© OECD/IEA 2017

China Energy Outlook 2017

18 December 2017

© OECD/IEA 2017

Context

A WEO in-depth focus on China

Ten years since the last full review of China, breathtaking progress since then

China part of the IEA family since 2015; report in collaboration with Chinese experts

The report has been translated in Chinese; launched in China on 8 December

China’s drive for “blue skies” has domestic and global implications:

New era of development & economic shift towards light industries & services change

structure of energy use

Energy demand growth slowing; predominance of coal under challenge

Leadership for China in a range of clean energy technologies, increasing role in gas markets

Environmental considerations to the fore, notably air quality

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.. as China moves global energy markets, again

Change in world energy demand by fuel

Low-carbon sources & natural gas meet 85% of the increase in global demand:

Coal (Mtce)

0

500

1 000

1 500

2 000

2 500

- 5001990-2016 2016-40

Oil (mb/d)

6

12

18

24

30

1990-2016 2016-40

Gas (bcm)

400

800

1 200

1 600

2 000

1990-2016 2016-40

Low-carbon (Mtoe)

400

800

1 200

1 600

2 000

1990-2016 2016-401990-2016 2016-40

A world in motion..

China’s switch to a new economic model & a cleaner energy mix drives global trends

Other countriesChina

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Solar PV forges ahead in the China’s power mix

China average annual net capacity additions by type

China turns away from coal while confirming its position as the global leader in clean energy,

leading the way on solar PV, wind power, hydropower and nuclear

Renewables

Nuclear

Gas

Coal

Renewables

Nuclear

Gas

Coal

10 20 30 40 50 60 GW

2010-2016

2017-2040

Solar PV Wind

Solar PV Wind Other

Other

10 20 30 40 50 60 GW

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The future is electrifying

Electricity generation by selected region

India adds the equivalent of today’s European Union to its electricity generation by 2040,

Middle East

2 000 4 000 6 000 8 000 10 000

Africa

Southeast Asia

European Union

India

United States

China

TWh2016 Growth to 2040

Sources of global

electricity demand growth

Industrial motors

Cooling

Large appliances

Connected & small

appliances

Electric vehicles

Other

while China adds the equivalent of today’s United States

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300

600

900

1 200

1 500

Industry

Mtoe

Transport Buildings

A change in quantity & quality of

final energy demand

Electricity accounts for more than half of final energy demand growth to 2040

As China enters the next phase of development, the focus shifts from industry-led towards

a services-led growth model with a focus on energy efficiency and electricity use

Renewables

Heat

Electricity

Gas

Oil

Coal

2000 2016 20402000 2016 20402000 2016 2040

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China becomes the world’s largest oil importer

China oil demand growth by sector

China becomes the world’s largest oil importer by around 2020; air quality policies could

lead to a plateau or peak in oil demand, but oil security remains a challenge

China passenger car stock

Electric

Conventional1

2

3

4

mb

/d

Cars

Trucks

Petrochemicals

Other

300

400

500

100

200

Mill

ion

2016 20402020 2025 2030 2035 20402016

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706 bcm in 2016

Global gas trade

Asia’s growing gas import requirements are largely met by LNG,

with exports from the US accelerating a shift towards a more flexible, liquid global market

LNG ushers in a new global gas order

Gas exportersGas importers

39% shipped by LNG

1 230 bcm in 2040

59% shipped by LNG

AustraliaRussia& Caspian

MiddleEast

Other

Africa

US &Canada

AustraliaRussia& Caspian

MiddleEast Other

AfricaUS& Canada

Other OtherOther Asia

China

Japan& Korea

Japan& Korea

China

Other Asia

Europe

Europe

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China a major force in global gas markets

China projected LNG demand versus contracted supply

Industrial gas demand leads the way as China accounts for one-quarter of global gas growth to 2040;

China’s growing import needs become a major spur for investment in new global supply

20

40

60

80

100

120

140

2015 2025 2030 2035 2040

Contracted LNG

LNG demandbcm

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China’s strategic choices on coal

Natural decline of coal production versus retirement rates for China’s coal-fired capacity

The operational lifetimes of existing coal infrastructure, both on the supply

and demand sides, presents China with a series of strategic choices in the 2020s

200

400

600

800

1 000

600

1 200

1 800

2 400

3 000

2015 2020 2025 2030 2035 2040

50 years

40 years

30 years

Retirement age of coal power plant(right axis):

