Energy Supply Short of Demand
Nov 25 - China Daily; North American ed.
Many provinces and regions across China have struggled with coal, electricity and oil shortages over the past two years.
Net oil imports reached a record 97 million tons last year.
And 21 provinces and regions experienced blackouts or electricity rationing
last year.
China's economy has been in a heavily-industrialized stage which has
massively increased energy demand. Accelerated urbanization also contributed to
the energy consumption surge as city dwellers use 1.7 times more energy than
rural residents.
The elastic coefficient of energy consumption over economy reached 1.1 last
year, indicating that energy consumption is increasing faster than GDP growth.
Energy conservation in 2003
The government has promoted energy conservation since last year to deal with
the serious energy shortage.
First, the government strengthened the legal framework. It stipulated various
energy conservation laws and regulations including "The 10th Five-Year Plan
of Fuel Oil Conservation and Substitution" and "The 10th Five-Year
Development Plan of Ethanol Fuel and Alcohol Fuel for Vehicles".
China's top planning body, the National Development and Reform Commission (NDRC),
also promoted the development of oil conservation and oil substitution
technologies, and launched pilot programmes for ethanol-fuelled and gas-fuelled
vehicles.
The NDRC published plans for oil conservation and replacement in August,
aiming to save and replace 150 million tons of oil by 2020.
The NDRC outlined a long-term energy conservation plan at the end of last
year which set energy saving targets and measures to meet these.
Last year also witnessed the emergence of demand side management, a new
concept in energy conservation.
This means that, in the 21 provinces and regions suffering from power
shortages, local governments have urged enterprises to reschedule their shifts
to avoid putting too much pressure on power supplies at peak hours.
Local governments offer time-of-use tariffs with peak rates that could be two
to five times higher than off-peak rates in order to discourage peak time
consumption.
They have also introduced an interruptible power tariff that compensates
those voluntarily breaking their power supply.
For example, Hebei Province offers a subsidy of 10,000 yuan (US$1,200) for
every 10 megawatt load of power shut-off for one hour.
Another innovative concept is the "Energy Conservation Volunteer
Accord," the first of which was launched last April by Jinan Iron &
Steel Group and Laiyang Iron & Steel Company in East China's Shandong
Province.
Energy Management Companies (EMC) also made progress last year, with more
being established and more enterprises inviting EMCs to help them manage their
energy consumption.
The establishment of a financing mechanism for EMCs is also under way. An
association of EMCs is expected to be established later this year.
The China Energy Conservation Certification Centre started to set stricter
standards in 2003 to ensure that home appliances save energy. This is in order
to cut stand-by energy consumption which currently accounts for 10 per cent of
residential power consumption in China.
The centre set new technical qualifications for energy-saving colour TVs,
demanding that stand-by energy consumption be within 3 watts.
The centre has so far granted certificates for energy- conservation lamps
manufactured by more than 20 companies.
Government departments launched a week-long promotion campaign to increase
public awareness of energy saving, including seminars and newspaper articles.
Progress and challenges
Major industries have improved energy efficiency in recent years.
Average coal consumption at coal-fired power plants has decreased from 392
gram coal equivalent/kilowatt hours (gce/kwh) in 2000 to 381 gce/kwh in 2002.
Although some inefficient small coal-fired power plants resumed operation in
2003 due to the widespread power shortages, the impact of this was offset by the
fact that large generators are fully operational.
Meanwhile, newly-established generators are mainly efficient large ones with
an average installed capacity of over 300 megawatts. These units can also help
further cut coal consumption in China's power industry to 379 gce/kwh by 2005.
But daunting challenges remain.
One problem is the reliability of statistics.
According to the "Five-year Plan for China's Energy Conservation and
2010 Outlook," energy consumption per 10,000 yuan (US$1,211) GDP growth is
expected to fall from 2.97 tce in 2000 to 2.3-2.5 tce by 2005, representing a
drop of 15-23 per cent. The reduction of energy consumption can cut the emission
of carbon dioxide by 150 million t- C (tons of carbon equivalent).
According to the plan, energy consumption efficiency should increase by 36-37
per cent by 2005. Major energy-consuming products should drop by 5-10 per cent.
But it seems quite difficult to meet these targets when energy production and
consumption has fluctuated greatly in recent years.
According to the National Statistics Bureau, China's energy output dropped
during the 1996-2000 period.
Output fell from 1.33 billion tce in 1996 to 1.07 billion tce in 2000.
But this rebounded to 1.21 billion tce in 2001, and further increased to 1.39
billion tce in 2002.
Energy consumption also experienced similar fluctuations. It kept decreasing
during 1996-99 period, dropping from 1.39 billion tce in 1996 to 1.30 billion
tce in 1999.
And, again, the consumption recovered since 2000, and shot back to 1.48
billion tce in 2002.
The statistical fluctuation has hampered efforts to set targets to improve
energy efficiency and energy conservation and caused uncertainties in terms of
policy analysis.
For instance, energy consumption per 10,000 yuan (US$1,211) of GDP decreased
from 2.68 tce in 2000 to 2.58 tce in 2001.
Should consumption keep dropping like this, it is expected to fall by 18.4
per cent by 2005, meeting the target of 15-23 per cent set for the period of the
10th Five-Year Plan.
