Speaker 1: With Laurent's segal end from London and Gerard Reed from Berlin.
Speaker 1: This is redefining energy.
Speaker 2: Today. On redefining energy, we're going to talk about that
Speaker 2: elephant in the room China.
Speaker 3: Yeah, the panda, Yeah, the panda.
Speaker 2: Sorry, you're dead right, panda in the room.
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Speaker 3: Back to the show, and whatever China does in terms
Speaker 3: of energy technology investment has so much impact on the
Speaker 3: rest of the world. But also we have, I believe,
Speaker 3: a very distorted view of what China does and what
Speaker 3: China brings. So we thought it was a good idea
Speaker 3: to bring someone who can talk about that interaction between policy, investment,
Speaker 3: entrepreneurships and especially with what's happening in the Gulf right now?
Speaker 3: Is China going to be a winner or loser? What's happening?
Speaker 3: So jobbed, very very fast field of conversation. Okay, we
Speaker 3: have decided to bring doctor Michael Maidan. She is the
Speaker 3: head of the China Energy research at the Oxford Institute
Speaker 3: for Energy Studies and she knows the China system inside out.
Speaker 2: So let's bring around the show.
Speaker 3: Michele. Welcome to the show.
Speaker 2: Thank you so much, and the excited to talk about
Speaker 2: the topic today, which is China and really what's going
Speaker 2: on and energy and maybe it let me just kick
Speaker 2: off the same one. If I look from the outside,
Speaker 2: the most astounding thing for me is how China has
Speaker 2: electrified its society and brought so many people out of
Speaker 2: poverty over the last twenty years. But maybe talk about
Speaker 2: that as a starting point.
Speaker 1: You're right, the sort of transformation of China's energy system
Speaker 1: in the past twenty years has been phenomenal just in
Speaker 1: terms of access to energy growth affordability. Though the last
Speaker 1: five years have been really striking. If you look at
Speaker 1: some of the charts of penetration rates, of renewable production
Speaker 1: rates of all the clean technologies they have the sort
Speaker 1: of es curve Israel, and that has happened really in
Speaker 1: the space of five years. It's been building up in
Speaker 1: the system for much longer through industrial policies and innovation,
Speaker 1: but the impact of that big electrification push with it decarbonization,
Speaker 1: has really happened over the past five years. That said, right,
Speaker 1: China has. And it's really fun to talk about the
Speaker 1: China numbers because it is the biggest of everything. It's
Speaker 1: got the biggest power system and we've just demand as
Speaker 1: exceeded ten thousand tarawa hours last year. It's got the
Speaker 1: biggest renewable deployment in the world, and last year alone
Speaker 1: it added four hundred and thirty gigawatts of wind and solar.
Speaker 1: But at the same time it added more coal capacity
Speaker 1: than India did over the past decade. It's the biggest
Speaker 1: importer of crude oil, it's the biggest consumer and producer
Speaker 1: of coal globally. So I think the story beyond that
Speaker 1: recent electrification is also an optionality and flexibility story, where
Speaker 1: China has all of the above, and now we're coming
Speaker 1: to a point of how do you mix and match
Speaker 1: those energy sources.
Speaker 3: Looking back at those China mus volume and it's always
Speaker 3: a bit difficult to know looking back, but you know
Speaker 3: you've got those plans every five years. Now we are
Speaker 3: entering in the fifteenth one. How much would you say
Speaker 3: is stuck down coming to sparty this side and everybody follows,
Speaker 3: and how much is market led, how much is province led?
Speaker 3: Or is it very difficult to assess? What are the
Speaker 3: drivers of that electrification?
Speaker 1: I think it's electrification and system change more broadly, that
Speaker 1: comes from clearly a top down vision. There's a guiding principle.
Speaker 1: There is a very strong central power. Certainly in the
Speaker 1: past decade, you sort of you can look back and
Speaker 1: see not as strong centralized power, but an ability to
Speaker 1: give a sense of direction, to put resources behind that
Speaker 1: sense of direction. Some of it is subsidies and active support,
Speaker 1: and some of it then filters down to local governments
Speaker 1: that give tax cuts or tax brakes and cheaper land.
