China

China (2014)

Type:

Energy profile

Extent of network

The grid system run by the State Grid Corporation of China (SGCC) and China Southern Power Grid Co (CSG) is highly sophisticated, using high-voltage DC (1000 kV) and AC (800 kV). The UHV grid is expected to reach 40,000 km by 2015, following CNY 500 billion (US$75 billion) of investment by the SGCC. By 2020, the capacity of the UHV network is expected to increase to 300 GW. Transmission and distribution losses are also targeted to fall to 5.7% by 2020, from 6.6% in 2010.There were 11.5 million households without electricity in 2006. Since 2006, the major state-owned transmission corporations have been implementing an electrification programme called ‘Electricity for Every Household’ nation-wide. So far 520,000 households (1,650,000 people) have benefited from this programme.Households without electricity mainly reside in rural areas where grid expansion is considered too technically and economically difficult, although such expansion would be considered desirable to promote social justice.The government aims to merge State Power Corporation’s 12 regional grids into three large power grid networks, namely a northern and north-western grid operated by State Power Grid Company and a southern grid operated by the Southern Power Company by 2020. At present, China does not have a unified national electricity grid. Its current grid system is fragmented into six regional power grid clusters, all of which operate rather independently, and inter-regional interconnections are weak. There is a plan to build a unified and smart grid system nationwide by 2020, which should incorporate energy supplies from various sources, and large-scale smart grid construction is set to be included in the 12th Five-Year Plan.

