The People's Republic of China
Electricity Abroad In the latest report in our series on international electricity markets, Vincent DeVeau looks at the dramatic transformations taking place in the world's second largest economy.
The people's Republic of China is a nation undergoing an almost unprecedented transformation. Beginning with the ascendancy of Deng Xiaoping in 1978, China's formerly monolithic and strictly centrally planned and controlled economy began to refocus on market-oriented economic development.
Reforms gradually expanded to include fiscal decentralization and increased autonomy for state enterprises, contributing to a more than ten-fold increase in GDP since 1978. Today, China is the second-largest economy in the world after the U.S. By 2000, industrial output had quadrupled, and for much of the population, living standards have dramatically improved.
Despite this, inefficiencies remain, and periodic shortages of electric power have been a serious concern. The tightness of the situation is illustrated by these figures from 2004: while electricity production stood at 2.19 trillion kWh, consumption reached 2.17 trillion kWh - leaving little margin for error. In 2002, China's electricity supply fell far short of demand because of dry spells that decreased hydroelectric supply, combined with an overall generation shortfall and unplanned increases in demand from energy-intensive industries. Twenty-one provinces, municipalities and autonomous regions in China suffered large-scale electricity shortages, resorting to planned blackouts to limit consumption.
According to the International Energy Agency, China will need to invest a total of nearly 2 trillion U.S. dollars in electricity generation, transmission and distribution in the next 30 years: half in generation and half in transmission and distribution.
A massive reorganisation of the industry is also underway. China dismantled the State Power Corporation in 2002, setting up 11 smaller companies. These smaller companies include two electric power grid operators, five electric power generation companies and four associated companies. Each of the five electric power generation companies owns less than 20 percent of market share. Further reforms will separate power plants from power-supply networks, encourage competition and modernise pricing.
In 2003, the State Electricity Regulatory Commission was established, charged with carrying out structural reforms, speeding up the implementation of new regulations and developing an electrical supply trading market.
Coal is the most abundant energy resource in China, and fuels approximately 78 percent of power generation. China is, in fact, the world's largest coal producer, accounting for nearly 28 percent of global annual production. According to Chinese government sources, during the next 30 to 50 years, coal will continue to provide at least 50 percent of China's energy, maintaining its fundamental position in the Chinese economy.
Paradoxically, although coal is such a critical resource for China, there are only a few large coal producers among China's more than 25,000 coalmines, and the level of coal mining mechanisation is only around 40 percent, with mining technology and equipment lagging years behind most other developed countries. Structural reform, therefore, is also taking place in this industry, and China plans to build 13 large coal production bases and reorganize 13 large coal enterprises to rationalise production and ensure supply. Coal mine safety is also a critical issue. China has the highest coal mining accident mortality rate in the world. Several major accidents have occurred in recent years, killing thousands of miners. The Chinese government is therefore making a major investment in safety in tandem with its restructuring of the industry.
Being a military nuclear power, China has also developed, as might be expected, a small commercial nuclear power industry. Although Chinese energy policy has historically focused on the development of coal-fired power, its booming economy forced a re-think in 2004, placing more emphasis on the development of nuclear power. Citing the advantages of zero emissions, a stable fuel price, and lower generation cost, the Chinese government sees nuclear power now as a fundamental part of their long-term development. With 9 nuclear units presently online and 2 more coming online this year, China plans an additional 30 units with the goal of providing 4% of China's total power, up from the current 1.6 percent, by 2020.
