THE REALITY OF ENERGY DEVELOPMENT IN CHINA
by Gordon Feller
Jin Hua Gong Mine, Datong, Shanxi, China
(Photo: Peter Van den Bossche)
Editor's Note: The Chinese rely on coal for about two-thirds of their total energy production. And with relatively abundant reserves of coal, and relatively scarce reserves of other fossil fuels, as China increases energy production, coal will remain their main source of energy. This is the reality of energy development in China.
According to the US DOE's Energy Information Administration, over the next 20 years or so, the amount of energy produced in China from coal is going to double, from about 50 quadrillion BTUs ("quads") of energy in 2007 to 95 quads by 2030. It is a certainty that China can achieve this level of coal production - what is uncertain is what ultimate level of overall energy production will guarantee the Chinese the lifestyle enjoyed by fully industrialized nations, and hence how much more energy they will have to find elsewhere.
The answer lies in two unpredictable trends - technological advancements in clean, renewable energy production, and improvements in energy efficiency, or "energy intensity," which is how many units of energy correspond to a unit of gross national product. There is reason for optimism on both counts. Non-hydroelectric renewable energy currently amounts to less than 1% of global energy production, yet advancements in photovoltaic technology, solar thermal technology, possible breakthroughs in biofuel yields and extraction methods, and enhanced geothermal technologies all promise exponential growth over the next two decades.
As China completes their process of industrializing and urbanizing, they also have the opportunity to implement cradle-to-cradle, highly advanced technologies that leapfrog the legacy technologies in-place elsewhere. It is often easier to start from scratch than to retrofit, and China can make the most of this and achieve unprecedented levels of energy efficiency and energy intensity.
Meanwhile coal production in China increases at an astonishing pace, and most of the operating coal plants in China lack modern scrubbers to remove gross air pollution. In this regard, concerns over CO2 may be misplaced. It could be that black soot that settles on arctic ice is warming the northern polar regions more than the CO2 that accompanies that soot. And the ill-health attendant to that soot is beyond debate. The costs to remove genuine pollution, nitrogen dioxide, sulpher dioxide, carbon monoxide, particulate matter and toxic metals - is far, far less costly than attempting to sequester the CO2 emissions. And the technology to do this is well established.
It is going to take decades for clean renewables to replace coal. In the meantime, the international community should encourage the Chinese to at least clean up their coal emissions. Getting rid of the particulates and other pollutants would improve the health of hundreds of millions of people, it would prevent black soot from melting northern ice, and unlike schemes for CO2 sequestration - or ending coal burning all together - it is feasible in the short term. - Ed "Redwood" Ring
China's Coal - The Reality of Energy Development in China
by Gordon Feller, January 2008
COAL CONSUMPTION IN CHINA BY SECTOR
2004, 2015, and 2030
Sources: 2004: Energy Information Admin. (EIA),
2015 and 2030: EIA, "System for the Analysis
of Global Energy Markets" (2006).
China is the second largest energy consumer in the world and most of its energy consumption is coal. This dominance of coal is not expected to fall significantly even as China's energy demand grows.
China's Development Research Center of the State Council estimates that coal will account for 66 percent of primary energy consumption in 2010. Coal-based power generation will account for 65 to 70 percent of total generation for the next decades. Industry is the other major consumer of coal.
While China's coal resources are deemed sufficient for its needs in the coming two decades, the environmental cost of coal use is already beginning to take its toll, particularly through SO2 and NOX emissions which are the leading causes of acid rain. In 2002, about 34 percent (or 6.6 million tons) of China's SO2 emissions were released from power plants. Acid rain falls on an estimated 30 percent of China's land mass and can become a threat to agricultural output. China's CO2 emissions, now even surpassing those from the United States, are also a threat to the global environment. A combination of clean-coal technologies at the input, processing and output stages of the power generation process, the enforcement of emission control regulation, and sector policies (such as pricing) have the potential to mitigate the environmental impact of coal use. Significant reductions in environmental impact in the long-term will require a major effort.
