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China’s electric vehicles go global: Protectionism won’t work

BYD Seal

Electric vehicle (EV) imports from China will account for 25% of EV sales in Europe in 2024.

Now China-based EV and battery firms are on the verge of coming to North America and there is no such thing as batteries without content from China.  This is the context for U.S. protectionist legislation.

What follows is a most comprehensive plethora of reasons on why 1) protectionism won’t work and 2) North American and European EV manufactures are vulnerable to disruptive market threats.

China green shift global impact greater than COP

Expectations for COP29 in Azerbaijan, based COP28 in the United Arab Emirates?

The light getting in though the cracks is few countries are immune to competition with China’s sweeping expeditious green transition.

China’s brisk energy transition intentions are three-fold, decarbonization of its economy, domination of global clean tech manufacturing and reduced dependence on imported fossil fuels.

Renewables

The COP28 final statement calls for a tripling of renewables capacity by 2030.  China had an objective to triple renewables capacity by 2030 too, but China will meet its 2030 renewables target in 2025. The country will continue to increase capacity sharply thereafter.  By 2030, the forecast is for China is to hit 3.9 terawatts (TW).  The aforementioned COP28 global ambition was for 11 TW by the end of the decade.

According to the IEA, China now accounts for 60% of global renewables capacity installed in 2023 and this will carry over into 2024.  The expansion of capacity is outpacing rising demand.  For 2023, China investments in renewables will attain the summit of US$177 billion.

For 2023, BloombergNEF projected China solar capacity additions to reach 208 gigawatts (GW), twice the entire U.S. solar capacity.

China’s new wind and solar capacity installations for 2023 may amount to 300 GW, astronomical compared to the global capacity increase of 338 GW in 2022.

By September 2023, total installed wind and solar capacity was 400 GW and 520 GW, respectively.  To put this in perspective, Hydro-Québec, one of the largest utility companies in North America, has a total production capacity of 47.5 GW.

All together, China is installing 20 GW of wind and solar per month.

By the third quarter of 2023, 53% of China’s power sources were wind, solar, hydro and nuclear.  That’s a giant leap from 2011 when coal accounted for 80% of the country’s power supply.

The scale of some of the renewables projects is staggering.  The Golmud Solar Park in Qinghai, the world’s largest solar park, has a capacity of 2.8 GW with 7 million solar panels spread over sands.  Even that is just the beginning.  The plan calls for expanding this park 6-fold in the next 5 years.

In 2022, plans were announced for 500 GW of onshore solar and offshore wind projects for Gobi Desert across Xinjiang, Inner Mongolia, and Gansu provinces.

To transport gargantuan new capacity, ultrahigh-voltage (UHV) lines projects are eye-popping.  State Grid Corp of China, the country’s largest State-owned utility, has started construction on 13 UHV lines covering 30,000 km.

China catapults economy-wide electrification

China is electrifying its economy at a mind-boggling rate, with 1.1 million electric buses and trucks; two-thirds of the global market for light EVs; electric subways and light rail; and 42,000 km of electric high speed passenger and freight rail.

Consequently, China’s Sinopec, a large petroleum refiner and distributor, anticipates peak gasoline will occur in 2023.

Coal

China’s electric power carbon emissions will peak in 2023 or 2024, ahead of the 2030 target, plateau for a while, and then enter an exponential decline.  This is attributable to mindboggling increases in renewables capacity, and an uptake in hydro capacity.

True, China has the world’s largest coal power plant fleet.  Yet, the opening of 2 coal plants per week or 106 GW of new power plants in 2022, responds to peaking requirements only.  While China reached 1,100 GW of coal power plants functioning in 2022, 775 GW of operational coal plants were shut down or were projects that never made it to construction.

Consequently, coal plants in China on average run 50% of the time.  Carbon Tracker has divulged that 40% of China’s coal plants are losing money.  The 5 major state-owned coal power plant companies are also experiencing heavy losses.

The capacity usage will fall further to 25% over the next two decades.