Speaker 1: So you do have an enabling policy environment that can
Speaker 1: trickle down. But within that, once that's created, it's hugely competitive,
Speaker 1: and you've got the EV's companies and the battery companies
Speaker 1: that are now making very small margins because they're competing
Speaker 1: with each other for the market share. So you haven't
Speaker 1: actually a really interesting dynamic of central government directives that
Speaker 1: then spurs a lot of competition, and it's not always
Speaker 1: been efficient and perfect. We've got this image of the
Speaker 1: monolith in Beijing that is able to direct everything in everyone.
Speaker 1: The reality is way more complicated and fragmented. You look
Speaker 1: back at evs, there was so much subsidy fraud and
Speaker 1: there is so much adjustment and consolidation in a number
Speaker 1: of sectors. You know, that premise of the central government
Speaker 1: being able to guide the sector has also led to overcapacity.
Speaker 1: We've seen it repeatedly in a number of industry and
Speaker 1: you know, now it's called involution in China and it
Speaker 1: will lead to a round of consolidation. But it's a
Speaker 1: really confusing from the outside combination of top down directives
Speaker 1: and yet a lot of bottom up innovation, competition, creativity,
Speaker 1: and local government sort of stepping in to protect their
Speaker 1: needs and their interests, which makes it really confusing.
Speaker 2: You know, I did a lot of financing in the
Speaker 2: Chinese solar market like fifteen twenty years ago, and the
Speaker 2: thing that I was struck by then was was the
Speaker 2: animal spirits, which is they basically just went out there
Speaker 2: and said's complete and there was like, I don't know,
Speaker 2: the probably was one hundred companies at the time, and
Speaker 2: then if you look at the way the market's consolidated
Speaker 2: now there really is only a handful of them left.
Speaker 2: And the other thing that then happened in all of
Speaker 2: that is these companies became the technology leaders as well.
Speaker 2: It wasn't that they were just low cost producers. They
Speaker 2: did everything better quicker than we did in the West.
Speaker 2: And I suppose when I look at the EV space,
Speaker 2: I would assume the same is going to happen, or
Speaker 2: do you see it differently.
Speaker 1: I mean, there's absolutely a consolidation happening in the EV
Speaker 1: space and in the battery space. We're going to cut
Speaker 1: down from over one hundred companies to a handful of leaders.
Speaker 1: What's also been interesting, sort of in addition to these
Speaker 1: animal spirits in the clean tech space, which is very
Speaker 1: very different to traditional oil gas power, these are new companies.
Speaker 1: These are private entrepreneurs that have come into the space,
Speaker 1: often from adjacent industries, from batteries or electronics. They've shaken
Speaker 1: things up in China as well. They have the EV
Speaker 1: companies or a massive challenge for the incumbents that have
Speaker 1: been competing with ice makers and Western automakers. So what's
Speaker 1: really been interesting there is how they've come in from
Speaker 1: a very different sector. They've innovated, they've shaken up practices.
Speaker 1: They've also been gradually able to vertically integrate, some more
Speaker 1: than others. But they've gone from the batteries gradually into
Speaker 1: the mining as well. Like BID has its own fleet
Speaker 1: of ships now in order to be able to move
Speaker 1: the cars around, so there's also sort of ability to
Speaker 1: weather different storms. I guess on the entire supply chain
Speaker 1: to your critical mineral costs are taking a hit, then
Speaker 1: you've got a different segment of the supply chain in
Speaker 1: which you're making money, and that's really helped them. The
Speaker 1: bigger and the most powerful ones are the ones that
Speaker 1: are more vertically integrated, which I think is very different
Speaker 1: to what we're seeing in the West. Tends to still
Speaker 1: be quite siloed and quite specialized.
Speaker 2: I was going to add one. I think it's amazing
Speaker 2: really is when I look at say something like BID,
Speaker 2: which is you've gone from sort of a million car
Speaker 2: production to five million car production, and at the same
Speaker 2: time you suddenly have eight hundred and fifty thousand employees.
Speaker 2: It's for me it's the speed at which these companies scale,
Speaker 2: which is for me astounding because we've never seen anything
Speaker 2: like this in the West in terms of what they did.
Speaker 2: And as you said, they're vertically integrated. So BID makes
Speaker 2: its own batteries, it makes its cars, it makes its
Speaker 2: power electronics, and it has its own shipping fleet.