Renewable energy potential

RES in China are distributed unevenly, mostly in the regions where there are spectacular landscapes, or in the regions where there is high dependency on imported energy. Therefore the potential to develop renewable energy generated power plants varies considerably as well. According to the Long to Medium Programme for Renewable Energy Development, China has substantial potential for sustainable energy mainly from wind and solar.HydropowerChina is endowed with 500 GW of hydropower potential, more than any other economy, according to the World Watch Institute. In 2009, China was the world’s largest producer of hydroelectric power. In the same year, China generated 549 Bkwh of electricity from hydroelectric sources, representing 16% of its total generation. Also, installed generating capacity was around 197 GW in 2009, accounting for over a fifth of total installed capacity. The country added 16 GW during 2010 to reach an estimated 213 GW of total hydro capacity, a significant increase over the 117 GW in operation at the end of 2005. An additional 140 GW of capacity is planned for construction in China over the next five years. The government’s State Energy Bureau announced plans to increase hydro capacity to 380 GW by 2020. The largest power project under construction is the Three Gorges Dam along the Yangtze River, which will include 32 separate 700-MW generators, for a total of 22.5 GW. When fully completed, it will be the largest hydroelectric dam in the world. The Three Gorges project already has several units in operation as of 2009, and reached full capacity on the 4th July 2012.Wind energyWind is the second leading renewable source for power generation, and China leapfrogged the United States in 2010 to become the world’s largest wind producer, after almost doubling its capacity in both 2008 and 2009. Extensive regions of Northern and Western China hold particularly large potential for wind energy, specifically the provinces of Inner Mongolia, Xinjiang, Gansu, and Tibet. However, the windiest areas are sparsely populated regions where electricity demands are low. High voltage transmissions lines are needed to connect these areas with electricity consumers in rapidly growing eastern China. The lack of transmission infrastructure in this sector has thus left a significant amount of capacity inoperable. The country proposed a low-carbon development strategy, in which 15 GW of wind power capacity will be installed every year to reach 200 GW in 2020, up from 31 GW at the end of 2010, 20 GW each year to reach 400 GW in 2030, and land and offshore of 30 GW per annum, amounting to 1,000 GW in 2050.During 2011 and 2012, China plans to install more than 30 GW of wind power capacity. Wind power capacity doubled for three consecutive years in 2008-10. The annual addition of installed wind power in 2008 was almost 6000 MW, the cumulative installed capacity by the end of 2008 was 12 GW, and the total production capacity by 2010 was 16 GW. Currently, six 10 GW class wind power stations are under construction in Jiuquan (Gansu), eastern Inner Mongolia, western Inner Mongolia, Hebei, Jilin and Hami (Xinjiang), as well as a 10 GW-class marine power base along the Jiangsu coast. With the Jiuquan wind power station, the wind power industry in China starts a new phase of large-scale development. The government has implemented a programme of wind power concession bidding and published the benchmark on-grid price of wind power, which has played a positive role in stabilising the main power market. It has also granted tax preferences on import and export duties, and value-added tax, as well as financial subsidies for the development of wind power. The National Renewable Energy Laboratory of the Chinese Academy of Meteorological Sciences estimates that China has a potential of 235 GW of generating capacity on mainland China, with larger potential offshore.Solar energyChinese solar power potential is estimated at 1,680 billion toe (equivalent to 19,536,000 TWh) per year. 1% of China’s continental area, with 15% transformation efficiency, could supply 29,304 TWh of solar energy. Solar photovoltaic (PV) cell production capacity was about 4 GW and PV module capacity was about 3 GW in 2008, and the cumulative capacity of installed PV power was 150 MW by the end of that year. Of that, 55% was in independent PV systems. Meanwhile, solar water heaters in China cover more than 125 million square metres (60% of the world’s total). China is expected to reach a capacity of 300 MW by 2010, and 1.8 GW by 2020. The country exported almost 95% of PV solar cells to other countries because the price remained too high to be competitive with other forms of energy within country.BiomassThe development and utilisation of biomass in China has also made great progress. Key areas are biogas, biomass power generation and liquid biofuels, but the major uses of biomass in China are for power generation and heat generation rather than for biofuel production. China’s installed capacity of biomass power generation rose about 25% in 2010 to 4 GW from a combination of sources including sugarcane, bagasse, solid biomass, organic waste and biogas liquid from livestock waste. The capacity is expected to reach 30 GW by 2030.China had built more than 1600 large-scale digesters and more than 30 million household biogas digesters, the annual output of biogas was about 14 bcm and the annual output of biofuel was 1.65 Mt. China was Asia’s largest fuel ethanol producer at 2.1 billion litres in 2010; and the country produced 0.2 billion litres of biodiesel. In 2012, China’s capacity for bio-diesel production was estimated at 3,408 million litres/ year, unchanged from 2011, with actual biodiesel production estimated at 568 million litres. Other biomass energy applications in China are still in the initial development stages.GeothermalChina has installed capacity of geothermal generation at 9 GWth, the second largest in the world. It also has the largest actual annual energy production at 21 TWh. Geothermal capacity for electricity generation in 2012 stood at 24.2 MW, the eighteenth-largest in the world, however overall geothermal energy usage is forecast to rise to roughly 1.7% of the country's total consumption by 2015.