These contradictions are largely the result of provincial governments supporting their local coal enterprises and jobs.

A forthcoming plateau in infrastructure projects translates into less coal for cement production, a 2.7% reduction in 2023 and 61% reduction by 2036.  Likewise, petrochemical and aluminium production drops will contribute to lower demand for coal.

These factors should result in a decline in coal demand by 2024, as alluded above.  Not only many coal plants permitted up to 2023 will never get built, but also many existing coal plants will become stranded assets.

In China, likewise for Europe and India, 90% of coal plants will be uncompetitive by 2025.

EVs

The BloombergNEF Electric Vehicle Outlook 2023 reported that EV growth rates for 2022 were 62% world-wide and 95% in China.

In 2022, China had 600,000 electric buses on the road, at least 99% of the world total.  That year, it manufactured 138,000 e-buses for the domestic market.

There were 400,000 electric trucks on China’s roads in 2022.

China’s rate of light-duty EV growth is 4 times that of the U.S.  Total EVs sold in China are greater than in the rest of the world.  For the end of 2023, it is projected plug-ins will have reached 38% of sales.

Too, China is now the world’s largest exporter of EVs.  For 2022, exports from China acquired 11% of the European market.  An irony of sorts, Tesla’s Shanghai factory is China’s largest EV exporter.

North America is vulnerable to an invasion of EVs from China too.  China’s BYD will soon launch the BYD Seal in North America to compete with the Tesla Model 3.  Other Chinese EV brands are planning international expansion.  By contrast, North American EV and battery investments related to the U.S. Inflation Reduction Act and Canada’s Budget 2023 await production start-up dates.

Fascinating is the electrification of the three-wheelers for which China and India account for 90% of the global fleet.   There were 117 million 3-wheelers on the roads in the world by 2022, 70% of which were electric, though most with lead-acid batteries.  That jumps to 300 million if two-wheelers are included.

The 3-wheeler sales in 2022 were over 12 million units encompassing a major migration to lithium-ion batteries.  For the short-term, it is the two- to three-wheelers that will generate a noticeable decline in oil consumption.

The global share of EVs in two- and three-wheeler sales increased from 34% in 2015 to 49% in 2022.

Clean tech manufacturing

China has 9 of the 13 largest solar manufacturers in the world and 7 of the top 10 global wind manufacturers are in China.

Solar panels production was 310 GW in 2022; were about 500 GW for 2023; and 1000 GW in 2025, the latter 4 times the output worldwide.

Energy storage battery capacity to accommodate intermittent renewables power will go from 550 GWh in 2022; to 800 GWh in 2023, and 3,000 GWh in 2025.

By early 2022, China accounted for 80 percent of global battery production capacity.

China had 125 battery factories in 2022 and more than double are in the planning or construction phases  This despite, China having only 10% of lithium raw material, while Australia has 50%.

Lower battery prices give China an EV edge in global markets.  The average price of a Chinese EV battery is US$26,500.  That is one third of the transaction price in Europe and half that of the U.S.

An astonishing next generation battery head start is that of China’s BYD breaking ground in January 2024 for the first sodium-ion gigafactory, a technology still in the development stage for most. Sodium-ion batteries are composed of abundant iron and sodium, free the more expensive lithium plus nickel, cobalt and graphite.  This technology replaces lithium cathode material and can be combined with hard carbon anode.  It is less vulnerable to cold weather.  BYD will initially use these batteries for scooters and micro-vehicles.

Also, China’s leadership comprises a long-term view, having issued rules that all battery powered vehicle manufacturers must be responsible for battery recycling.  The policy also directs that the design of batteries facilitates recycling.  China is experimenting with a battery recycling framework.

Decarbonization

By far, China dominates global industrial production, 61% of global steelmaking, 57% aluminium manufacturing and 52% cement output, collectively more than half of global production.  The chemical and paper sectors represent 40% of the global share in these sectors.