Speaker 3: Right.
Speaker 1: But obviously, you know, human capital is something that China
Speaker 1: has lots of. It is BYD that has one hundred
Speaker 1: and twenty thousand R and D employees. That's kind of
Speaker 1: scale that we can't really get in the West. And
Speaker 1: that's again it's an interesting combination of corporate strategies but
Speaker 1: also government enabling policies. We've written about this quite a bit,
Speaker 1: where you know, in the West we're focused on its subsidies,
Speaker 1: it's technology transfers or technology theft, and that's the only
Speaker 1: thing that the Chinese are good at. If you look
Speaker 1: at some of the policy framework or sort of what's
Speaker 1: happening more broadly in industrial policy, there's industrial clusters and manufacturing hubs.
Speaker 1: That means that you have a huge ecosystem that enables
Speaker 1: this innovation and enables gill and talent and R and D,
Speaker 1: and it makes that whole feedback loop between your production
Speaker 1: and your consumption much faster. If it takes two to
Speaker 1: three years to come up with a new auto with
Speaker 1: a new car model in the West, I think it
Speaker 1: takes nine months in China. And just the fact that
Speaker 1: you have these ecosystems is really significant, and that's a
Speaker 1: feedback loop between government and corporate that has really helped
Speaker 1: some of these innovations and the low carbon technology development.
Speaker 3: Now, Michael, let's look about the eight hundred pound gorilla.
Speaker 3: Energy security. It's a fundamental of the China energy pretty see.
Speaker 3: Can you talk about energy security when it comes to
Speaker 3: the power sector, and then with address oil and gas,
Speaker 3: especially considering what's happening in the Gulf right now.
Speaker 1: If you look at China's power sector, if you look
Speaker 1: at power supplies in China, they're overwhelmingly domestic. It's mostly coal.
Speaker 1: Ten percent of Chinese coal is imported, and then it's nuclear, renewables, hydro,
Speaker 1: a fraction of gas. So really the power system is
Speaker 1: predominantly self sufficient. Oil and gas. China has four million
Speaker 1: barrels a day of oil. That's roughly the size of
Speaker 1: Iraqi production. So it's got massive oil reserves. It's got
Speaker 1: I think the fourth or fifth largest gas reserves globally,
Speaker 1: But obviously demand is outstripped that massively, So yes, you
Speaker 1: can argue an electrification is denting oil demand growth. Gasoline
Speaker 1: diesel demand in China have already peaked and that's trending downwards.
Speaker 1: And yet oil imports are not declining. And if you
Speaker 1: look at future four cots, even in a world where
Speaker 1: it's energy transition electrification advances rapidly, it's still the biggest
Speaker 1: crude importer globally. Just because of the size of the system.
Speaker 1: You're still going to have petrochemical demand and jet fuel
Speaker 1: demand which sort of offset some of the decline, and
Speaker 1: transport fuels. But the point is that that vulnerability doesn't
Speaker 1: go away. What they have again done is giving themselves
Speaker 1: optionality and a hedge and flexibility in their stockpiling crude.
Speaker 1: But what we can see is that China's energy security
Speaker 1: policy seems to be vindicated from these first few weeks
Speaker 1: of the crisis in the Gulf in terms of oil supplies,
Speaker 1: the fact that China has diversified its import sources, So yes,
Speaker 1: it relies on the Golf for fifty percent of its crude.
Speaker 1: But you can flip it and say it relies on
Speaker 1: other sources for fifty percent of its crude. It has
Speaker 1: stocks that it's not releasing just yet, but it does
Speaker 1: have that as a cushion. And the big electrification program,
Speaker 1: so moving away from gasoline and diesel to electrification of
Speaker 1: passenger vehicles and trucks, which have really been gaining momentum
Speaker 1: over the past year. That serves as a shock absorber.