Energy framework

In the 1980s, Chinese leaders acknowledged that industry was energy inefficient and an obstacle for economic development. Since then, the government has adopted the principle of “equal treatment to development and conservation with immediate emphasis on the latter”, making conservation of strategic importance to energy policy. Measures have been adopted to promote efficient energy use. The national energy law and regulation system consists of two parts: those adopted by NPC and those issued by the State Council and related ministries. Crucial energy laws include the Electricity Law (1995) and the Energy Conservation Law (1998).The Energy Conservation Law aims to strengthen energy conservation, particularly for key energy-using entities, promote rational use of energy and energy conservation technology. This law regulates energy conservation activities and promotes energy-saving. It led to over 164 state energy savings standards which help to reduce carbon emissions. For instance, the new energy efficiency standard for room air conditioners is expected to yield cumulative carbon emission reductions of over 300 million tons by 2020, which is about the size of the European commitment under the Kyoto Protocol.In 2004, the State Council approved the Medium and Long Term Energy Development Plan for 2004-2020, and NDRC launched the first China Medium and Long Term Energy Conservation Plan. In 2005, NPC adopted the Renewable Energy Law, which set out duties of the government, business and others in renewable energy development and utilization. It also included measures relating to mandatory grid connection, price regulation, differentiated pricing, special funds and tax reliefs, and set the goal of 15% of China’s energy from renewable sources by 2020.In February 2005, the Renewable Energy Law (REL) was passed by the National People’s Congress. A number of supporting regulations and guidelines have been put into place to implement the law.Article 4 of the REL requires that a goal for the amount of renewable energy in China’s energy portfolio be established. A series of administrative orders and guidelines, notably the Eleventh Five-Year Plan for Renewable Energy Development (EFYPRED) and the Mid- and Long-Term Plan for Renewable Energy Development (MLTPRED) were published to specify what the goal ought to be.The goal for total RE capacity by 2010 was 300 million tce, of which 248.24 million tce was to come from renewable electricity. Hydroelectricity is counted as RE. In the 2010 and 2020 targets, hydroelectric represents 80% of all renewable capacity. The goal for non-hydro renewables is 1% of grid-connected electricity generation by 2010 and 3% by 2020. Electricity investors whose capacity exceeds 5000 MW shall get 3% from non-hydro renewable sources by 2010 and 8% by 2020 (MLTPRED). The REL set up guaranteed grid access and cross-subsidization to ensure that renewable electricity plants recover their operation costs. Article 14 stipulates that enterprises such as the State Power Grid and the China South Power Grid shall sign agreements, with approved renewable electricity generators, to purchase all their grid-connected electricity. The State Electricity Regulatory Commission’s (SERC) executive order No. 25, Rules for Grid Enterprises to Purchase all Renewable Electricity, 2007, detailed grid responsibility for purchasing all grid-connected renewable electricity.The price at which grid operators purchase renewable electricity is not decided by the market but follows government-guided prices. For wind, the wholesale price is based on bid prices from a government-organized tendering process. For biomass, solar, and other renewable electricity, prices are set by the government based on a rule similar to the “rate of return” principle: that is, cost plus a reasonable return on capital. These prices are much higher than fossil fuel electricity. The purpose of guaranteed grid access at a government-set price is to ensure a market for renewable electricity which is still significantly higher cost than fossil fuel generation.In return for ensuring access for renewable electricity, grid enterprises are allowed to recover the cost above purchasing conventional electricity through cross-subsidization. According to Article 20 of the REL and the “Renewable Electricity Pricing and Financing” published by the National Development and Reform Committee (NDRC) in 2006, grids may recover from customers (1) expenses for getting renewable electricity connected, and (2) the difference between purchasing renewable electricity and purchasing fossil fuel electricity of the same amount.The REL also set up other economic incentives for RE. Article 25 encourages financial institutions to provide preferential loans. Article 26 states that the government shall provide tax benefits to eligible renewable projects. So far, neither SERC nor NDRC has published administrative orders to implement these measures. As a result, they have been used in an ad hoc and limited manner.According to Administrative order No. 2001-198, issued by the Ministry of Finance (MOF) and the State Administration of Taxation in 2001, value-added tax for municipal solid waste for power generation is refunded. The value-added tax for wind power was reduced from 17% to 8.5%. As a result of the REL with feed-in tariffs, China’s installed wind capacity has doubled every year since 2005, and reached number one for “newly added capacity” in 2009.In 2006, the State Council issued the Decision to Strengthen Energy Conservation. In the same year, NDRC set two goals in the 11th Five-Year Plan (2006-2010): to double per capita GDP of the country by 2010 (compared to 2000) and decrease the energy consumed per unit of GDP by 20%, targeting an annual savings rate of 4%. In line with this target, the government raised electricity prices for eight energy-intensive industries.In June 2007, NDRC issued China’s