Natural decline ofproduction

Coal mining:Mtce GW

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10% 20% 30% 40% 50%

China leads the push for clean energy technologies

China’s share of global investment, 2017-2040

China is the leading global investor in power generation and end-use sectors; its emphasis

on clean energy investment is a driver of the global clean energy transition

Electric vehicles

Energy efficiency

Wind

Solar PV

Nuclear

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The Sustainable Development Scenario is an integrated approach to meeting three Sustainable Development Goals that are closely related to energy

A new strategy for energy & sustainable development

SustainableDevelopment

Scenario

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Achieving CO2 reductions while meeting air quality and

energy access goals

China energy-related CO2 emissions

2

4

6

8

10

2010 2020 2030 2040

Gt CO2

Efficiency39%

Renewables31%

Fuel-switching4%Nuclear7%CCS15%Other5%

New Policies Scenario

Sustainable Development Scenario

Energy efficiency is central to the steep decline in emissions

seen in the Sustainable Development Scenario

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Air quality is an energy issue

Concentration of fine particulate matter in China

Urbanisation & an ageing population increase vulnerability to health impacts in China,

but a clean energy transition cuts pollutant emissions considerably

Today

2040: New Policies Scenario

2040: Sustainable Development Scenario

Source: WEO analysis, IIASA

© OECD/IEA 2017

Stronger policies to build a more sustainable China

220bcm

additional gas demand

3timesmore efficientthan today

760GW

Solar PV capacity

320million electric

vehicles

An additional 30% investment is required to 2040 to achieve the Sustainable Development Scenario,

with 40% of energy supply investment going to renewable electricity generation

The Sustainable Development Scenario in 2040

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Electricity generation (China)

Towards a low-carbon power sector in China

New Policies Scenario

Power generation in 2040 is all but decarbonised in the Sustainable Development

Scenario, with renewables accounting for more than 60% of total generation

Sustainable Development Scenario

25%

50%

75%

2010 2020 2030 2040

100%

Coal

Coal CCS

Gas CCS

Gas

Oil

Nuclear

Hydro

Wind

Solar PV

Other renewables

25%

50%

75%

100%

2010 2020 2030 2040

25%

50%

75%

100%

2010 2020 2030 2040

© OECD/IEA 2017

Conclusions

Structural shifts in the economy and the clean energy transition change quantity &

quality of energy demand growth; China moves global energy markets – once again

China is set first to become the world‘s largest oil importer, and then the largest oil

consumer; future oil security hinges on supply- and demand-side policies

Natural gas helps to replace coal in the energy mix and soon makes China the world’s

largest gas importer, with strong implications for global LNG markets

China remains the world’s largest investor in clean energy; its success in delivering on a

clean energy transition is critical for its own as well as global environmental goals

As China joined the IEA family in 2015 and partnership grows, the WEO-2017 China

Outlook sheds light on China’s energy challenges & opportunities in a global context

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iea.org/weo

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Energy-related CO2 emissions by sector and peak year in

China in the New Policies Scenario

2013

2014

2019

2030

1

2

3

4

5

2000 2010 2020 2030 2040

Gt

CO

2

Industry

Transport

BuildingsOther

Power

Total: 9.2 Gt CO2 in 2028

China’s energy-related CO2 emissions reach a peak in 2028, driven by declining

coal use in the industry sector; all sectors except transport peak before 2040

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Outcomes of the Sustainable Development Scenario vs. New Policies Scenario (2040, world)

Electricity Clean cooking

800

1 200

1 600

2 000

People without access to modern energy(Million people)

400

Benefits of the Sustainable Development Scenario

20

30

40

CO2 emissions(Gt CO2 in 2040)

101

2

3

4

5

Premature deaths fromair pollution

(Million people)

Indoor Outdoor

0

In an integrated approach, universal energy access can be reached while also achieving climate goals and reducing air pollutant emissions, at little extra cost

© OECD/IEA 2017

200

400

600

800

200

400

600

800

200

400

600

800

…but global trends mask significant

regional differences

Policies are successful to decouple pollutant emissions from energy demand

growth to 2040; but the air pollution problem remains far from being solved

Change in energy demand and pollutants to 2040

Mtoe

Mt

Mtoe

Sustainable Development ScenarioNew Policies Scenario

-24

-16

-8

Fossil fuels & bioenergy

Wind, solar& other

Energy demand (Mtoe)

SO2

NOX

Pollutants (Mt)

PM2.5

-40

-32

-24

-16

-8

Mt