Energy development strategy

1
Energy development strategy security in China

• Zhou Dadi
• Energy Research Institute
• National Development and Reform Commission
  (NDRC), China

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Mr. Zhou Dadi

• Senior Associate, Carnegie Endowment Energy and
  Climate Program, Beijing
• Director General Emeritus, Energy Research
  Institute, National Development and Reform
  Commission
• He is well known nationally and internationally
  in energy and environmental policy analysis
• He is the lead representative from China to the
  Intergovernmental Panel on Climate Change. He
  holds physics and engineering degrees from
  Tsinghua University

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Outline

• Economic growth and driving forces
• Energy production and consumption
• Energy development plan and security
• Regional cooperation

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Economic development in ChinaGDP growth rate
higher than 9 for 30 year in average
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Driving forces for economic growth

• Stable social condition and continuous policy
  direction
• Industrialization and urbanization
• High capital investment
• Expansion of manufacture
• Foreign trade priority policy, export market
• Expansion of infrastructure
• Labor migrated from agriculture to industry and
  service sectors
• Domestic demand increases
• Upgrading of consumption housing and
  mobilization

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High investment rate in China

• High saving rate and capital investment rate is
  one of key factor for high GDP growth
• Investment vs. GDP ratio increased from 34 in
  2001 to 57 in 2008
• Foreign direct investment keep increasing with
  69.4, 74.8, and 92.4 billion US dollars for 2006,
  2007, 2008 respectively,
• Manufacturing, and real estates are major sectors
  for FDI (54 and 20 respectively in 2008)

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Capital investment in high growth(in billion RMB
yuan)
8
Annual increased capacity of Infrastructure
9
Industry is major contributor for GDP(added
value in billion yuan)
10
High energy intensive products(million tons)
11
Export contributes large share of production
(million unit in 2007)
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Household expense increase steadily

• Residential consumption upgrades
• Housing remains the priority in rural area
• Housing and real estates in urban area become one
  of focuses of investment
• Family appliances popularized
• Family cars
• 9.4 million automobiles sold in 2008, and 13
  millions this year

13
Industrial sectoral structure(world bank report,
figures for 2006)
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Total Energy Production Unit
10,000 tce
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Energy consumption increased rapidly, average
8.9 2001-08
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Energy Consumption

• From 1952 to 2008, coal consumption reduced from
  95 to 68.7 and the percentage of hydro, wind,
  nuclear and natural gas increased to 11.7
• By 2010, total energy consumption of coal, oil,
  natural gas, nuclear, hydro and other renewables
  will be 66.1, 20.5, 5.3, 0.9, 6.8 and 0.4.

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Industry dominates the energy consumption

• 70 of primary energy consumed by industry, with
  residential use only above 10
• Energy intensive sectors consume about 50
• More than 75 of electricity consumed by industry
• Metallurgy, chemistry, building material,
  petroleum chemicals, consume about one third of
  power
• 90 of primary energy supplied by domestic
  production
• Coal contribute about 70 of the total, and coal
  will still play important role in the future

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Coal production increased 180 million tons
annually in average 2001-08
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Domestic crude oil production increased steadily,
annual growth rate 2.1
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Crude oil production will mainly depend on
reserve exploration

• Oil experts prefer to keep longer term of stable
  output
• Domestic production may keep minor increase for
  decade
• Peak production may be less than 230 million
  tons, but potential still remains
• Resource management reform may lead to more
  findings, but three giants voices are strong
• Offshore exploration in South China Sea expected

21
Domestic natural gas production increase 13.7
annually 2000-08
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Natural gas is new area for expansion

• Reserve finding keeps fruitful these years
• Support capacity expansion in a larger scale
• Future output capacity may around 250 to 300
  billion cubic meters per year
• Some optimists suggest higher potential, but
  conservatives think lower
• Natural gas infrastructure on the track
• Demand is strong and grows fast
• Urbanization,
• Environmental standards
• Capacity for higher cost

23
Power generation capacity expanded in high rate,
annual peak expansion over 100 GW
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Power sector will continue expansion with lower
rate