National Climate Change Programme, the country’s first global warming policy initiative. This indicated the need to adopt measures, covering: GHG mitigation; adaptation; climate change science and technology; public awareness on climate change; and institutions and mechanisms.Concerning mitigation, the focus is on energy production and transformation, energy efficiency and conservation, industrial processes, agriculture, forestry and municipal waste. As to energy production and transformation, measures aim to strengthen the existing energy legal system, improve the national energy programme, implement the Renewable Energy Law, promote favourable conditions for renewable energy and GHG mitigation, stimulate energy price reform, optimize the energy mix, promote innovation and efficiency in generating technologies, renewable and non-renewable, including nuclear power. These policies are expected to have a major influence on the energy and utilities sectors. China is voluntarily committed to reducing its carbon intensity per unit of GDP by 40-35% by 2020 compared to the 2005 level. It has also announced plans to reduce its energy intensity levels by 31% from 2010 to 2020 and increase non-fossil fuel energy consumption to 15% of the energy mix in the same time period.From June 2007, different tariffs (5-10%) were imposed on 142 export goods classified as energy intensive and polluting goods, and tax rebates were abolished for 553 so-called ”high energy-consumption, highly polluting, resource based” products. The government has also supported energy conservation projects, and requires financial institutions to back them. However, state-led initiatives to increase energy efficiency have not yet received wide support from local governments and industry.China’s 12th Five-Year Plan (2011-2016) on National Economic and Social Development, targets economic growth, innovation, competitiveness and social developments. Economic growth in the main three sectors, namely the farming, industry and services, is the main objective. Specific emphasis is dedicated to Green development, environmental protection and energy conservation. The Plan includes binding global energy targets, with non-fossil fuel resources reaching 11.4% of primary energy consumption by 2015, energy intensity decreasing by 16% and CO2 emissions per unit of GDP decreasing by 17% by 2015. It also states that the country anticipates to increase the share of natural gas and other cleaner technologies in the country’s energy mix and close several smaller coal-fired plants that were less efficient and heavy pollutants. In January 2012, the government launched a pilot programme in seven provinces and cities to place an absolute cap on carbon emissions, a first for the country, in an effort to kick-start the development of a functioning carbon market in these areas, following unsuccessful “soft cap” programs in the past.In order to further increase the adoption of renewables, China’s 12th Five-Year Plan sets a target for RE sources to reach 9.5% of total energy consumption, and 20% of annual electricity production by 2015. In 2012, the targets were further defined as follows: 100 GW of wind capacity (including 5 GW offshore wind), 35 GW of solar energy14 and 290 GW of hydro power by 2015. In China, the energy development plan, published in January 2013 as part of the 12th Five-Year Plan, sets ambitious renewables targets with mandatory 2015 targets for non-fossil energy use, energy intensity, carbon intensity and particulate emissions.China ratified the UN Framework Convention on Climate Change (UNFCCC) on 5 January 1993 and the Kyoto Protocol on 30 August 2002.In 2012, the government published a new Energy Policy White Paper, aiming to continue the development of energy supply and provision whilst addressing the need to balance growing consumption with sustainability. The white paper sets out a number of key policy goals, in support of the 12th Five-Year Plan. These include expanding international collaboration in energy and promoting technical and scientific development, as well as improving universal energy access and the broadening of institutional reforms in the energy sector. This will include the accelerated development of an improved legal framework for the sector, promoting market-oriented reforms, and improving administration of the sector, including simplifying administrative procedures and reducing direct government intervention, as well as establishing a comprehensive statistics, monitoring and forecasting agency for the sector.Particular prominence was given to the continued development of new and renewable energy sources in the country, with specific policy goals for hydropower, solar, wind and biomass energy, as well as new nuclear development, with an increased focus on safety and sustainability. The white paper also sets out goals for increasing distributed generation in the country, aiming to construct 1,000 new distributed generation systems by 2015.China Renewable Energy Scale up Program (CRESP)The China Renewable Energy Scale up Program (CRESP) has been designed as a strategic partnership between the GoC and the World Bank/GEF. The program includes three GEF supported phases over a period of 15 years. The GEF program is justified by the long-term and complex nature of the policy issues hampering the scale up of renewable energy and the need for a flexible approach to adapt to the fast changing environment and the priorities as they emerge during implementation. The objective of the CRESP program (three phases) is to enable commercial renewable electricity suppliers to provide energy to the electricity market efficiently, cost-effectively and on a large scale. The objective of CRESP Phase II is to support the ambitious renewable energy scale-up program in China with a focus on efficiency improvement and reduction of incremental costs.

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