This year marks the beginning of China's 14th Five Year Plan and the beginning of its journey towards "carbon peak and carbon neutrality". Relevant policy deployments will be intensively introduced, and greener and lower carbon economic development will be the main theme of future development. Achieving the goals of "carbon peak and carbon neutrality" means that more electricity will replace fossil energy consumption, and the overall demand for electricity in society will greatly increase. Copper, as a non-ferrous metal with conductivity second only to silver, is an essential material for the development of clean energy and terminal electrification. Therefore, in the process of achieving the goal of "carbon peak and carbon neutrality", the demand for copper metal will inevitably increase from both the power generation and consumption ends.
Realizing the policy path of "carbon peak and carbon neutrality"
According to IEA data, China's total carbon emissions have continued to rise in the past 30 years, reaching 9.497 billion tons in 2018. Among them, the power and heat sectors accounted for the highest proportion of carbon emissions, reaching 52%, followed by the industrial sector (28%) and transportation sector (10%), while other sectors accounted for 10% of total emissions. It can be seen that the power sector is the main source of China's carbon emissions, and deep decarbonization of power is the core sector to promote low-carbon transformation in the whole society. On this basis, it is also necessary to add electrification to the end use energy industry to improve the electrification rate in the industrial and transportation sectors.
The deep decarbonization of electricity is to adjust the energy consumption structure of China. According to the data provided by the IEA, the proportion of coal power generation in China's energy consumption in 2018 was as high as 61.8%, natural gas power generation (7.3%), crude oil (3.2%), and clean energy in hydropower (3%), wind power (2.5%), biomass (3.6%), nuclear power (2.4%). Compared with the energy structure of developed economies such as the United States, Europe and Japan, China's fossil energy consumption accounted for too much, and the proportion of coal power generation with the largest carbon emission coefficient in fossil energy was far higher than that of other major economies. In order to achieve the goal of carbon neutrality, it is necessary to adjust the energy structure dominated by fossil fuels to a structure dominated by non fossil fuels. The General Secretary mentioned that the consumption proportion of non fossil fuels needs to reach 25% of the total energy consumption by 2030, and according to the plan, the consumption proportion of non fossil fuels needs to reach 80% by 2050. Deep decarbonization of the power sector is a certain direction for the future. For the development of non fossil energy, biomass and geothermal energy are relatively small, and only the Yalong River and Nujiang River remain undeveloped in hydropower, with limited hydropower space. Due to safety considerations, the scale of nuclear power construction is much lower than expected. So looking back, the future development of non fossil energy will mainly rely on wind power and photovoltaics.
The proportion of electricity to terminal energy consumption is one of the important indicators to measure the level of electrification development. According to the IEA data above, it can be seen that the industrial and transportation sectors need to increase decarbonization efforts in the terminal. In recent years, the substitution of electric energy in the transportation and industrial sectors has developed rapidly. In 2019, the proportion of terminal electricity consumption in China reached 26%, with the industrial and transportation sectors accounting for 25% and 3% respectively. The "2020 Energy Work Guidance" of the National Energy Administration proposes that the proportion of electric energy in terminal energy consumption should reach around 27%. In December 2019, State Grid Corporation of China proposed an important judgment to achieve "two 50%" by 2050, namely "China's energy cleanliness rate will reach 50% and the terminal electrification rate will reach 50% by 2050". It is expected that the terminal electrification rate will increase to 32% by 2025, and to 40% and 52% by 2035 and 2050, respectively. In the industrial sector, the use of coal in industrial boilers and coal kilns will be replaced by electricity, and the proportion of electricity will gradually increase to 43% by 2035 and continue to climb to 52% by 2050. The transportation sector is the fastest growing sector in terms of electrification. Under the policy promotion of the "New Energy Vehicle Industry Development Plan (2021-2035)", China's new energy vehicles will develop rapidly, increasing the electrification rate of transportation from nearly 3% in 2017 to 13% in 2035, and reaching 35% in 2050.
The Drive of Copper Consumption by Carbon Peak and Carbon Neutrality
The policy path for carbon neutrality is to deeply decarbonize electricity and vigorously develop non fossil energy, mainly wind power and photovoltaics. Research has shown that renewable energy facilities require several times the amount of copper used in traditional energy facilities; The second is to increase the electrification rate in the terminal sector, convert coal to electricity in the industrial sector, and develop new energy vehicles in the transportation sector. It can be seen that both policy paths will increase copper consumption.