Speaker 1: Now that doesn't mean that China is completely insulated from
Speaker 1: the shocks in the Middle East. Higher prices are impacting
Speaker 1: Chinese end users and Chinese refiners. There is a physical
Speaker 1: shortage that is gradually appearing, and there are various indications
Speaker 1: about exactly how many Chinese tankers are moving through the
Speaker 1: Strait of Hormuz. But also that as Saudi is finding
Speaker 1: other export routes, mainly through Yamboo, then the Chinese refiners
Speaker 1: are able to load some crude. There is still going
Speaker 1: to be a shortfall, and I think the compounding impact
Speaker 1: of the lack of availability of oil of products, the
Speaker 1: precursors to petrochemicals are really important, and the shortages and
Speaker 1: price increases in gas are going to impact chemicals, for
Speaker 1: instance in China, But overall, if you compare China to
Speaker 1: other Asian countries, it is really I don't know if
Speaker 1: the least ex posed, but it has the most significant
Speaker 1: buffers and shock absorbers in the system right now. And
Speaker 1: what about metals, I think metals is something that's going
Speaker 1: to play out over time with a variety of sort
Speaker 1: of second and third order impacts from what we're seeing
Speaker 1: right now. And the other thing we forget when we
Speaker 1: talk about China's dominance in clean tech, they still need
Speaker 1: the minerals lithium, cobalt, rare, they have plenty, but manganese, nickel,
Speaker 1: that's all still important in order to process and to
Speaker 1: produce clean tech. So it's not like they're completely independent.
Speaker 2: I hear very clearly what you're saying there. What's for
Speaker 2: me interesting about China is the fact that what they
Speaker 2: did is they did see this dependence and said, adism,
Speaker 2: we need to at least lessen it. And they made
Speaker 2: this decision maybe fifteen years ago that one we would electrify.
Speaker 2: But the other thing that they did was they also
Speaker 2: did it as part of their industrial strategy and geopolitical strategy.
Speaker 2: Industrial strategy is, hey, let's produce all these components and
Speaker 2: then geopolitical strategy is you be into export all of
Speaker 2: these And I think that they've done an amazing job
Speaker 2: of taking this strategic view of the future. Like again
Speaker 2: correctness of our own, we might say they were just lucky,
Speaker 2: but I don't think. I think it was a real
Speaker 2: plan behind what they've done.
Speaker 1: Absolutely, there was absolutely an industrial policy and an industrial vision.
Speaker 1: And if you remember ten fifteen years ago, there was
Speaker 1: talking China about moving away from industrial capacity, relying more
Speaker 1: on consumption and services. And they've sort of realized that
Speaker 1: if you lose your industrial capabilities, you also lose economic
Speaker 1: competitiveness and a defense industrial base, and they've sort of
Speaker 1: slowed down that move towards a service oriented industry and
Speaker 1: sort of a post industrial economy. So they absolutely recognized
Speaker 1: the importance of industry and industrial capabilities. I think a
Speaker 1: lot of the clean tech there were different policy strands.
Speaker 1: So for evs, it was about a combination of of
Speaker 1: leap frogging ice technologies that they weren't going to be
Speaker 1: able to compete with energy security that led them to
Speaker 1: develop the EV sector. Solar started as an export industry, right,
Speaker 1: it was a few entrepreneurs, as you know, well that
Speaker 1: came back to China and said, look, they're feeding tariffs
Speaker 1: in Europe, let's capitalize on that. And it only gradually
Speaker 1: became a domestic industry. So they started from different perspectives,
Speaker 1: but again there was that consistent industrial policy and that
Speaker 1: move throughout the value chain. Because China also has so
Speaker 1: many resources and natural resources that today it is in
Speaker 1: an extremely strong position in those supply chains. I'm not
Speaker 1: sure it's set out to dominate them, but it clearly
Speaker 1: had a vision that these were things that China could
Speaker 1: and should develop, with lots of mistakes along the way,
Speaker 1: but today are pretty successful, a pretty significant position globally.
Speaker 1: That gives China a huge amount of leverage.
Speaker 3: Now let's talk a bit about the narrative from the
Speaker 3: West looking in China, what is real and what is balloons?
Speaker 3: We need to pop? Because there were very successful books
Speaker 3: recently saying okay, without Apple transferring so much expertise, they
Speaker 3: would never been able to produce a smartphone. There is
Speaker 3: the view which I share that the arrival of Testla
Speaker 3: and Shanghai somehow has boosted the development of evs. And
Speaker 3: of course, what is US brilliance versus China execution? Because
Speaker 3: you go from a football field to a functioning plant
Speaker 3: in less than a year. I mean, nowhere else in
Speaker 3: the world is that possible. So my question is what's
Speaker 3: real and what is fantasized.