China’s wide array of state-owned enterprises (SOEs) are pillars for backing a decarbonization goal under the umbrella of China’s 14th 5-year plan.  Under this plan, carbon neutrality will be accomplished by 2060, CO2 emissions will peak by 2030 and 50% of increased energy consumption will stem from renewables by 2025.

As for energy SOEs, they are immune to the straitjacket of oil and gas companies, incapable of changing their increased fossil fuel trajectories.   In this regard, SOEs are diversifying their portfolios, with a strong push for renewables and massively investing in research and development and innovation of clean technologies.

Belt and Road Initiative (BRI)

BRI is by far the most ambitious global economic development program involving over 115 countries.

From 2013 to 2022, fossil fuel infrastructure accounted for two-thirds of BRI power sector investments.

In September 2021, China announced it will not support new coal plants abroad, though not all new coal projects were shut down.

China has since established the BRI International Green Development Coalition with 134 international partners.  UN Environment will facilitate BRI recipients to achieve UN Sustainable Development Goals including green finance and energy, plus energy efficiency.

For the first half of 2023, 56% of the US$12.3 billion in BRI energy investments were allotted to renewables.  Colour coded prioritization of projects favours green ones. 

China emissions to-date 

There are those who suggest China must act first before their own countries take action on climate change and China is addicted to coal.  China is acting first, leaving no excuses for the climate naysayers.

Granted, China emitted 31% of global emissions, 11,397 metric tonnes (Mt) in 2022.  This is more than twice as much as the U.S. for 2022 at 13.6%, with 5057 Mt.

This does not tell all.  On a per capita basis, China’s emissions are half that of the U.S.  Since 1751, China is responsible for  half the cumulative emissions as the U.S.

But this is history, China is migrating into a green transition quicker than most can assimilate.

The takeaway

The U.S.$369 billion Inflation Reduction Act (IRA) which is spurring a tsunami of investments in clean tech plus manufacturing of EVs and batteries is largely about closing the green economy gap with China.  One year after the IRA passage, in August 2023, private sector investment announcements in U.S. clean tech projects totaled up to US$278 billion and 170,000 jobs.

The domino effect on the European Union is such that it is exploring how to close the clean tech investment gap with the U.S.  The EU “lost” its solar industry in favour of China, European wind manufacturers are struggling to compete with lower cost Chinese turbines and 11% of the European EV market is represented by Chinese imports.

China’s march to dominate the green economy suggest a green transition will become a global competition imperative.

China will change the course of the global energy geopolitical titanic.

By contrast, the inclusion of reducing fossil fuels in the COP28 final statement is not a milestone.

Ukraine green reconstruction: Global model opportunity

Updated July 20, 2023

Many stakeholders from Ukraine, the European Union and around the globe, including just-in-time working groups, international financing institutions and the private sector, are currently engaged in “Made in Ukraine” green reconstruction agenda.  The challenges are colossal.

Half of Ukraine’s power generation infrastructure has been destroyed or badly damaged.  It makes little sense to reconstruct a tangled web of centralized energy distribution networks.  Rather the emerging consensus among key players is for decentralized area-specific clean energy solutions that can be built quickly, secure energy independence and offer less vulnerability to attacks by aggressors.

Equally important, energy inefficient buildings have been destroyed beyond repair in many entire cities and/or districts.  Interdisciplinary international groups are in place to plan the rebuilding of communities respecting circular economy and energy efficient criteria and Ukrainian architectural history.  These strategies call for using up to 90% of the rubble to minimize emissions during the construction process and the manufacturing of building materials.

Regarding farming equipment and practices, drones conceived, manufactured and precision operated in Ukraine, along with imports, positions Ukraine to be a world leader in applying drones for agricultural tasks without the need for heavy equipment and airplane dust spraying.

As well, green steelmaking, critical minerals and many other possibilities will be integrated into the transition.

No guarantees, but all pertinent players are readying in sync for the humongous tasks ahead.

Perfect storm for the green economy and fossil fuels alike

perfect storm: updated July 7, 2023

Investments in clean tech deployment in 2022, US$1.1 trillion, were for the first time ever, equivalent to that spent on fossil fuel production.  The story behind these historic stats is that of a current perfect storm and circumstances leading up to the present.