According to the 2020 new energy installed capacity data released by the National Energy Administration, the total newly installed capacity of wind power and photovoltaic power in China in 2020 was 71.67 million kilowatts and 48.2 million kilowatts, respectively. The total newly installed capacity of wind and solar power was about 120 million kilowatts, with a total installed capacity of 281 million kilowatts and a total installed capacity of 253 million kilowatts. The General Secretary has set a cumulative installed capacity of 1.2 billion kilowatts for wind and photovoltaic power by 2030, and based on the requirement that the proportion of non fossil energy consumption reach 25% by 2030, the industry estimates that non fossil energy such as wind, hydro, and nuclear power will reach a total of 1.6 billion kilowatts. It is speculated that the increase will mainly come from wind and solar power generation, and it is expected that wind and solar energy will reach a total of 1.5 billion kilowatts by then. The China Photovoltaic Industry Association predicts that during the 14th Five Year The average annual increase in photovoltaic installed capacity is generally expected to be 70 million kilowatts, with an optimistic estimate of 90 million kilowatts. At the 2020 Beijing Wind Energy Conference, more than 400 wind power companies launched a joint declaration for the first time in history, pledging to add over 50 million kilowatts of wind power installed annually. After 2025, the annual average new installed capacity of wind power in China should not be less than 60 million kilowatts, and reach at least 800 million kilowatts by 2030.
According to research data released by the National Copper Association, the average copper consumption in renewable energy systems is 8-12 times higher than that in traditional power generation systems, with wind turbines using about 6 tons of copper per megawatt and solar photovoltaic power using about 4 tons of copper per megawatt. According to the above calculation of wind power and photovoltaic installed capacity, it is estimated that from 2021 to 2025, wind power consumption of copper will be 1.5 million tons, photovoltaic consumption of copper will be 1.12 million tons, and the total annual copper consumption of wind power and photovoltaic will be 524000 tons. From 2026 to 2030, wind power consumption of copper will be 1.8 million tons, photovoltaic consumption of copper will be 1.12 million tons, and the total annual copper consumption of wind power and photovoltaic will be 584000 tons,
According to statistics, the demand for copper in the industrial sector is about 1.3 million tons, of which 54% is used for transformers and motors, consuming 702000 tons of copper, and the remaining 46% is used for non electromechanical equipment. In the future, the electrification of the industrial sector and the conversion of coal to electricity will increase copper consumption in the transformer and motor sectors. Currently, the electrification rate in the industrial sector is 25%, and it will reach 43% by 2035. Based on this, it is estimated that the electrification rate in the industrial sector will increase by 18%, and the copper consumption of mechanical and electrical equipment will reach 1.21 million tons by 2035, with an annual increase of approximately 34000 tons of copper consumption.
The copper consumption of new energy vehicles is approximately 60kg for plug-in vehicles and 83kg for pure electric vehicles. Assuming a ratio of 2:8 between plug-in and pure electric vehicles, we estimate that the copper consumption of new energy vehicles will reach 470000 tons by 2025. At the same time, in terms of copper consumption of charging piles, the vehicle to pile ratio will be 3.2:1 in 2020, and the long-term goal is to reach 1:1. Considering the increase in vehicle to pile ratio in 2020, assuming that the vehicle to pile ratio will reach 1.5:1 by 2025, the copper consumption of a single charging pile will remain unchanged, and the ratio of household charging piles: public DC charging piles: public AC charging piles will remain unchanged from 2020, we estimate that the copper consumption of electric piles will reach 1:1 by 2025. 87000 tons, the overall copper consumption of new energy vehicles and supporting charging piles is 557500 tons by 2025. From 2021 to 2025, the average annual copper consumption of new energy vehicles was 290000 tons.
Under the guidance of the carbon neutrality target, China will focus on reducing carbon emissions from two aspects: deep decarbonization of electricity and increasing terminal electrification rate. Deep decarbonization of electricity will stimulate the vigorous development of clean energy such as wind power and photovoltaics, while increasing terminal electrification rate will lead to the transformation of energy consumption from coal to electricity in the industrial sector and the vigorous development of new energy vehicles in the transportation sector. It is expected that during the 14th Five Year Plan period, the average annual installed capacity of wind power will be 50 million kilowatt hours, driving an average annual consumption of 300000 tons of copper. The average annual installed capacity of photovoltaics will be 70 million kilowatt hours, driving an average annual consumption of 224000 tons of copper. The industrial sector's coal to electricity conversion will add 34000 tons of copper consumption annually, and the vigorous development of new energy vehicles will add 290000 tons of copper consumption annually. Overall, the carbon neutrality target during the 14th Five Year Plan period will increase China's copper consumption by 850000 tons annually.
