It Starts With China, Part the second

Let’s start with China and see how it works. In 2010 they consumed about 100 quads. The EIA projects that to rise to about 163 quads by 2030 (based on Figure 14 of their report showing China as consuming 23.7% of the 739 quads projected for the world). That’s a CAGR percentage of 2.47%, higher than their estimated growth rate for the rest of the world—1.4%. But is it high enough? As mentioned above, China’s energy consumption grew in 2010 by over 11%, and they look set to match that in 2011.

On a per capita basis, China’s energy consumption rose from 29 million British Thermal Units (mbtus) to 56.2 mbtus between 1996 and 2006, the latest date available for examination at the EIA website.

China’s per capita GDP is also set to grow, from its 2010 level of $2,802 (measured in 2005 U.S. dollars) to $10,718 in 2030. And during this period, China’s population is also projected to grow from its current 1,341,335,000 to 1,393,076,000.[1]

Starting With a Bad Example

As it happens, Hungary had a very similar per capita GDP—$10,676—in 2006. It’s certainly not absurd to conjecture that their energy consumption per capita might be quite close to China’s energy consumption when it reaches Hungary’s level, whenever that might be.

Hungary’s per capita energy consumption that year was 114.7 million btus. Applying that to China’s projected population yields a total of 159.7 quads—and that’s far less than the EIA projects.

However, Hungary has been a well-developed nation for a long time, with a stable population and needing little in the way of fresh housing stock or road building, and its population’s needs for appliances and cars are for replacement rather than new acquisitions by people joining the middle class for the first time. The same would hold broadly true for other European countries with similar incomes. Is there a better example?

Apples and Apples

I offer for consideration Oman—a developing country whose population and GDP has grown quickly in recent decades, if not as quickly as China’s, and which had a per capita GDP of $11,528 in 2006. Their per capita GDP doubled between 1980 and 2006, showing that development was vigorous and sustained, much like China’s.

Although much smaller than China, Oman has many parallels, even to the extent of using 5-year plans to steer their economic development. They have spent the last 40 years taking a development path that may not be radically different from what China will be doing in the next 25. Their population growth rate has been similar to what China expects. They have a long coastline, and maritime developments may be similar between the two. Their neighbors have been as touched and troubled as China’s. The CIA World Factbook lists many features in common. So Oman seems a very good comparison and far more appropriate than Hungary, primarily due to China’s continuing development of basic infrastructure and the number of people moving into the middle class over the next 20 years.

Oman had per capita energy consumption of 177.2 mbtus in 2006. If China’s per capita energy consumption were to reach the same level as Oman’s, it would total almost 247 quads. Whether China achieves that level of development in 2020, 2035 or 2050 is not significant here; when their per capita GDP approaches $11,500, their energy consumption may be near 250 quads. And as far more analysts make their living projecting financial trends than energy consumption (and have far more at stake), we would expect to see fairly accurate projections of when China would arrive at that point. If the EIA has their GDP figures right, it will be in 2035. The Price Waterhouse Coopers study mentioned earlier predicts that China’s GDP will grow more quickly (at a 6.3% CAGR). If that’s correct, it would happen in 2032.

I should look at one more point before expanding our examination. Is it realistic to think that China actually can provide adequate energy to achieve the increase demanded by their rising GDP? After all, we are talking about a rise from 56 mbtus per person to 177 mbtus in as short a period as 20 years.

It would be nice if history provided some examples of that happening in non-island countries (island countries frequently have wild swings in energy consumption for a variety of reasons, usually stemming from dramatic changes in the primary fuel sources used).

There are several—the states comprising the former Yugoslavia increased per capita energy consumption from 77 mbtus to 174 between 1980 and 2006, and Iceland went from 250 to 348. And a number of countries either doubled (Turkey, Hong Kong) or even tripled (Malaysia) per capita energy consumption during the same period. And, as luck would have it, Oman doubled its energy consumption and per capita GDP between 1980 and 2006. There is also one other country that tripled its energy consumption in that time frame—China went from 17.6 mbtus per capita in 1991 to 56.2 in 2006. So it can be done.

Few people think that China will grow at the same rate it achieved over the past few decades. Indeed, very few developing countries—actually, no developing countries—have an unbroken streak of continuous growth at high levels for the fifty year period that we’re referring to for China. But then, very few believed that China could maintain this high rate of growth over the past three decades…


[1] Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2010 Revision, http://esa.un.org/unpd/wpp/index.htm

5 responses to “It Starts With China, Part the second

  1. “Indeed, very few developing countries—actually, no developing countries—have an unbroken streak of continuous growth at high levels for the fifty year period that we’re referring to for China.”