• Quick capacity expansion eliminates shortage,
  with peak growth rate over 15 a year
• Technology improve significantly, with the best
  coal fired power generators manufactured in China
  (SC/USC)
• Fuel efficiency for power supply improved 2 per
  year in the last 5 years, with per kw power
  supply fuel consumption 349 gce in 2008 (Japan
  299 gce)
• Ultra supercritical (USC) unit cost lower than
  600 US dollar per Kw
• Electricity demand will increase with lower rate,
  while still large scale
• Generators load time under 5000 hour for thermal
  power in average in 2008

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Chinese economy is under optimization

• World financial crises impacted the export
  significantly
• Domestic financial incentives supported the
  investment on infrastructure, and keep the GDP
  growth rate high
• Concern on possible inflation due to high
  liquidity, and real estates bubble
• Government calls for structural adjustment, and
  creation of domestic consumption
• China is looking for new stems of economic growth
• Financial policy will be kept stable while focus
  is changing from keeping growth rate to improve
  quality

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Forecast of future demand of energy

• Different forecasts under various views on
  economic growth in the future
• The lowest forecast of energy demand for 2020 is
  around 4 billion tons of coal equivalents, more
  than one third increase from this year.
• Economic growth rate may keep higher than 7 for
  another decade
• Urbanization will keep going
• Infrastructure construction will keep on large
  scale, while further expansion unlikely
• Growth will depend on domestic demand, if works
• Energy intensive sectors saturated, almost no
  room for expansion

27
Lower growth rate of energy demand in the future

• Not short term change, but Long term change
• Energy demand is likely to keep on lower growth
  rate than before
• Cleaner energy have great potential
• Environmental constraint become stronger
• Climate change is becoming important criteria for
  energy development
• Low carbon approach comes into account

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Energy conservation first

• Energy conservation is of higher priority in
  policy
• Target of 20 efficiency improvement within 5
  years, is national policy, and will be achieved
• Energy management system has been improved for
  this national target
• Targets and action plans developed for all the
  provinces, cities, counties and enterprises
• Action based on revised energy conservation law,
  and relevant regulation system (effectiveness
  since 2008)
• Economic incentive system established
• Standards, labeling system improved
• Similar target and work plan will be developed
  for next 5 year period

29
Energy structure optimization

• Give priority to clean energy
• Nuclear power will become one of key energy
  sector
• Target of 2020 will be adjusted from 40 gw into
  more than 70 gw, and a couple of 100 gw in the
  future
• Great potential for international cooperation on
  nuclear energy

30
More clean energy needed

• Hydro power is of great potential
• China will try to exploit all the hydro power
  economically viable
• Natural gas demand is increasing rapidly
• Domestic production will be tripled in the next
  decade
• Import of natural gas will become import supply,
  both of pipe and LNG

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Favorable policy for renewable energy

• Renewable energy law came into effect at the
  beginning of 2006
• Accessing the grid with favorable price (feed-in
  tariff)
• Cost sharing by all the users
• National and provincial target of renewable
  shares (10 2010 15 2020)
• Wind power over 10 Gw in 2008, annual capacity
  added will over 10 Gw by 2010
• 10 Gw increase of wind power in the coming
  decade, and maybe more in the future

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Energy security is an important policy element

• China will import more oil and gas, and maybe
  coal in the future
• Domestic oil production will keep flat, and may
  increase some, slowly
• Increasing oil consumption will rely on import
  mainly, excepting the possible alternative from
  biomass or gas
• More than 20 million automobiles will be sold in
  the future annually

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Peaceful energy cooperation

• Peaceful raise of China needs peaceful energy
  cooperation
• We will do our best to avoid historical mistakes
  happened by others, (the disputes on resource
  lead to world wars, and regional collision)
• Develop win-win framework for importer and
  exporter, based on multi-beneficial agreements
• Develop political trusts, based on interests of
  both sides

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Develop regional energy cooperation

• Establish sufficient energy security and
  cooperation communication in East Asia, East and
  East-South Asia, and whole Asia
• Create framework for Asia energy security and
  cooperation, as current frames, such as IEA, are
  not designed for Asia
• Avoid conflict between suppliers and users, but
  develop cooperation between two sides
• National policy needs to consider other
  countries basic interests on energy security
• Importers should not be competitors

35
Improve energy security frameworks

• Recognize changes that developing countries
  become major new demand currently and in the
  future
• Asia becomes more dependent on import of oil and
  gas
• Challenge, but major new opportunity for business
  and prospects
• A great potential for a cross Asia energy supply
  and utilization network