The combination of the Ukraine war; high fuel prices; European Union energy independence and electric vehicle (EV) strategies; the U.S Inflation Reduction Act and Bipartisan Infrastructure Law; China’s new 5-year plan; and tectonic changes in other countries have created the perfect storm for:

  • Renewables to overtake coal by 2027;
  • Strong EV sales in China and Europe while the North American new “normal” EV wait times for delivery ranging from 6 months to 2 years or more; and
  • Intensified climate action plans around the globe.

Paradoxically, the same perfect storm has given rise to the oil and gas industry’s 195 fossil fuel carbon bombs underway and planned, many of them in Canada.

Electric vehicles and equipment for mining decarbonization

MacLean Engineering Transmixer electric vehicle

As with most environmental solutions, electric mining equipment (EME) offers opportunities for reducing capital and operating expenditures, while providing a host of solutions to address risks. These lower risks include decarbonization; curtailment of colossal ventilation expenses to evacuate fumes, particulate matter and heat from diesel engines; and improved employee health and working conditions.  Higher profits, diminished risks and enhanced social acceptability associated with EME, are hard to beat.

Critical minerals: Global and Canadian portraits

Updated May 1, 2023, Pure lithium

Global developments in a nutshell

For the rest of this century, most of the world’s needs for critical minerals can be accommodated from mined resources in democratic countries and 95% recycling of battery content.  China and the European Union have policies in place to optimize electric vehicle (EV) battery recycling.

Australia towers above the rest as a source of half of global lithium resources.

Canada and the U.S. provide financial support for advancing critical minerals activities.

Howbeit, China’s critical mineral importation practices are admittingly problematic.  The antidotes are critical mineral deposits and policies of democratic counties plus EV manufacturers being sensitive to such concerns as integral parts of their public DNA image.

Too, South American lithium extraction practices pose large-scale unresolved environmental perils.

Big Oil, renewables, electric vehicles + clean tech: Fossil fuel windfalls

Wind, solar, storage + electric vehicle

Prior to the Russian barbaric invasion in Ukraine, announcements made by the oil and gas majors seemed to imply they were engaged in energy diversification.  This diversification has been typically presented as that of increasing the proportion of their assets in clean technologies while reducing the exploitation of fossil fuel reserves.

Now, with the oil and gas companies earning windfall profits linked to the Ukraine war, inflation and European urgent short-term requirements for fossil fuel sources substitutes, the real truth is coming out.  High fuel prices have revealed opportunist short term thinking prevails over lofty long-term goals.

Canada’s indecent descent on climate since 2021 fed election

Forest Wildfire

The Canadian federal election of September 20, 2021 brought the Liberals back to power, once again as a minority government.  As with previous elections, the Liberal election campaign leading up to voting day, placed a major emphasis on addressing climate change.  Though the Liberals failed to deliver on previous emission reduction targets, this time things appeared to be different in that a former climate activist, Steven Guilbeault, was appointed the Minister of the Environment and Climate Change Canada.

What has happened since this nomination constitutes a sad tale of giant steps backwards.  These are presented hereafter.

China: Largest emitter to green gamechanger, but…

China climate emergency global influence

China is several years ahead of other developed countries on the migration to a green economy, in clean technology production capacity, massive market penetration and green investments. China already has an extraordinary global green export potential. China leads in renewables, electric vehicles and battery production, incrementally regulating plastic solutions, high-speed rail, private clean tech investment, government environmental support and green bonds.  China’s concurrent climate actions are gamechangers destined to have huge global competition impacts on energy, economic, transportation, industrial and other paradigms, perhaps more so than the climate crisis.  But there are simultaneous contradictions. China is the world’s largest liquified natural gas importer, once again ramping up coal production and certainly not a leader on human rights.