    I do not think it will be continuous. However, I think that that fact will not be usefull for your estimate. The most likely scenario that knocks out China’s continuing surge, would be another developing country. This would mean more quads sooner.

    The rationale was well posted by RPJr in his decarbonization works. I think your model would be better if you would use China continuing on this path as the best alternative, since, and I beleive it was the EIA that pointed it out, that output/quad is lower, the lower the per capita wealth of a nation is. This means if a country(ies) knock off China it will mean more quads at an earlier date.

    I am curious about your model though. One of the items I think should be included and do not know if yours or others have it, is the energy effieciency income factor. Typically, as developing nations develop, effeiciency goes up as the per capita income goes up at about 2% per annum. If this translates into consumer buying power as it normally does, this will mean quad demand will grow, but the output/quad ratio will drop that 2% per annum.

    I don’t think many understand the nature of the Chinese market. I know that in certain food value added products, that China could literally take 100% of the world’s market and still be a little short. It is expected that in the next 10 years they will be able to buy by economic power or build their own. The demand is there. As their economy matures and China becomes also a buyer rather than just a seller as mature markets do, the capacity of their market is more like 20% per year rather than 6.3%. It has more to due with risk and capitalization markets, than the market demand itself.

    One of the interesting studies from ecology was the Odum brothers work equating money to energy and vice versa. Those who would posit a slow growth rate or a break in this run by China, need to review what the Odum brothers wrote about mankind. China needs to become poor again in order to realy break this streak. “Poor” can be loss of wealth or competition. They have too much money (potential energy an ecological sense) not to be able to convert it to energy, and energy demand.

    I think you are underestimating. I think those estimating below you are not even in the ballpark yet.

  2. “It is difficult to make predictions, especially about the future”

  3. Going through Qinghai Province a couple of years ago I was struck by the number of houses that were being converted from mud brick to fired brick. Small brick factories were ubiquitous, all coal fired. There were also a lot of solar water heaters on both domestic dwellings and factories. This is in a province that gets most of its power from hydro. China is putting a huge effort into building an infrastructure to open up the more remote provinces of the country, (lots of tunnels and interstates where possible) and this will have a “knock on” effect that is, I suspect, underestimated.

    • Hi Heading Out

      China is really serious about green energy and I wish them luck with it. They need it far more than we do. But they have a very steep hill to climb and I think they’re going to need a lot of help and even more luck to avoid serious environmental problems due to over-consumption of coal. That’s a theme that I will probably be beating to death here–fair warning.

  4. serious environmental problems due to over-consumption of coal.

    What is over-consumption? As China grows its GDP local entrepreneurs (vide the brick factories) have to look somewhere for their fuel, given that the state provided power is strained (particularly when rains don’t fall as planned). Small locally owned mines spring up to provide the power – they are generally poorly run and the operators rarely have adequate training so that they have high accident and death rates, but they provide a source of power that is the only one readily available. (Remember that in parts of Mongolia they still collect animal dung to burn for fuel).

    The plateau that we are on now in terms of crude oil production and the rising internal consumption of oil in the producing countries means that, according to the Export Land Model the amount of oil available for export will decline at an increasing rate. China recognizes this and is generating long term agreements for oil and natural gas, with pipelines into Turkmenistan and Russia as just a couple of examples. It is now trying for better agreements with Saudi Arabia. But it will not be enough, because once you start to modernize you can’t take your people back for long and survive.

    The price of oil will rise with increase in demand, and lack of significant increase in global supply. Poorer countries will have to turn to their own indigenous coal, because it is all they will be able to afford. (See in particular Botswana and adjacent countries in Africa). China will help those Southern African countries to develop their infrastructure (as they are offering to do for Saudi Arabia) because it gets them into the circles who decide where the energy exports go.

    China is thus acting in its own self-interest. There is not yet enough prospect for renewable energy, particularly in the case of renewable liquid fuels to help China in this regard. You might want to review how America changed with the advent of the automobile and the arrival of the paved road network – China has still to see all those effects in the Western states.

    No, China will need all the coal that it will get, not to “over consume”, it will not be able to produce or transport enough to meet demand, and there is nothing else on the horizon with enough credible volume of supply to help meet their needs.

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