Is China Seriously Beating the U.S. in the Shift Toward Natural Gas?

Despite its stigma as a highly polluted country, China is aggressively transitioning toward cleaner-burning natural gas.

Aug 30, 2014 at 12:39PM

The United States believes in natural gas. The fuel is cheap and plentiful, emits half as much carbon dioxide as coal, and holds tremendous promise in reducing America's dependence on foreign energy. Given these advantages, it's no surprise the U.S. has increased its use of gas for power generation.

And entrepreneurs such as T. Boone Pickens are working tirelessly to ensure that America's roads will be dotted with many more natural gas-powered vehicles in the future. But despite this progress, one unlikely country is transitioning toward natural gas at a much faster pace: China.

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A natural gas-powered vehicle in Pingyao, a county in China's central Shanxi province. Photo credit: Wikimedia Commons.

China's shift toward gas
At first glance, it might seem ridiculous that China -- a country infamous for its smog-filled cities and polluted waterways -- is beating the U.S. and other developed countries when it comes to adoption of natural gas. But you have to remember that it's starting from a much lower base. Nonetheless, the statistics are impressive.

According to estimates by consultancy IHS, China has added a whopping 1,500 natural gas refueling stations over the past five years, with about half of those opening in 2013 alone. By contrast, the U.S. added just 84 compressed natural gas, or CNG, stations last year.

China rolled out another 30,000 natural gas-fueled trucks last year and currently has some 2 million natural gas-powered trucks, buses, and cars on its roads, compared to a grand total of roughly 110,000 natural gas vehicles, or NGVs, in the U.S.

Indeed, the world's most populous nation is poised to become the fastest-growing market for natural gas-powered vehicles in the years ahead. By 2020, some 3.8 million cars, trucks, and buses in China will be powered by compressed or liquefied natural gas, nearly double the current figure, according to Bloomberg New Energy Finance. Why is that?

Key drivers of China's transition
A lot has to do with government policies promoting NGV use to combat China's growing air pollution problem. In fact, one of the biggest drivers of growth in the Chinese NGV market will be local governments converting their vehicle fleets -- such as taxis, waste collection trucks, and police cars -- to run on natural gas.

The attractive economics of NGVs relative to electric or hybrid vehicles is another major driver. To support the shift, China recently inked a $400 billion, 30-year deal with Russia to import as much as 38 billion cubic meters of natural gas each year.

It is also investing heavily in the necessary infrastructure to import and distribute natural gas. For instance, state-owned oil companies such as CNOOC, PetroChina, and Sinopec are constructing numerous LNG import terminals along China's eastern shore, as well as smaller liquefaction facilities in inland areas. They're also teaming up with Western energy companies like BP and Total that will supply the fuel.

A long way to go
Despite China's aggressive shift toward natural gas, the country has far to go. Natural gas accounted for just 4.9% of its total primary energy consumption in 2012, according to U.S. Energy Information Administration data. That share is expected to rise to 8% by 2015 and 10% by 2020. By contrast, natural gas today accounts for nearly 30% of total U.S. energy consumption.

Furthermore, even with the expected doubling of the NGV count by 2020, such vehicles will then represent a minuscule 2% of the estimated 200 million automobiles in China. Still, that's a lot better than the 110,000 NGVs currently in the U.S., which represents a much smaller 0.05% share of the more than 250 million vehicles on the nation's roads.

Despite the challenges that lie ahead, China's decision to use more natural gas is a welcome development for the world's largest energy consumer and a major step in tackling its air pollution problem.

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