A quickie on China Shale and Renewables

China Shale Update, Quickie

Although significantly increasing its shale gas reserves, China is likely to fall way behind on its output targets. This due to lack of water, lack of infrastructure, deep drilling and low oil/gas prices. There are mainly two LARGE sources of energy that can replace chunks of China’s coal dependency: natural gas and nuclear. While conventional gas production is rising, China missed its annual shale gas target of 6.5 billion cubic meters in 2015. Having already cut production estimates by 2020 by ONE THIRD, China produced “only” 4.47 billion cubic meters of natural gas from shale in 2015. Last week,  Royal Dutch Shell Plc, said it was no longer pursuing it’s China shale venture. China aims to produce 200 million metric tons of crude oil and 144 billion cubic meters of natural gas in 2016, having added 1.12 billion tons of crude reserves in 2015. Of that, 217 million tons are recoverable, putting total recoverable reserves are 3.496 billion tons. China produced about 215 million tons in 2015.

Renewable, not stopping anytime soon!

Meanwhile, renewable energy is becoming cheaper to produce and a low-cost-of-oil environment for the foreseeable future has not stopped renewable energy investment, as this graph shows:

April 6, Capacity

Fig. 1: Installment in Power Capacity, 2008 to 2015 (BNEF)

While government subsidies were instrumental in getting the market started, now economies of scale are the true driver of falling prices. Cost of solar power has fallen to 1/150th of its level in the 1970s, while the total amount of installed solar has soared 115,000 times. Not too meaningful, given the bases of comparison. However, since 2000 the solar capacity has multiplied 7 times, while wind has multiplied 4x. These two graphs from BNEF is telling enough:

April 6, Falling Prices

Figure 2: Falling solar prices and Booming Installed Capacity (BNEF)

April 6, Solar and Wind

Figure 3: Capacity Doubling (BNEF)

 

So, how about costs? Coming down rapidly. Every time global wind power doubles, there’s a 19% drop in cost, and every time solar power doubles, costs fall 24%. according to BNEF. What is the conclusion? Coal is being phased out….good for the climate!

April 6, Coal

Figure 4: Coal phase out (BNEF)

 

 

 

 

 

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