China has the second-largest electricity market in the world, and its demand for power is set to grow exponentially. In the IEA’s latest World Energy Outlook the impact of differing future scenarios on the development of this market is explored. We focus on the impact of two of those scenarios.

Heather Johnstone, Senior Editor

The 2007 edition of the International Energy Agency’s (IEA’s) well-respected World Energy Outlook (WEO) has a special focus on China and India, the world’s two emerging economic and energy giants. As in previous WEOs, a scenario approach was adopted to examine future energy developments, and covers the period from 2005 to 2030.

The base projections are derived from a Reference Scenario (RS), which assumes that governments do not introduce any new energy policies, and therefore do not affect the underlying trends in energy demand and supply. The Alternative Policy Scenario (APS) in contrast analyzes the impact on global energy markets of a package of additional measures currently under consideration that address energy security and climate change.

In the following article we focus on China’s power sector, and compare how this sector will develop up to 2030 under these two scenarios.

Energy giant

In less than a generation, China has changed from being a minor and largely self-sufficient energy consumer to the world’s second largest and fastest-growing energy consumer, and a major player on the global energy market.

Power generation currently accounts for around 40 per cent of the country’s total primary energy – a slightly higher share than that of the rest of the world. In 2006, nearly 90 per cent of new power generation capacity was coal fired, compared to 70 per cent in 2000. China has the second-largest electricity market in the world, behind the USA. The country’s per capita electricity consumption is approximately one-fifth of the OECD average. Total electricity generation reached 2544 TWh in 2005, with an installed capacity 517 GW.

Reference scenario Outlook

In the past 20 years, China has achieved an impressive development of its electricity infrastructure. Installed power generation capacity increased from 66 GW in 1985 to 517 GW in 2005 and 622 GW in 200612.

In the RS total generation is projected to increase by 4.9 per cent per year, more than tripling by 2030. In the period 2005-2015, it is projected to grow by 7.8 per cent per year, much faster than the 3.1 per cent average annual rate over the period 2015-2030.

Over the projection period, generation investments will lead to capacity additions of 1312 GW, which is more than the current installed capacity in the US. A projected total generation of 8472 TWh and an installed capacity of 1775 GW by 2030 means that China will equal the current levels of production and capacity in the USA and the European Union combined.

Fuel Mix

Coal fired generation accounted for 78 per cent of total electricity supply in 2005. This share is one of the highest in the world, although lower than in countries such as Australia, South Africa and Poland. Coal will remain the predominant fuel in generation over the projection period (Figure 1). Coal fired generation is expected to increase at an average rate of 4.9 per cent per year.

Figure 1: Coal will remain the main fuel for power generation in China between 2005-2030
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The expansion of coal fired generation in China will continue to be based on pulverized coal, with supercritical steam cycle technology expected to play a much greater role in the future, because of its efficiency and emissions advantages. China has made considerable progress in the implementation of state-of-the-art coal fired generation technologies, by building larger, more efficient power plants.

China added 18 GW of supercritical plant in 2006, bringing total supercritical capacity to about 30 GW. There are about 100 GW of supercritical plant on order, implying that the share of supercritical technology in new capacity will increase significantly over the next few years.

Natural gas accounted for just one per cent of total generation in 2005. Although gas is not competitive with coal for power generation under current market conditions, China is pursuing policies to diversify the electricity mix and to reduce local pollution, which could boost the share of gas in certain regions. Thus, in the RS, gas fired generation is expected to reach 313 TWh by 2030, which will represent around four per cent of total electricity generation.

Nuclear generation totalled 53 TWh, or 2.1 per cent of total generation in 2005. It is projected to rise five-fold, with its share increasing to three per cent of the total by 2030. Two new reactors were connected to the grid in 2006 and 2007, bringing the total number of reactors in operation to 11 and installed capacity to 8.6 GW. Four reactors with a total capacity of 3.2 GW are under construction and expected to be completed by 2010-2011.

The government’s target is to have 40 GW in place by 2020. This target seems ambitious given the current level of development, the long construction times and the current global bottlenecks in nuclear component manufacturing, which impose extended delays on delivery. In the RS, installed nuclear capacity reaches 21 GW in 2020 and 31 GW in 2030.

China is the largest producer of hydroelectricity in the world, producing 397 TWh in 2005. In the RS, hydropower is expected to rise to 1005 TWh in 2030, but its share of total power output will fall from 16 per cent to 12 per cent. China’s economic hydropower potential – some 1750 TWh – is the highest in the world. The government’s 300 GW target will be met by 2030 in the RS.

China is actively engaged in the development of other sources of renewables to generate electricity, mainly wind power, biomass and solar photovoltaic. Generation from these sources is expected to reach 263 TWh in 2030, about three per cent of total electricity.

