China’s Role in the Future of Green Energy - Transcript

China’s Role In The Future Of Green
Energy
00:00:02
Speaker 1
This is the Nordic Asia podcast.
00:00:06
Speaker 2
Welcome to the Nordic Asia Podcast, a collaboration sharing expertisein Asia across the Nordic region. I am your host Saskia Lilli Lehtsalu from University of Start to Asia Center in Estonia. And here with me is Einari Kisel who is currently the head of Partnerships and Strategy in Finest Center for Smart Cities in Tallinn University of Technology. And among other of his public sector jobs was in the period of 2014 to 2020 Regional Manager for Europe in the World Energy Council. While most of Einari’s work has been in the public sector, his academic research has focused largely on energy research and his current research in FinEst Center for Smart Cities focuses on energy policy and security. However, the main reason I have asked Einari to join me today is a report not yet published to general public, regarding the future relations between Asia and Estonia. While our main topic today is going to be about energy, especially clean energy markets and supply chain questions between Asia and Europe, I would like to take a few minutes first to talk a bit about the report itself. So Einari, if you could start us up, what this report about and what does it predict for us in regards to the big energy dilemma that we face today?

00:01:23
Speaker 3
Right. The universities of Estonia have made a study for the Ministry of Foreign Affairs of Estonia in order to explore what kind of future risk can we predict with the relations with Asian countries. And from this context, one of the key aspects that came up across there was that we can see that that the energy transitions, energy futures are very much today dependent on the Asian countries, especially on China. As far as the Chinese companies, which are usually very much related to the government, have taken very much over the markets or for the development and mining of the all the minerals and metals that are required for the green transition. If you take it from the perspective that say if you would like to produce the battery for the car that weighs about 400 kilos, and then it would require actually about 200 tonnes of ground to be mined in order to receive this. So that the minerals that are required there. If you would like to build up a solar panel, then for each 500 megawatts that you install, you would need about 35 million tons of glass. You would have to have 28 million tonnes of steel or 23 million tonnes of concrete. If you go further from there, well, if you look for the windmills that you produce on the ground, not on the offshore, but on the onshore windmills, you would need about 2228 million tons of concrete for 500 megawatts, three to be installed. About 58 million tonnes of steel and iron. And for the offshore windmills, it goes even more than that. Let's say you would need four 500 megawatts of to be installed. You need 241 million tons of low alloy or electrical steel to be installed there, 190 million tonnes of copper. And it is you amounts of resources that you would actually need there. But today, if you look at the market, what has happened there is that vast majority of all these minerals are coming today from China and from other Asian countries as well, even more. If you look at the resources where they are mined, say they are not in Europe. Europe is the one who actually buys all these products, mainly from China and is installing them. But in the end of the day, actually, the resources are coming from countries like Chile, Indonesia, Russia, Congo, Australia, and they are produced then very much in China. So, China has taken a very strong stance in all of these markets. And then when you go further from there, the question is that, well, look how actually this kind of dependence that Europe has created during the last ten years on such as green technologies and with Asian countries, mainly with China, will influence in the future the economic ties and also political ties, whether there will be some kind of, let’s say, influence, as we see today, for example, with the relations with Europe and Russia, where the dependence has been built up on gas supplies. Whether we are building up today a similar dependence on China and how we can get rid of it and how we can avoid that? This was the main focus for the report that we were doing for the Minister of Foreign Affairs to see what kind of futures can happen? How Europe can position itself in these kind of futures, and how we can benefit as a Estonia from that?

00:05:36
Speaker 2
So that green energy we talk about does not seem that green at all when you bring it like that, that there's so many materials that must be brought in. I know that, so for us, last Thursday, on the seven July for the listeners, the International Energy Agency came out with a press release warning the world to diversify the solar panels supply chains, which are currently dominated by China like you brought out. So we can see that there there seems to be awareness growing as well quite, quite quickly.

00:06:03
Speaker 3
Yes. Well, I think International Energy Agency is doing a very fine job at the moment from this context and showing that what kind of relations there are already. Say, what they brought out was also that today about 80% of the world's solar panels are coming from China. And if.. if the trends are continuing, then by 2030, this share can grow to 95%. So, China would clearly dominate this market in a way. And there are other such kind of resources as well that you can see here. All the China is just in a very dominant position already today. If we talk about the rare metals, then 87% of the market today is dominated by Chinese companies. There are very few countries in the world that actually produce such kind of rare metals. One of them is Estonia, but Estonia just provides 1% of the world's rare metals. However, there is growing question that well, in practice what happens there is, is that China produces all these green technologies based on electricity that is produced from coal and growingly from coal. If you look at the share of China in the electricity market, you could say that just two years ago, China became the country that uses 50% of the world's coal that goes for electricity. So, I would argue that to a very large extent, also, the solar panels that are produced in China are not so clean, as you may expect. And all the other area metals that are coming from there, again, say to a large extent that to produce them, the coal-based electricity is used.