The World Bank's recent analytical work on China's coal sector found that coal mining is in desperate need of restructuring and modernization. Overall, coal is far behind China's power and oil/gas sub-sectors in economic efficiency, modern management, and technology. There are more than 30,000 coal mines in the country, most of them small mines producing a third of the country's coal even after widespread mine closures. The small mines are a major source of the sector's problems including lack of safety (some two-thirds of the reported 6,000 coal mining fatalities per year occur in small coal mines), environmental damage (small mines are the least equipped to address the environmental impacts of coal - only a small fraction of small mines wash their raw coal), and sub-optimal exploitation or, at worst, waste of resources. At the same time, small-scale mining is a sensitive issue that needs to be addressed in the wider context of the economic and social priorities of the town and village governments which most often operate them.
From mine to market, a fully laden coal barge
floats its way down the Yangtzee River.
China is the second largest producer of electricity in the world and its power demand growth is also among the world's highest. With rapid economic growth continuing to drive energy demand, China faces supply reliability concerns across the energy sector. These concerns are particularly acute for power and oil. The key priorities and challenges facing China's energy sector in the medium-term are:
(1) Ensuring Energy Supply Reliability to Meet Demand Growth:
With rapid economic growth continuing to drive energy demand growth, China faces supply reliability concerns across the energy sector. These concerns are particularly acute for power and oil.
(2) Ensuring power supply reliability:
China is the second largest producer of electricity in the world and its power demand growth is also among the world's highest. By the end of 2000, China's total installed capacity reached about 320 gigawatts and was expected to grow to about 400GW by 2005, about 500 gigawatts in 2010 and between 850 gigawatts and 950 gigawatts in 2020. But electricity consumption has jumped by much higher rates annually than are implicit in the above 2000-2005 estimate with power shortages first affecting the provinces responsible for the country's export boom (Guangdong, Fujian, Zhejiang, Jiangsu, and Shanghai) along the eastern sea-board. In 2004, 19 out of 31 provinces had to ration electricity. The reliability of the power supply system, particularly, the transmission grid has also become an issue. The government forecasts a power shortage of 10 to 15 percent in the key manufacturing areas estimating that about $108 billion of new generation capacity will be needed in the coming five years to close the gap.
Despite progress in power sector reform, the sector has suffered from systemic problems such as a piecemeal approach to restructuring, slow development of a regulatory framework leading to inefficiencies and abuses of monopoly/monopsony power, mismatch between loan maturities and economic lives of power projects, inadequate wholesale electricity and transmission pricing regimes, and low efficiency of electricity supply and use.
To guide the sector's evolution, the national government of China released a comprehensive reform program for the power sector in April 2002 whose ultimate objective is to provide customers the best service at the lowest possible cost through continued break-up of the monopolistic industry structure and gradual expansion of competition to improve sector efficiency.
(3) Managing the security of oil supply:
China's oil consumption accounted for nearly a quarter of primary energy in 2002. With a growing passenger vehicle fleet, greater inland freight transportation, and the high growth rate of industrial output, oil consumption is expected to retain this share of primary energy till 2010 even as China's total primary energy consumption will more than double between 2000 and 2020. In 1993, China became a net importer of oil. And the proportion of imports in oil consumption has risen from 7.3 percent in 1995 to 31 percent in 2000. The government estimates that oil imports will account for 60 percent of total oil consumption by 2020. The government is responding to the vulnerability to oil price volatility and supply risk through a mix of measures including the development of a strategic oil reserve, acquisition of upstream oil assets, and fuel efficiency standards for vehicles. The government has sought the World Bank's advice in developing a coherent and comprehensive policy response to the question of oil supply security under the wider rubric of a policy report on long-term energy security.
