Looking forward to part 3