But if we base our calculation on an energy consumption increase of 2.62 tce
in 2002 and 2.72 tce in 2003, the consumption efficiency target will be missed.
In terms of energy conservation, China saved 51.5 million tce in 2001,
meaning that meeting the conservation target of 300 million tce will be possible
in the 2001-05 period.
But consumption surges in 2002 and 2003 had a negative impact on energy
conservation. To meet conservation targets, China has to save 120 million tce in
2004 and 2005. This is almost impossible.
In fact, unpredictable energy statistics are mainly in coal production and
consumption.
According to some investigations of the coal industry, coal production and
consumption figures were distorted before 2002, failing to reflect reality.
Statistics in 2002 and 2003 have corrected this inaccuracy, and could be relied
on.
If this conclusion is correct, it will help us adjust our energy conservation
targets, and make a precise assessment of recent energy consumption and
production.
Energy conservation priority
China's energy production increased by 4 per cent annually from 1981 to 2000,
to satisfy the nation's soaring economic growth. The elastic coefficient of
energy consumption over GDP growth was less than 0.5 per cent.
But it is a challenge for us to keep the coefficient at this level, which
requires the quadrupling of the economy by 2020 by only doubling energy
consumption.
The hard fact is that China, as the world's largest developing country, is
set to use more energy for a long period.
Per capita commercial energy consumption in China reached 1.15 tce in 2002.
It is equivalent to 0.8 tons of oil equivalent per capita which is only 42 per
cent of the global average, one-fifth of that of OECD countries, or one-tenth of
North American countries.
In China's villages, 60 per cent of energy consumption still depends on
burning foliage.
Electricity consumed per capita in urban and rural areas is only 132
kilowatthours. About 20-30 million people in remote poverty- stricken areas have
no access to electricity.
According to our institution's research, we need at least 2.3 billion tce of
energy to quadruple the economy by 2020.
This number could reach 3.6 billion tce or higher, without effective efforts
to save energy and improve efficiency. We cannot allow this to happen given
insufficient supply and the fragile environment.
In addition, energy shortages in 2002 and 2003 offered a stimulus to small
inefficient power plants and coal mines which should be all phased out by 2005
to resume production. If this situation continues, the improvement of energy
efficiency will be severely undermined, and the policy of "prioritizing
energy conservation" could become a nonsense.
Saving energy and improving energy efficiency has become an important way to
balance energy demand and supply.
As the most populous developing country in the world, we cannot copy the
development model of developed countries. Instead, we have to develop a new
model which prioritizes energy conservation and greater energy efficiency.
Saving energy and increasing energy efficiency is not only a problem that we
have to consider when the energy supplies fall short, but a long-term strategy
we should always keep in mind.
11th Five-Year Plan
Several targets should be met in order to quadruple the economy by doubling
energy consumption by 2020.
Energy consumption should be around 2.1-2.2 billion tce by 2010, a level we
can afford in terms of energy supply and the environment.
Coal consumption should reach 2 billion tons by 2010 from 1.58 billion tons
last year. Consequently, coal consumption in the energy mix should decrease to
65 per cent by then from the current 67 per cent.
Oil consumption should reach 380 million tons by 2010 from 252 million tons
last year. Natural gas consumption should rise to more than 100 billion cubic
metres from 34 billion cubic metres last year.
In the power sector, hydropower generating capacity should reach
160,000-180,000 megawatts, nuclear power 15,000 megawatts and wind power
10,000-12,000 megawatts.
On the administrative front, it is vital to create a well- organized
management regime for energy conservation.
A sound management system calls for establishing energy conservation
institutions at local-government level and a co- ordinating mechanism between
the institutions and local governments.
The regime should also include management, services and the monitoring of
energy consumption, a system appraising the energy efficiency of key
enterprises, and the collection of statistics.
Energy conservation should always be emphasized when industrial policies are
being drawn up. The energy efficiency index should be an important gauge in
industrial strategy, engineering design and project approval.
Projects, including imported ones, should meet international standards in
terms of energy efficiency. Energy-efficiency standards for imported technology
should be improved, and the importing of inefficient technology should be
prohibited.
We should draft favourable financial, tax and banking policies for energy
conservation to encourage enterprises and society in general to save energy.
These policies include offering tax breaks for those using energy-
conservation products, adopting fuel taxes when the time is right and
interest-subsidized loans for energy-conservation projects.
Local governments should be encouraged to establish special funds to promote
the research and development of energy conservation technology and the
construction of energy-saving projects.
The export of energy-intensive production should be restricted as soon as
possible.
Raising social awareness of energy saving through education and training is
also part of the important work we need to do in the next a few years.
The government should establish a flexible financing scheme to increase
energy efficiency in public transport, housing and home appliances by using
energy conservation labels.
Energy efficiency standards for fuels and major energy-intensive products
should be set up to establish market entry requirements for energy-consuming
products.
At the same time, a reliable energy database is essential to support the
government's decision.
Before the institutional reform in late 1990s, China enjoyed a sound system
in collecting and analyzing energy data.
But the system was undermined after the reform.
Without a reliable database, it will be difficult for China to implement this
energy strategy.