Speaker 1: Everything is real, The question is how do you contextualize
Speaker 1: it and what do you make of it. Every data
Speaker 1: point probably that you'll read about China is true, the
Speaker 1: huge increases in power capacity, but also the fact that
Speaker 1: coal is still hugely significant, and it's such a vast
Speaker 1: and big country that you will have innovation that is
Speaker 1: based on probably pure technology theft, and equally a lot
Speaker 1: of technology that's based on a lot of hard work,
Speaker 1: home grown industry and innovation. So all of the above,
Speaker 1: what's important is the context and the nuance, which we
Speaker 1: lose very very quickly because the conversation about China, and
Speaker 1: I would say the energy transition becomes breathless and siloed
Speaker 1: very very quickly. China's good, China's bad. China can innovate,
Speaker 1: China can only steal. That's one of our biggest problems.
Speaker 1: If you look back historically, China's clean tech development has
Speaker 1: been based around a lot of technology transfers. Initially, there
Speaker 1: was a lot of innovation that came from the West.
Speaker 1: Where China has been very very good is at process innovation,
Speaker 1: at scaling up and again using that massive industrial base
Speaker 1: and skill base to scale up. I wouldn't say, though,
Speaker 1: that China cannot innovate today. First of all, that process
Speaker 1: innovation has been hugely additive and significant when you look
Speaker 1: at it again, to date, China has been better at
Speaker 1: sort of that process innovation rather than design intensive technological innovation.
Speaker 1: So you have less of those disruptive technologies coming from China.
Speaker 1: It doesn't mean that it's not going to happen. I
Speaker 1: do think that today in the system where clean tech
Speaker 1: or low carbon technologies are so developed, that ability for
Speaker 1: incremental innovation is just huge. We talk about sodium mine batteries,
Speaker 1: of all, the Chinese are doing that already. Part of
Speaker 1: it is to reduce dependence on lithium, and part of
Speaker 1: it is just because there's an ecosystem there. So there
Speaker 1: was that notion that China can't innovate, and then it's
Speaker 1: all the innovation and the growth in clean tech is
Speaker 1: because of subsidies and technology theft. I think that's wrong.
Speaker 1: It doesn't mean also that China is completely independent and
Speaker 1: is now going to dominate everything. There are areas where
Speaker 1: China does need the West and does rely on the West,
Speaker 1: and obviously synergies and collaboration would be great.
Speaker 2: What I was going to say, the other advantage that China,
Speaker 2: I think has is just a fact that it has
Speaker 2: a big market and the government doesn't just sort of say,
Speaker 2: go out there and build stories. They go, well, let's
Speaker 2: create a market for let's create a mark for evs.
Speaker 2: And so what there is is massive amount of learning.
Speaker 2: So if I take the case of say electric vehicles, well,
Speaker 2: actually they started with electric scooters, and they started years ago,
Speaker 2: and so people were sort of normalized in the around
Speaker 2: oh yeah electric, yeah, okay, so power cable, so what
Speaker 2: while we the West have not been normalized in and
Speaker 2: around it. That's the other big advantage that they have
Speaker 2: is that they're just more joined up in the way
Speaker 2: they go and approach these things.
Speaker 1: The electric scooters and small evs is not an example
Speaker 1: of a joined up strategy or of Beijing sort of
Speaker 1: say having this vision. Electric scooters originally and electric motorcycles
Speaker 1: were not allowed, and this was something that developed because
Speaker 1: there were batteries and because they were low cost, and
Speaker 1: innovation just happened because this was such a huge market.
Speaker 1: It emerged and it wasn't regulated to begin with, and
Speaker 1: the government actually tried to crack down on it. But
Speaker 1: then it became such a lucrative market that it's part
Speaker 1: of the market. That's the other thing that we miss
Speaker 1: a little bit with this vision that central government has
Speaker 1: it all planned and designed, and we don't appreciate just
Speaker 1: how much organic growth and room for innovation there is
Speaker 1: in I guess at the margins of the market, but
Speaker 1: the margins of a market like China that just becomes
Speaker 1: very quickly transformative because of the numbers.