00:08:00
Speaker 2
Before we go on, I just wondering, is that something new or like a new problem that's been seen now or when you were in the World Energy Association or Council, Sorry! Was it also something that was talked about. Or is it something that people are coming kind of understanding right now?

00:08:15
Speaker 3
Well, say it was a time when this kind of trend was just emerging, but it wasn't discussed much on these days. But it was three years back. But during the last five years, China has basically built up the main core of this dependence and also this market strength. Well, in practice, what happened was that European countries like Denmark, Germany, started to develop all these technologies for wind farms, for solar and so on. And once they were ready, then their companies actually invested also in China. And also Chinese companies started to invest into these technologies as well. So they were ready made technologies then and went it to large scale. And as far as electricity in China is much cheaper than it is in Europe, it was much more competitive also to produce these same green products and green technologies in China, and they outcompeted all the competitors.

00:09:22
Speaker 2
So they essentially bought up the market, kind of, is that what you're saying?

00:09:26
Speaker 3
Well, they bought up technologies.

00:09:28
Speaker 2
Technologies. Okay.

00:09:29
Speaker 3
Yes. Well, and as far as they have, also a large internal market. Actually, to be honest, the largest installer of solar panels and wind parks in the world is also China. They are investing vast amounts of their capital into the solar panels. Some are parks and also into wind parks. And based on that, they can also create very strong companies as far as there is a basic consumption that comes from their own country.
 

00:09:59
Speaker 2
So we understand that we have an awareness of that in the last five years now. But it truly seems like a big question now is what do we do about it. Is there anything we can do? Can we bring back the making of this technologies to Europe? Is that even a possibility? What could we do?

00:10:14
Speaker 3
Well, certainly it is. But I think the even bigger question is that where do we get the resources?

00:10:20
Speaker 1
Mmhmm.

00:10:22
Speaker 3
And, well, since some of these resources can be explored also mined, also in Europe. But it is much more difficult to create any kind of mine or carry in Europe. So, people are much more aware of the impacts and they have stronger say about against these kind of mines and carries as well. Well, if you look at where the mines are today or for the important metals that, for example, nearly 70% of cobalt comes from Congo, which is actually under the control of Chinese companies. 33% of nickel comes from Indonesia. Again, Chinese companies are presentthere, even when we speak about copper. 28% of world copper comes from Chile. And again, Chinese companies are the ones who are present there and take the contact. So it means that for European companies to go to these countries to start to mine there is not a very easy option because Chinese are already settled there. To go to own countries. Well, it requires a very big shift in thinking of the people. That mining is also necessary in order to go through the green transition that we are looking for.

00:11:45
Speaker 2
Hmm.

00:11:46
Speaker 3
Of course, to install technologies, it's easier. The key question there is, again, the electricity price.

00:11:54
Speaker 2
Mm hmm.

00:11:55
Speaker 3
That if you produce the products there, they might not be so competitive in the market compared to Chinese products. And this is the question whether somebody is risking to build up such kind of factories, which usually are like hundreds of millions of euros. And to compete with Chinese. If there are no border mechanisms from what border mechanisms applied in the European Union, then these kind of producers within the European Union would, in a global scale, probably not be competitive.

00:12:31
Speaker 2
00:13:01
Speaker 2
I mean, it's already raising prices and energy markets as well. It might be seem a bit scary in Europe at the moment to even talk about it, but would it be something like in the report there was this one scenario that was about like dividing because of values. Would that be something that there would seem logically in that sense that we decide that, you know, we're ..we're going to do this, we're going to pay a bit more, we're going to subsidize it with money from the European Union, for example, and build up our own like independency in a sense. Wouldthat be something? Well, this this was exactly the core of the question that we explored there in this report that, well, if we would build up something in Europe, whether we could also cooperate with other countries in Asia. Mm hmm. That would be also be interested, actually, in developing their own green transition and green markets. Whether we can also.whether we have to build up some kind of, so to say, economic walls between these systems. Well, we explored four different scenarios in this future. Well, looking at the potential for collaboration and in the other end we looked for what happens if there will be just a pure conflict between two ideologies, two areas and how we can cope with that. What happens is actually then and there are also wider implications to that. If you think of the perspective that there will be a similar kind of conflict that today between Russia and the rest of the world with a war in Ukraine, if such kind of conflict would also be between China and the rest of the world, then we would be a very difficult situation and also all the green.. green transition would actually be held for a while because we won't be able to build up such kind of own technologies, own factories in such pace, that we could replace the supplies that today are coming from China. So, the question there is that how actually Europe could get rid of such kind of dependence that we have built up today. If you look at the in the future, again, you can see that, well, if we are going for the green transition, there is actually a need for even in some cases, to increase the volumes of these metals that are required there. It would be need to increase them 20 to 40 times. It means that anyhow, from the current volumes, we have to go way beyond the levels that we are today. So, it would require also investments in Europe. The prices most likely will also go up for some time. But in the same time, well, most likely Chinese producers will be in the market as well. Whether we will build up such companies and mining in Europe or would we rely just on China and dollar on the other countries? This is dependent that actually now with the conflict of Russia with Ukraine has become more evident also for the European leaders that such kind of scenario, such kind of futures can actually happen as well.