Electric vehicle battery recycling: Competing with mined materials

electric vehicle battery recycling facility

The environmental footprint of an electric vehicle represents a sectorial industrial revolution, including the first lifecycle end of an EV battery.  With existing technologies, 95% of an EV battery can be recycled for inclusion in a new EV battery and/or energy storage.  The remaining 5% can be handled by third party recyclers.  Because the price of mined lithium is rising exponentially, recycled EV battery materials are set to compete with mined content.  With high recycled content, the emissions of a new battery can be reduced by 64%. The result is massive battery recycling investments and recycling agreements with EV manufacturers are underway and planned, especially in China, Europe and the U.S.  In the U.S., the Inflation Reduction Act (IRA) offers tax credits that can be stacked on top of each other for the EV battery supply chain.  An IRA proviso is that the raw materials, including materials derived from battery recycling, be sourced in the U.S.  In addition, the U.S. Bipartisan Infrastructure Act allots US$7 billion for all battery supply chain stages, including battery recycling.  To counterbalance the IRA, the Canadian 2022 Fall Economic Update includes a 30% Investment Tax Credit covering clean technologies.  But the Canadian tax credits may fall short compared to the cumulative eligibility criteria impacts of the two U.S legislative initiatives. The U.S. initiatives, alongside the monumental head start in China and Europe, auger for a colossal challenge for the Canadian national and provincial governments to assure Canada is a major battery recycling player, despite two prominent existing Canadian recycling firms.

Putin losing energy war: European climate emergency

Nord Stream 2 gas pipeline padlocked

Putin’s war has created an electroshock for Europe because it depends on fossil fuel imports for 60% of its energy, one-third of which comes from Russia.  Organically evolving European Union (EU) plans target 2027 for a massive and rapid transition to a green economy and energy independence.  Renewables, electric vehicles, clean technologies and energy efficiency will all play major roles in the creation of fast-forward paradigms for global emulation.  For the immediate, by the end of 2022, EU plans entail cutting Russia gas imports by two-thirds, substitution fuel sources plus ramping up renewables and energy efficiency.  These EU plans will be devastating for the Russian economy.  Russia needs European oil and gas revenues more than Europe needs these fuels.

Canada’s 2030 climate plan: Designed to fail

Oil sands development

Canada’s 2030 Emissions Reduction Plan (ERP) was made public March 29, 2022.  Since the country’s oil and gas sector with methane included, plus transportation components, together, represent about half of Canadian emissions, one would have thought these sectors would be objects of strong climate initiatives.  Yet, for these sectors, the ERP appears to be the product of accommodation of industry lobbies.  The action items stupendously lack integrity and are weak.  As such, the ERP like all previous government emission reduction targets, will not achieve its goals.

Fossil fuel methane climate emergency: Solutions

Methane emissions underestimated

Methane emissions are underrated at one third of global warming gases, largely because fossil fuel sector methane emissions are underestimated by 70 percent.  Current data indicates the energy sector accounts for 40 percent of man-made methane.  Consequently, the COP26 non-binding pledges of over 100 nations for a 30 percent reduction by 2030 are not only dreadfully inadequate, but also, without standardized measuring, reporting and verification standards, oil and gas industry methane greenwashing is rampant.  The draft European Union (EU) plan to reduce methane emissions up to 80 percent by 2030 zeros in on methane accountability norms and establishes transparent extraterritorial requirements to cover imports.  The U.S. too, with the backing of the Inflation Reduction Act and the Bipartisan Infrastructure Law, now has the foundation for vigorous proposal to update its regulations and investments in methane reduction.  Sadly, Canada’s methane ambitions procrastinate and are fuzzy.  Lastly, stringent government actions would be less critical if the oil and gas industry applied existing technologies to capture fossil fuel methane and sell it for a net profit.