Speaker 3: And to follow on your point, I add the privilege
Speaker 3: to see Stella l the number two of BIDE at conference.
Speaker 3: My god, what a rock star. She started a carry
Speaker 3: on parking lots waiting that the clowns is open. It
Speaker 3: is to supply boots and she would come with her
Speaker 3: samples of imitated the Sangyo batteries. And I mean, look
Speaker 3: what Biada has become. You can have all the plans.
Speaker 3: I mean every country make plans. Two ordered countries in
Speaker 3: the world to ordered plans, but some deliver because you
Speaker 3: have a generation of entrepreneurs. Zanget c ATN and so on,
Speaker 3: which I mean those people are absolutely remarkable, and it's
Speaker 3: always very puzzling that the Chinese system looks very monolithic
Speaker 3: and top down, as you say, But some heroes, some
Speaker 3: crazy entrepreneur has managed to put their energ and reinvest
Speaker 3: like crazy and developed. Now okay, we talk about Bady,
Speaker 3: but it's the size now they're reaching is absolutely insane.
Speaker 3: They mean more car Lastion, th and Ford really for
Speaker 3: being there fo one hundred plus yours.
Speaker 1: And I think the demand certainty is something that's really
Speaker 1: really important, where again for low carbon technologies, there has
Speaker 1: been consistency in the demands actually throughout, but in the
Speaker 1: policy again where we focus on subsidies, there's been subsidies
Speaker 1: and government support for production of all of this kit
Speaker 1: but also for demand and then for the infrastructure to
Speaker 1: go with it. So you've had that consistency of commitment
Speaker 1: that has been really really significant, and you have had
Speaker 1: these entrepreneurs that have been able to come in. But equally,
Speaker 1: that's one side of the energy system, the coal, oil,
Speaker 1: gas power. These are not private mavericks. These are state
Speaker 1: owned companies with a massive legacy of a bureaucracy and
Speaker 1: a responsibility for energy security and you know, operating in
Speaker 1: a pricing system that is set by the government and
Speaker 1: is quite hard to navigate and juggle through. So we've
Speaker 1: got the two sort of images of China that coexist,
Speaker 1: which again to your question, which I think is a
Speaker 1: brilliant question. Everything is true and sort of nothing is
Speaker 1: true unless you can textualize it.
Speaker 2: One thing that I'm really interested in is the environmental
Speaker 2: side of things, because it's very tear you go to
Speaker 2: China to day and you compare Shanghai to ten years ago,
Speaker 2: that just the air quality is just in a different league.
Speaker 2: In fact, it's probably better than most Western cities. Is
Speaker 2: that by accident or was that part of their strategy?
Speaker 1: Air quality was a massive driver of change, and if
Speaker 1: you remember twenty twelve to thirteen, just about the time
Speaker 1: of a leadership transition, there was heavy pollution in China.
Speaker 1: If you remember the headlines of Airmageddon, it was impossible
Speaker 1: to be engaging. It was stifling, and there was a
Speaker 1: lot of analysis in China as well at the time
Speaker 1: about the economic costs of deteriorating local air quality, and
Speaker 1: for many, many years actually efforts to improve air quality
Speaker 1: where the drivers have changed so evs as well were
Speaker 1: part of that. There are no sort of known climate
Speaker 1: deniers in the Chinese leadership, so it's not the climate
Speaker 1: is a contested issue, the need to improve climate, but again,
Speaker 1: historically it's been about local air quality that's really been
Speaker 1: a driver. What maybe a difference with the West, at
Speaker 1: least the West ten years ago, was that it was
Speaker 1: one enabling factor for change in the energy system. And
Speaker 1: so the need to improve air quality alongside the industrial competitiveness,
Speaker 1: alongside a positive position in climate diplomacy. Most of the time,
Speaker 1: all of that worked together in order to enable this
Speaker 1: shift in China's energy system, but climate alone was never
Speaker 1: a driver. And I think climate and the need to
Speaker 1: reduce carbon emissions, which right China still has a target,
Speaker 1: albeit quite nebulous, to peak emissions before twenty thirty and
Speaker 1: reaching at zero by twenty sixty. That will slow down
Speaker 1: if it's seen as interfering with economic growth or with
Speaker 1: industrial competitiveness. The good thing is that it goes hand
Speaker 1: in hand with economic growth and industrial competitiveness right now.
