BASF is Working on the ‘Green’ Verbund Site in China

China Market Insider BASF is Working on the ‘Green’ Verbund Site in China

01.04.2021Author / Editor: Henrik Bork* / Ahlam Rais

BASF is working with authorities in China to use more electricity from renewable sources at its chemical plants. The company has just announced a particularly ambitious goal for the new Verbund site in Zhanjiang, in the southern province of Guangdong: The first plants at the Verbund site, which is currently under construction, are to be operated entirely with renewable energies.

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Beijing/China – According to BASF, the company plans to invest around ten billion dollars (around 8.4 billion euros) at the giant Verbund site in southern China by 2030. There, at the southern tip of mainland China, the company's third-largest site is currently being built, after Ludwigshafen and Antwerp. Construction started in 2019. The first plants are scheduled for completion by 2022 and will produce engineering plastics and thermoplastic polyurethane (TPU).

Even before anything has been built there, BASF is already presenting the site as a ‘role model for sustainable production’. In its own words: "BASF will operate the first factories at the Verbund site in Zhanjiang, Guangdong Province, 100 per cent with renewable electricity.”

New Concept with Pioneering Character

To achieve this goal, the company has been helping local government agencies in Guangdong to develop their new energy policy, which aims to increase the share of renewable energy in the energy mix at the behest of the Beijing headquarters.

The Germans have proposed a new concept with pioneering character in the Southern Province, the press release says. The concept, called R-DPP (Renewable Direct Power Purchase), is intended to ensure that industrial electricity consumers can improve their carbon footprint in the future. BASF announced that it is working with China Resources Power on the project.

China Resources Power, once founded as a developer and operator of coal-fired power plants, now generates a little more than half of its energy from renewable sources such as solar, wind, and hydropower. BASF will now become the power producer's first customer in China to purchase clean power under the new R-DPP concept, the press release said.

Sustainability and Lobbying

There are several obvious reasons for this energy policy cooperation between the German chemical company and the communist state and party leadership in Guangdong. For instance, the Ludwigshafen-based company is generating concrete evidence for its corporate PR on the subject of energy transition – or at least they are already announcing it. "Sustainability is firmly anchored in our corporate strategy, and it is our goal to become CO2-neutral by 2030," says BASF manager Markus Kamieth as a justification for this initiative in China.

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On the other hand, this project certainly improves BASF's relations with important government agencies in China. As a major electricity consumer, helping to reform the local energy purchasing rules in China while at the same time making a contribution to environmental protection sounds like a dream come true from the perspective of a corporation's government affairs department.

China's provinces are under intense pressure from the Beijing headquarters to increase the share of renewable energy in their energy mix. China's president and supreme party leader Xi Jinping made a surprise announcement last September that the People's Republic wants to be carbon-neutral as early as 2060. By 2030, China therefore already wants to exceed the peak of its CO2 emissions, according to the Chinese head of state and party leader.

Ambitious Goals in the Land of Coal

From the point of view of provincial politicians, who are now supposed to implement this ambitious goal - while at the same time continue to ensure economic growth and employment in a nation of billions - good advice is expensive. How to drastically reduce the share of fossil fuels in primary consumption in China is one of the big question marks currently hovering in the still rather polluted air above mainland China.

While more than half of all electricity in the EU was generated with renewable energy for the first-time last year, China is still miles away from such an advanced energy mix. Currently, 85 per cent of China's primary energy still comes from fossil fuels, including coal, petroleum, and gas. This will ultimately result in nearly ten billion tons of CO2 emissions.

Even the rapid recovery of the Chinese economy from the corona lockdowns in the first quarter of 2020 is anything but ‘green’ right now. On the contrary. Coal is still king in the Middle Kingdom. In 2020, new coal-fired power plants with a capacity of 38.4 GW had been built in China, the equivalent of two-thirds of the newly installed coal capacity across the entire globe.

Constructive proposals like BASF's, therefore, also help the Chinese Government to propagate exemplary goals at least in advance - and to work towards the ambitious climate goals of its party leader in modest steps. In the future, if it is possible to supply large electricity consumers in Zhanjiang and the surrounding area with competitively priced green electricity, then this project would really set an example.

* Henrik Bork, former China correspondent of the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency. ‘China Market Insider’ is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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