Wind power capacity was 1.3 GW in 2005 and doubled in 2006. By the end of that year, there were 91 wind farms in operation in 16 provinces, equipped with 3311 wind turbines. With its large land mass and long coastline, China has relatively abundant wind resources. Estimates by the China Meteorology Research Institute, based on measurements done at ten m above ground, indicate a potential of 253 GW for onshore wind power. The institute estimates offshore wind resources to represent an exploitable potential of about 750 GW.

The government’s target for large-scale wind turbines is 5 GW in 2010 and 30 GW in 2020. In the RS, wind power capacity is projected to reach 49 GW in 2030 and wind power to account for 1.6 per cent of China’s electricity supply.

China’s biomass consumption, at 227 million tonnes of oil equivalent (Mtoe) in 2005, is the largest in the world. It is almost entirely traditional biomass, i.e. agricultural wastes, scraps from the forestry and forest product industries, and municipal waste. Only 3.3 Mtoe were used in power generation in 2005. The government target calls for 5.5 GW of biomass-fired generating capacity by 2010 and 30 GW by 2020.

In the RS, total biomass consumption remains broadly unchanged through to 2030. However, the utilization pattern changes considerably. Traditional biomass consumption falls to 159 Mtoe by 2030. By contrast, demand for electricity and heat from biomass, including industrial on-site generation, is projected to increase, from 8 TWh in 2005 to 110 TWh in 2030, requiring 3.3 Mtoe and 38 Mtoe of biomass fuel, respectively.

By the end of 2005, China’s installed capacity of photovoltaic systems was approximately 70 MW, of which approximately 50 per cent was used to supply electricity in remote rural areas without grid connection.

Since 2000, China’s domestic PV industry has grown rapidly, achieving annual PV module production capacity of approximately 300 MW at the end of 2006. The future potential is very large, as most areas benefit from high solar radiation. The national targets are 300 MW installed by 2010 and 1.8 GW by 2020. PV technology can be expected to make significant advances beyond 2020 along with cost reductions. In the RS, China’s PV capacity is expected to reach 9 GW in 2030.

Alternative Outlook

As highlighted above China’s power sector currently accounts for almost 40 per cent of total energy consumption and furthermore for almost half of its total carbon dioxide (CO2) emissions. Both these shares are expected to rise in the future, if the government does not make additional efforts to diversify the electricity supply mix and to reduce CO2 emissions and local pollution.

The APS demonstrates that, if policies to improve the efficiency of the way electricity is used are put in place, electricity generation can be lowered by 12 per cent in 2030, compared with the RS. Total generation savings in 2030 would amount to almost 1040 TWh, with installed capacity 148 GW lower (Figure 2).

Figure 2 : China could significantly reduce soaring power demand if energy efficiency measures are introduced
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The projected electricity generation mix in 2030 is markedly different from that in the RS. While coal remains the dominant fuel, its contribution is substantially lower, contributing 64 per cent of total supply in 2030, as against 78 per cent in the RS. Coal fired generation is reduced by around 1850 TWh, which is close to the total level of coal based electricity produced in China in 2005, and installed coal fired capacity is reduced by around 350 GW.

The efficiency of new coal fired power plants is also higher in the APS. After 2015, new power stations are assumed to be as efficient as those built in the OECD. The average gross efficiency increases from 32 per cent in 2005 to 39 per cent in 2030, bringing it much closer to the OECD average of 42 per cent by 2030. Furthermore there is a greater implementation of cleaner technologies such as supercritical, ultra-supercritical and integrated gasification combined-cycle plants.

Gas fired power generation is also higher, reflecting efforts to diversify fuel supplies. Natural gas fuels six per cent of total generation in 2030, compared with four per cent in the RS.

Similarly nuclear power rises to 55 GW by 2030, compared with 31 GW in the RS, making China one of the largest nuclear power generators in the world with a share of 13 per cent in world nuclear power capacity. The share of nuclear power reaches six per cent of total generation in 2030, which is twice as much as in the RS.

Overall, the share of renewable energy in power generation rises steadily, to reach 24 per cent of total electricity generation in 2030.

China is expected to have 311 GW of hydropower in place by 2020, meeting the government target, and 380 GW in 2030. The target for wind power is expected to be exceeded, with wind power reaching 42 GW in 2020 and 79 GW in 2030.

Similarly, the target for photovoltaics (PV) is also expected to be surpassed. China is in the process of developing world-class manufacturing industries for wind turbines and solar PV modules, and this is likely to have a strong impact on the domestic electricity market.

The installed capacity for biomass is projected to reach 14 GW in 2020, instead of the 30 GW targeted by policy makers. In 2030, however, biomass capacity could reach 39 GW.

Clearly China is trying to manage its high power demand, and consequential high carbon emissions, by encouraging diversification of its fuel mix through the introduction of targets and policies. However, what the APS demonstrates is that the implementation of policies to improve energy efficiency would have a significant impact on slowing down China’s soaring demand.