Speaker 1: But it's more about air quality than it is about
Speaker 1: carbon emissions.
Speaker 3: Michelle, to wrap this great conversation last question with what's
Speaker 3: happening in the Gulf, and you've said that it's a
Speaker 3: vindication of china energy strategy, going local, going tech, going green,
Speaker 3: building reserves. What do you think that the impact of
Speaker 3: events now will have on the declination of.
Speaker 1: The few plant There's a lot of continuity. If we
Speaker 1: assume that there is vindication that these things are working,
Speaker 1: there's going to be more continuity than anything else. And
Speaker 1: are sort of doubling down on these principles of encouraged
Speaker 1: domestic supplies, including in minerals stockpiling. If they draw down
Speaker 1: or when they draw down on reserves, they're going to
Speaker 1: have to replenish them. And the fifteen to five year
Speaker 1: plan does mention oil stock specifically, so that's going to
Speaker 1: continue once prices calm down. And this kind of focus
Speaker 1: on technology, but its technology is sort of its renewables
Speaker 1: and coal. So the issue is that China has its
Speaker 1: own domestic resources. Renewables are great, but coal is really
Speaker 1: a significant source of energy security, and we might actually
Speaker 1: see more coal to chemicals. We were seeing this sort
Speaker 1: of peak in coal demand that could actually be temporarily
Speaker 1: reversed because gas, especially with Raslafan, with Katari production out
Speaker 1: now for potentially a couple of years that will undermine
Speaker 1: the role of gas in the energy transition and really
Speaker 1: move the story to renewables and coal and clean tech.
Speaker 1: I guess the other interesting question is what happens to
Speaker 1: Chinese exports of clean tech. There's a lot of talk about, well,
Speaker 1: this only accelerates the move to renewables, but also in China,
Speaker 1: and we talked about this, we're seeing a slowing in
Speaker 1: renewable adoption in electric vehicles because of domestic issues, because
Speaker 1: of price reforms and involution. All of the shock right
Speaker 1: now is also going to increase pressure on prices and
Speaker 1: on margins of all the clean tech producers in China,
Speaker 1: and I think governments around the world. While energy security
Speaker 1: sort of does increasingly look as though it runs through renewables,
Speaker 1: we'll have to see inflationary pressure, We'll have to see
Speaker 1: budgets and appetite to be dependent on China. I mean,
Speaker 1: I think there's a lot of talk about, you know,
Speaker 1: China winds or the kind of winners and losers. Way
Speaker 1: too early to talk about winners and losers. And you know,
Speaker 1: there are certain areas where there are clear advantages, but
Speaker 1: they're also huge dissident advantages. The point is that China's
Speaker 1: electrification and decarbonization will continue this focus on technologies of sufficiency,
Speaker 1: but there are lots of open questions, especially about the
Speaker 1: balance of power between the US and China and how
Speaker 1: that impacts perceptions of China's energy security.
Speaker 2: Well, I just want to thank you for a brilliant conversation.
Speaker 3: Really that was very enlightening. Yeah, very And of course
Speaker 3: we only have thirty minutes, and I'm sure we could
Speaker 3: speak for hours. But what I will remember, and because
Speaker 3: you're the expert, you speak Chinese, you read their documents,
Speaker 3: you go there, is that it's complex and simple. Ideas
Speaker 3: are just political acts, and you need to put yourself
Speaker 3: through their eyes and their perspective. So, Michael, thank you
Speaker 3: very much for coming on the show.
Speaker 1: Thank you both so much for having me job.
Speaker 3: I love those conversation, and especially I realized that I
Speaker 3: know very little about China.
Speaker 2: I think most of us know very little about China.
Speaker 2: But that's why we bring experts like her on. I
Speaker 2: call it the big elephant in the room. What You're right,
Speaker 2: it's the panda in the room. And it's incredible what
Speaker 2: they've done in the last fifteen years. If I think
Speaker 2: of in the areas that we're active, which is the
Speaker 2: renewables area. Really, you think fifteen years ago there was
Speaker 2: no major Chinese company that could brand name of right,
Speaker 2: and then suddenly you've got COTL batteries, number one in
Speaker 2: the world byde number one electric car manufactor in the world.