Green hydrogen, no panacea: Deep dive

Green hydrogen offshore wind powered

Green hydrogen, produced with electrolysers to separate hydrogen from water, uses clean energy as a power source.  Green hydrogen will not be with cost competitive with grey hydrogen for some time, perhaps not until 2030.  Grey hydrogen, derived from steam reformation of natural gas, represents 98 percent of global hydrogen consumption, and is primarily used for industrial processes.  To replace grey hydrogen with green hydrogen would require a doubling of global electricity generation with primarily solar and wind sources.  This would pre-empt the use of renewables for electrical power, with energy losses totaling up to 75% when green hydrogen is reconverted into electricity!  The result would be more use of natural gas for power production.  And there are extraordinary inefficiencies and technological challenges for green hydrogen use, while there is no shortage of affordable and efficient clean technologies alternatives.  Nevertheless, US$30 billion has been committed to-date for green hydrogen through government stimulus packages.  Is green hydrogen a fossil fuel industry trojan horse for gas derived hydrogen and the use of gas for electrical power?

Carbon capture and storage: Greenwashing, subsidies and carbon pricing

Carbon capture and storage site

Carbon capture and storage (CCS) technologies are the darling of the fossil fuel industry since CCS offers the opportunity to continue increasing production, with the support of gargantuan government subsidies, while appearing to be green and gaining carbon price credits. But all CCS projects to-date have failed to live up to emissions reduction expectations and CCS is energy intensive.  As such, CCS is a greenwashing narrative.

Shipping sustainability: Oxymoron but paradigm to change

Container ship powered by dirty oil, updated April 27, 2023

Cargo and cruise ships represent 2.6 percent of global emissions and could reach 17 percent by 2050.  Nearly all these ships use cheap dirty heavy oil with high sulphur content.   International regulations aren’t helpful as they are lax and difficult to enforce.  Fortunately, Maersk, the largest container shipping company in the world, has created the conditions for an industry-wide sectoral revolution by setting 2040 as a target to achieve net-zero emissions, requiring all new vessel acquisitions be carbon-neutral and has already ordered 12 green methanol powered ships.  Concurrently, many new technological solutions are under development including ones associated with electric, wind and biofuel energy sources.  Stringent territorial waters and docking standards, Maersk technological catalysts, financing of emerging remedies, could advance clean technologies quickly.  Finally, open-loop scrubbers are widely used as a band-aid to remove sulphur from the exhausts to transfer the pollutants into the sea.

Canada’s new plastics strategy falls far short of expectations

On a global scale, less than 10 percent of plastics are recycled.  Plastics are ubiquitous, meaning regulating its use is especially complex.  While Canada has only banned a half dozen of single-use plastics, the European Union and China are engaged in a holistic multi-year incremental approach to manage plastic production, distribution, consumption, recycling, disposal and substitution. Accordingly, the actions of these latter jurisdictions will influence global innovation and standards. By comparison, Canada’s plastic initiatives are symbolic greenwashing.

Canada sheepish on electric vehicles: Stringent legislation required

Electric vehicle charging

If present trends continue, transportation will be the Canadian largest source of greenhouse gas emissions by 2030.  Canada’s objective for a legislated 2035 zero-emission vehicle (ZEV) target for all new light duty models is too little, too late.  Canada can adopt incremental legislative objectives between now and 2035, much like what the European Union and China have done.  The latter jurisdictions may reach 50% ZEVs, mostly electric vehicles, by 2025.  Just as automakers can adjust to safety regulations while offering vast lineups of trendy vehicles, they can do the same with Canadian ZEV regulatory mandates.

Investing responsibly, in the Canadian green economy, not easy: Policy solutions

Canada compares poorly in buttressing clean tech firms.

Reliable standards for environmentally sound investments do not exist and very few Canadian clean tech firms are listed on a stock exchange.  Too often, Canadian clean tech firms must go outside Canada for financial support and/or to enter the stock market.  This article presents solutions for investors and clean tech companies alike, but these solutions require government action. 

Green economy: Financial sector zigzags

Green financing improves but has a long way to go

BlackRock, the world’s largest investment firm, has indicated that those that don’t tackle climate change will lose money in 5 years. Some financial institutions have made multi-trillion commitments from now to 2030 to invest in the green economy while still focusing the majority of investments in fossil fuels. Canadian banks are among the global top fossil fuel investors.