(4) Managing the Environmental Impact of Coal:
China is the second largest energy consumer in the world and most of its energy consumption is coal, 67 percent of primary energy consumption in 2002. This dominance of coal is not expected to fall significantly even as China's energy demand grows. The Development Research Center of the State Council estimates that coal will account for 66 percent of primary energy consumption in 2010. Coal-based power generation will account for 65 to 70 percent of total generation for the next decades. Industry is the other major consumer of coal.
While China's coal resources are deemed sufficient for its needs in the coming two decades, the environmental cost of coal use is already beginning to take its toll, particularly through SO2 and NOx emissions which are the leading causes of acid rain. In 2002, about 34 percent (or 6.6 million tons) of China's SO2 emissions were released from power plants. Acid rain falls on an estimated 30 percent of China's land mass and can become a threat to agricultural output. China's CO2 emissions, second only to the United States, are also a threat to the global environment. A combination of clean-coal technologies at the input, processing and output stages of the power generation process, the enforcement of emission control regulation, and sector policies (such as pricing) have the potential to mitigate the environmental impact of coal use. Significant reductions in environmental impact in the long-term will require a major effort.
Old and new mingle as human-powered coal carts
deliver energy to fuel China's industrial boom.
Overall, coal is far behind China's power and oil/gas sub-sectors in economic efficiency, modern management, and technology. There are more than 30,000 coal mines in the country, most of them small mines producing a third of the country's coal even after widespread mine closures. The small mines are a major source of the sector's problems including lack of safety (some two-thirds of the reported 6,000 coal mining fatalities per year occur in small coal mines), environmental damage (small mines are the least equipped to address the environmental impacts of coal - only a small fraction of small mines wash their raw coal), and sub-optimal exploitation or, at worst, waste of resources. At the same time, small-scale mining is a sensitive issue that needs to be addressed in the wider context of the economic and social priorities of the town- and village-level governments which most often operate them.
(5) Reducing Environmental Damage by Increasing the Proportion of Gas and Renewables in the Energy Mix:
China's gas consumption is low (at 2.7 percent of primary energy in 2002). But gas is beginning to gain momentum and substantial growth is expected with the share of gas in final consumption anticipated to more than double during the next decade.
Renewables accounted for less than 10 percent of China's primary energy consumption in 2002. With respect to renewable sources of electricity, China is one of the most well-endowed countries in the world estimated to include 160 gigawatts of wind power, over 75 gigawatts of commercially exploitable small hydropower, about 125 gigawatts of biomass energy, 6.7 gigawatts of known geothermal energy and high levels of insulation in many parts of the country. Analyses indicate that the greatest potential for displacing coal by renewable energy is in the power sector. Even so, renewable sources accounted for only 7.8% of primary energy in 2002 with large hydropower plants as the dominant source.
Recognizing this potential, the government seeks to begin use of the resources which are economically feasible. The government has decided to adopt a policy aimed at building demand by mandating electricity suppliers to meet some of their needs from renewable resources, often known as a mandated market policy. The policy is to be implemented through the enactment of a Renewable Energy Promotion Law (REPL) which has been ratified by the People's Assembly in February, 2005. In addition to the development of the law, regulations need to be introduced. Rather than introduce a law that requires all provinces to comply immediately, the government intends to try out the approach in four provinces (Fujian, Inner Mongolia, Jiangsu, and Zhejiang) which have all volunteered to participate as pilot provinces. These provinces have agreed to adopt the law and to take the actions necessary to comply with it over the period 2005-2008.
(6) Increasing Efficiency of Energy Use Including Heating Services:
The energy consumed to produce every one thousand dollars of GDP (or energy intensity) reduced from 2.49 tons of oil equivalent in 1980 to 0.84 by 2002. The reduction of waste since 1980 has been significant but it means that the easier gains have already been made. In an increasingly market-based economy, government-mandated programs are unlikely to succeed and stronger regulatory oversight will be needed. Despite the progress so far, a greater energy efficiency challenge lies in the future as China currently has a comparatively low per capita energy consumption level (1.1 tce per person in 2001 compared to 6.16 for South Korea, 6.2 for Japan, and 12.04 for the United States). Energy intensity reductions will be heavily influenced by the speed at which China's major energy-consuming industries move closer to international efficiency standards. Economic growth, rising incomes and the spread of a modern, technology-based way of life - al of these mean that energy efficiency needs to remain a major priority for energy policy.