Speaker 2: In the solar space, you've got long Jinko. You can
Speaker 2: go on and on and on in terms of what
Speaker 2: they've built up. So it's been incredible, and we just
Speaker 2: have to keep an eye on what they do going
Speaker 2: forward because the thing that I like about China is
Speaker 2: that they really do take this long term approach and
Speaker 2: they link their economic policy there let's call it the
Speaker 2: foreign policy, their geopolitical policy, and even their environable ant
Speaker 2: policy together in these long term plans and they go
Speaker 2: out and execute.
Speaker 3: Yeah, for those who really want to dig a bit deeper,
Speaker 3: especially in the fifteen plan, I will put in the
Speaker 3: show notes what friends of ours Carbon Brief have put
Speaker 3: together following the release of the plan, and especially they
Speaker 3: work with an excellent expert, probably one of the best,
Speaker 3: alongside Automikael Medan with Lorie mil Verta. So a lot
Speaker 3: of links. Now, maybe my impression of the fifteen plans
Speaker 3: a bit wrong, but it's really a continuation of the
Speaker 3: fourteenth Plan, same leader, same technology. So everything is going
Speaker 3: to be about more digital, more energy, more vulnerable, more transmission,
Speaker 3: more that asset us, more of everything, and undimental targets
Speaker 3: about carbon intensity they have become a bit murky. So yeah,
Speaker 3: they try to have it both ways. And if there
Speaker 3: is a crisis, called is always there to fill the gap.
Speaker 2: What I take out of at Loran as a commitment
Speaker 2: to being an electro state, that's really what I take
Speaker 2: out of the right. Yeah, and that's the learning I
Speaker 2: think for us in the West. Is that the future
Speaker 2: because that's a technology based future. There's so much innovation
Speaker 2: going on in that whole area of electrical technologies and
Speaker 2: and of course obviously AI and digital related to that.
Speaker 2: That's the future, and that's why we need to jump
Speaker 2: on the bandwagon, you know.
Speaker 3: Yeah, because if you look at their relationship with specific fuels,
Speaker 3: and they were one of the biggest purchases of energy
Speaker 3: from Qatar, so now it's gone for we don't know
Speaker 3: how long. If you look at the situation in relation
Speaker 3: to oil, they still import twelve million baril of oil
Speaker 3: per day. If you look where those imports come from,
Speaker 3: where they used to come from Venezuela, so that's a
Speaker 3: bit at risk. They used to come from Iran, so
Speaker 3: that's a big question mark. And the rest is Russia,
Speaker 3: so forty percent of their imports come from sanctioned countries.
Speaker 3: That's a vulnerability. What they've done in the past two years,
Speaker 3: which is remarkable, is building their strategic Petroleum Reserve, which
Speaker 3: went from eighty days two one hundred and thirty days
Speaker 3: to just to give you an idea, the Strategic Petroleum
Speaker 3: Reserve of China it's sweet time, is bigger than the
Speaker 3: US Strategic Petroleum Reserve. They don't truly trust that all
Speaker 3: fossil fuel complex, and they've created a lot of buffer.
Speaker 3: I don't know who's going to be a winner and
Speaker 3: a loser with the current situation in the Gulf, but
Speaker 3: what is sure is that China has been smart enough
Speaker 3: to shelter itself from external shocks.
Speaker 2: I think I like the way you put that there
Speaker 2: on It's actually not about even winner a loser. It's
Speaker 2: just making sure that you've protected yourself. It's making sure
Speaker 2: you're not a loser. I'd say what it's about making
Speaker 2: sure you're not a loser, and they've definitely done that.
Speaker 3: Okay job. We thank doctor Michael Maidan. She's a brilliant researcher.
Speaker 3: She publishes a lot of very good research. We put
Speaker 3: the link in the show note as well, so make
Speaker 3: sure that anything you want to ask on China you
Speaker 3: can call her exactly.
Speaker 2: Absolutely, thank you very much, my friend. But I'm looking
Speaker 2: chat forward to chatting again next week.
Speaker 3: Absolutely looking forward to it.
Speaker 1: Thank you for listening to Redefining Energy.
Speaker 2: Don't forget to rate the show and subscribe on Apple Podcast, Spotify,
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