Coal is the main source of energy in China, accounting for 69 per cent of total primary energy consumption. According to the International Energy Agency (IEA), coal’s importance in the overall fuel mix has been growing in recent years due to the booming demand for electricity, which is almost 80 per cent coal-based.
Oil demand has also been growing quickly, with its share of primary demand reaching 19 per cent in 2005. The country is now the third largest importer of oil after the US and Japan. The main sources of imports are Angola, Saudi Arabia, Iran, Russia and Oman.
Natural gas and the country’s many hydropower projects constitute just 2 per cent each. Nuclear power provides less than one per cent of primary energy. Renewable energy, particularly wind is growing very rapidly à‚— China is amongst the top five wind market in the world à‚— but continues to represent a small share of its total generation mix.
Major reforms in 2002 led to the breakup of the Chinese State Power Company to create separate generation, transmission and distribution companies. A State Electricity Regulatory Commission was also established to promote independence of the power sector. However, its effect so far appears to be limited. The 11th five-year plan covers 2006 to 2010 and aims to improve the operation of the electricity market to create a more open and competitive environment.
China’s total primary energy demand
Source: International Energy Agency World
China’s electrification programme has been a major success, with a claimed 99 per cent of the people now having access to electricity. This, together with the country’s growing economic strength, has led to an enormous rise in electricity demand over the past 20 years.
The result in the early years of the 21st century, however, was power shortages in many parts of the country. A surge in construction of generating capacity led to over 100 GW being added during 2006, bringing total capacity to 622 GW. This has reduced power shortages, although they still continue in some high-demand areas.
Tariffs in China have become increasingly free of subsidy over the past ten years, although some still remain. Electricity tariff control has been relaxed so that generators can now pass increases in the cost of coal to consumers. But there is still some way to go before prices are fully market-controlled.
Environmental awareness has been increasing rapidly in China as the effects of coal combustion are felt across the country. New coal plants are now prohibited near some major cities, and there is an increased emphasis on cleaner coal combustion. Many of the new coal fired power stations on order use supercritical technology to give much greater efficiencies than the traditional subcritical plants. The country is also introducing ultra-supercritical plants with higher efficiencies still.
Generating capacity is expected to continue to grow at close to 5 per cent each year for the next 20-25 years, according to the International Energy Agency. Most of the new capacity will be coal based, but an increasing role will exist for renewables, which, excluding hydropower, could reach 6 per cent of the total by 2030, when coal’s share drops to around 70 per cent. Nuclear capacity will also increase, but its overall share of generation will remain at 2 per cent. However, the contribution from gas fired plants is expected to rise to around 7 per cent.
The scale of power generation development in China is enormous. Capacity is predicted to virtually double from 2006 to 2020 and could potentially rise by another 50 per cent between 2020 and 2030. The rise in generating capacity will be matched by increased investment in transmission and distribution.
Part of the 11th five-year plan is the major scheme the East-West Power Transmission Project, which will bring electricity from the resource-rich west to the energy hungry east of the country. By 2020, ultra-high voltage grid connections should link all the major regional grids to allow much better matching of supply and demand.
The next ten years will be a period of enormous growth in the Chinese power sector. As mentioned, over 100 GW of capacity was added in 2006, but while not every year will match this figure, the target is for an additional capacity of around 50 GW annually.
Predictions suggest that while demand and supply may be in balance in 2008, demand will start to outstrip supply again in the next decade and a total investment of $590 billion will be required between 2006 and 2020 to maintain the power supply balance.