00:15:56
Speaker 2
I think something really interesting you brought out was that there's also a question that when you talk about Asia, we can talk about the, you know, maybe other countries besides China. I would definitely also want to be independent of China in regards to clean energy. And I believe one big player would be India, right. With Modi promising that every household will get energy in like 2050 and so on. I mean, we would definitely want them to be green as well. And as they are such a big market themselves, having them be free of China in that regard would be also quite the good. So, they could be a great partner, I guess.

00:16:28
Speaker 3
Indeed. And if you look at the last news actually from last week about the the India collaborating with Australia and also other Asian countries in order to build up their own green transition technology sector, then we see that there is already a movement and Australia has been very vital there as well. They have created such kind of collaborations in recent months, also with many other countries in the world in order toseek help actually to go there. Australia is one of the countries that has one of the largest lithium resources which is required for the batteries ofa cars, for example. So if we would  like to go for electric cars, Australia would be in a vital position there. Today they just mind this lithium, but the batteries themselves are produced in China. So, now they are looking for a new ways how to actually improve the situation there. Andindeed, you're very right that we are looking  very much on China only. But in practice the other countries in the region are also very interested to get rid of such kind of dominance.

00:17:42
Speaker 2
Mmhmm. Also a point that came from the International Energy Agency and their press release that I was quite surprised, I guess not surprised, but like pleasantly surprised about, let's put it like that. Was that I mean,one good thing China has done is that  they've made it quite cheap, the technologies. So, I guess it comes with a mass. Right. But would it be something that maybe if we would, you know, with Australia coming along, India coming along could somehow like repeat in a sense?

00:18:14
Speaker 3
Well, it's very hard to predict in a way I would say. Um, well looking on the history, one could say that, uh, say the people or the people who are doing forecasts, including also the International Energy Agency and say they have very often they underestimated the progress of the costs of the low carbon technologies. Mm hmm. Well, and say, for example, if you look at the solar photovoltaics and say that prices have dropped like ten times within last ten years. And the predictions that were made in 2008 were, like, three times off. The same counts for the wind power that, again, say the predictions that were made in 2014 even were like two times off from the reality that came in 2019. And with the batteries and the same thing that while the  predictions that were made, even 2017 were close to two times off what actually happened in 2021. So, I would not dare to make any kind of predictions anymore because it's say, the market is very unpredictable in this way. But what we can see today is that the well, this kind of curve has changed a bit because of all these energy prices that have went up and that today we are 3 to 5  years back with the prices of the solar panel, for example, where and say the prices have actually started to increase again for the solar panels. Whether it will be a stable trend or will be an impact of the highenergy prices remains to be seen in two or  three years.

00:20:14
Speaker 2
Well, I think we have been a bit bleak. It seems to me like the future is going to be a bit bleak in general, but maybe as a last thought. The last question, is there anything really positive that you have seen in the transition with like with the collaboration with Asia, like, for example, in Asia, Australia and India or things that show that we could have a better, I guess, future in regards to the energy dependency?

00:20:40
Speaker 3
Well, I think the collaborations that are becoming now evident between the different countries and say I say told about the Australian and Indian initiatives, they are actually doing the same kind of collaborations with European countries, European Union, with Canada, US. So, say there is a view that we can .. make a change there and create a greener transition that we are see in the path today and hope that this kind of trend will continue as well. And all these problems that are likely to appear in the future would not be in such a magnitude that that would hurt the green transition. And from this perspective, I think there is a.. Every country has its role to play, whether it's in Nordic countries have here a very good position as say one of the pioneers of all the green transition. And I think that this kind of position provides also the
possibility to improve also all the situation that has come to the table today, I would say, in the relation with Asian countries.

00:21:56
Speaker 2
Thank you Einari. I have been your host Saskia Lilli Lehtsalu from University of Tartu Asia Center in Estonia and discussing with me the current reality of our green energy markets and supply chain questions between Asia and Europe, as well as the possible future scenarios in the clean energy field was Einari Kisel, the heart of partnerships and strategy in FinEst Center for Smart Cities in Tallinn University of Technology. Thank you for joining to Nordic Asia Podcast, showcasing Nordic collaboration in studying Asia.

00:22:26
Speaker 1
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