(7) Efficiency in the heating sector:
Roughly half of China's population lives in northern regions where temperatures fall below 5oC for over 90 days every year. China currently consumes about 180 million tons of raw coal per year for space heating in urban residential and commercial buildings in its cold and severe cold regions. During winter, emissions from coal-fired central heating facilities are the primary cause of the serious air pollution that is prevalent in northern Chinese cities, and are a major public health concern of the Government. And energy use per unit floor area is at least double that of buildings in similar cold climates in Western Europe or North America, yet far lower levels of comfort are achieved. Due to its major cost advantage, and shortages of alternatives, coal is expected to remain the dominant fuel for central heating systems for the foreseeable future. To address these problems, it is critical to drastically improve the efficiency of coal-fired heating systems in residential buildings.
Air pollution from China can easily be seen from
outer space as a plume of smoke thousands of miles long
China's urban residential building stock is expected to more than double in the next 20 years. The Government estimates that energy use per unit floor area in new residential buildings can be cut in half, compared with the existing building stock, if compliance with the current energy code is ensured. But China's construction boom is already overwhelming efforts to enforce the country's new building energy codes. The housing development industry in general has little incentive to adopt energy-efficient building designs, materials and practices. Similarly, the central heating sector currently provides no incentives for consumers to respond to market-based energy costs. The heating systems are based on Soviet technologies that do not allow consumers to control their heating. Heat metering is non-existent. Billing is based on a flat per square meter price. Chinese leadership has made it clear that urban heating sector reform must proceed.
China's growth and development has been achieved at the expense of its natural resource base. For example:
- Land degradation is widespread and increasing. China has huge tracts of rapidly degrading grasslands, some of the worst water erosion problems and the highest ratio of actual to potential desertified land in the world.
- Thanks to large investments in tree plantation and shelterbelt development and a natural forest-logging ban, China has successfully turned the tide of formerly rapid deforestation. However, the country's natural forests had been in a continuous decline for over 50 years and the return of many forest ecosystems to a sustainable condition is still a long way off.
- Despite the establishment of a national system of nature reserves, the stresses on them have put the country's unique and globally significant biodiversity under serious pressure.
Water availability and quality continues to be a critical problem, particularly in northern China, and the situation is likely to deteriorate over the next decade, especially in the rivers north of the Yangtze. In order to equitably resolve the conflicting claims for water and other natural resources there is a need for both technical progress and improvements in institutional, administrative and regulatory arrangements.
China's rapid growth is now a driving force in the global economy and is achieving unprecedented rates of poverty reduction. However, growth is also seriously damaging the natural resource base and generating major environmental liabilities. The country's environmental problems include land degradation, deteriorating water quality and water scarcity, severe air pollution and declining natural forest cover. These problems threaten the health and prospects of current and future generations and are undermining the sustainability of long-term growth.
About the Author: Gordon Feller is the CEO of Urban Age Institute (www.UrbanAge.org). During the past twenty years he has authored more than 500 magazine articles, journal articles or newspaper articles on the profound changes underway in politics, economics, and ecology - with a special emphasis on sustainable development. Gordon is the editor of Urban Age Magazine, a unique quarterly which serves as a global resource and which was founded in 1990. He can be reached at GordonFeller@UrbanAge.org and he is available for speaking to your organization about the issues raised in this and his other numerous articles published in EcoWorld..
Additional EcoWorld reports on China:
ﾠCleaning Up China
ﾠChina's Energy Demand
ﾠChina's Renewable Energy
ﾠWind Power in China
ﾠChina's Energy Outlook
ﾠFuel Cell Development in China
ﾠChina, Canals & Coal