Energy Insider: China’s AI Boom Piles Pressure on Power Grid, Government Seeks to Bolster Green Electricity Demand

[para. 1] This week’s energy wrap by Caixin highlights significant developments in China’s climate and energy landscape, offering insights into policy shifts and industry activities. The focus ranges from promoting green energy and the burgeoning AI industry’s impact on power grids to Sinopec’s substantial shale oil discoveries and the implications of U.S.-Mexico tariffs on Chinese electric bus manufacturers.

[para. 2] China is accelerating the adoption of Green Electricity Certificates (GECs) to boost demand for wind and solar power. The central government has released guidelines requiring industries like steel and petrochemicals to increase their use of renewable electricity. This initiative also applies to government bodies and public institutions as they set an example for wider societal uptake. [para. 2][para. 3] The ease for individuals to buy GECs via grid operators and trading platforms is also emphasized.

[para. 3] The importance of this initiative lies in its role as a policy tool for China to enhance the consumption of energy generated from wind and solar resources. Companies can procure GECs, equivalent to 1,000 kilowatt-hours of renewable energy, through China’s green power trading market. The government ensures a stable supply of these certificates and drives consumption through mandated purchases, which supports Chinese manufacturers in meeting global trade requirements by reducing their carbon footprint.

[para. 4] The rapid expansion of China's AI industry is causing a significant increase in electricity consumption, drawing attention to its potential strain on the national power grid. By 2035, data centers in China are expected to consume 400 billion kilowatt-hours annually, which is quintuple their anticipated consumption for 2024. This will represent 3.2% of the national power usage, equivalent to Sichuan province's total consumption.

[para. 5] This electricity consumption spike is attributed to substantial increases in national data center usage, which grew by 31% year-on-year compared to an overall 6.8% rise in national power consumption as of 2024. This trend shows a forecasted average annual increase of 20% through to 2030, according to analysts, indicating a pressing need for infrastructure development to match demand.

[para. 6] Sinopec has achieved a milestone by certifying a major shale oil field in Jiyang, Shandong province, with over 140 million tons of shale oil reserves. Of these, 11.36 million tons are technically extractable, reflecting the potential for significant energy resource contributions. The field is the first of its kind to be approved under China’s new shale oil reserve calculation standards.

[para. 7] Sinopec's intensified exploration aligns with China's mission to enhance energy security through shale oil and gas development. Although the fracking process, commonly used in shale extraction, raises environmental concerns, China continues to advance in this area, albeit producing a smaller quantity than major global producers, with 4.35 million tons of shale oil and 25 billion cubic meters of shale gas in 2023.

[para. 8] Chinese electric bus makers are adjusting their strategies in response to the potential expiration of a temporary U.S. tariff exemption for products coming from Mexico. Yutong Bus Co. Ltd. is preparing by increasing local production and component sourcing in Mexico. [para. 9] If the 25% tariff is enforced, it could complicate the step into the U.S. market for Chinese automakers, potentially redirecting their focus towards strengthening sales within Mexico rather than relying on North American distribution channels.

These insights reflect the dynamic interplay of policy adjustments, technological advances, and geopolitical influences shaping China’s energy strategy.