An Analysis of China Southern Power Grid s Renewable Energy (non-hydro) and Energy Efficiency Development:

Transcription

1 An Analysis of China Southern Power Grid s Renewable Energy (non-hydro) and Energy Efficiency Development: Zhao Ang The Rock Environment and Energy Institute (REEI) August

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3 The Rock Environment and Energy Institute (REEI) is an independent think tank based in Beijing, China. In pursuit of social justice and environmental sustainability, REEI do studies on a range of environmental and energy issues. For more information, please visit International Rivers protects rivers and defends the rights of communities that depend on them. With offices in four continents, International Rivers works to stop destructive dams and promote water and energy solutions for a just and sustainable world. 3

4 Summary This report forecasts the electricity demand of China Southern Power Grid (CSG) in by a model with basic assumptions of annual GDP growth rate and elasticity coefficient of power consumption. Through an analysis of the status quo and potential of improving energy efficiency and exploiting non-hydropower renewable energy sources (wind power, solar photovoltaics and biomass energy) in the five provinces covered by CSG including Guangdong, Guangxi, Guizhou, Yunnan and Hainan, the report finds that the development targets set by CSG concerning non-hydro renewable power generation in the 12 th and 13 th Five-Year Plan (FYP) period are too conservative to fulfill the national mandatory target stipulated in the Mid- and Long-Term Plan for the Development of Renewable Energy, which requires that non-hydro renewable power generation of the large-scale power grids should occupy 3% of the total power generation by In addition, the five provinces powered by CSG enjoy rich non-hydro renewable energy resources, the cost of power generation from wind power, solar photovoltaics (PV) and biomass energy will further decline, and the government will continue policies that support renewable energy development. As a result, enjoying favourable conditions, CSG has the capability of strengthening its efforts in developing power generation from non-hydro renewable energy and reducing its dependence on thermal power and large-scale hydropower during the 13 th FYP period. According to the estimates, the report maintains that if CSG could meet the national target for investments in improving the energy efficiency and developing non-hydro renewable energy in 2020, then CSG would generate an addition of 48TWh in 2020, including 24TWh as a result of improved energy efficiency and another 24TWh generated from non-hydro renewable energy, which is equal to the electricity output of a thermal power plant with the installed capacity of 9.32GW or a hydropower plant with the installed capacity of 15.26GW, representing 6.1% of the total installed capacity of thermal power and 12.8% of the total installed capacity of hydropower respectively. Based our analysis, we present the following policy recommendations: A forward-looking and comprehensive mid- and long-term strategic energy development plan should be developed. CSG should take into consideration the potential for power generation from wind power, solar PV and biomass energy, and work out the development targets of the five southern provinces by 2020 to increase the installed capacity of these energy sources by following the national target, which requires that non-hydro renewable power generation of large-scale power grids should occupy 3% of the total power generation by This would bring CSG into a development pathway that depends less on thermal power and large-scale hydropower sooner. CSG should specify the scale of investment in energy efficiency by 2020, and establish effective cooperation in demand-side management and combined heat and power with enterprises involved in all aspects of the electric system. In addition, when investing in power grid development, more attention should be given to increasing input in energy efficiency so as to save electricity. 4

5 Methodology and Framework The report adopts a method combining literature review and basic modelling of power generation and demand to analyze the probability of reducing CSG s dependence on largescale hydropower and thermal power. A few interviews are conducted for the first version and later modifications. The report mainly makes the analysis in three aspects: the electricity demand forecast, room for energy efficiency improvement, and development potentials of renewable energy. Based on the current investment in energy efficiency and the national development target and policies concerning power generation using renewable energy sources, this report asks the question that, as far as CSG is concerned and with a view towards meeting the national target: to what extent energy efficiency should be improved and non-hydro renewable energy be developed by 2020, and what difference that would make compared to CSG s current target? The possibility that CSG over-fulfills the national target by 2020is not discussed here. In the end, the report presents some policy recommendations for CSG on how to meet the targets in terms of energy efficiency improvement and power generation from renewable energy. 5

6 Table of Contents 1 Forecast of CSG s electricity demand and output growth ( ) Forecast of China s electricity demand Forecast of electricity demand of the provinces powered by CSG Regional imbalance of electricity generation and consumption in CSG Ways to meet electricity demand Construction of power plants in CSG Average annual utilization hours of power generation facilities for different power sources Considerable room for energy efficiency improvement in the five provinces powered by CSG Potential of combined heat and power Potentiality of demand-side management of electricity Huge potential for non-hydro renewable energy in the five southern provinces National plan for development of renewable energy and incentive policies Targets Incentive policies Development of non-hydro renewable energy in the five southern provinces Resource potential Slow development of non-hydro renewable energy power generation in the five southern provinces with conservative targets Impact on the electricity structure as a result of energy efficiency improvements and nonhydro renewable energy development Policy recommendations and conclusions Related Resources Bibliography

7 List of tables: Table 1: Forecast of electricity demand by 2015 and 2020 in the five provinces powered by CSG (TWh) Table 2: Comparison of electricity generation and consumption in 2010 and 2011 among the five provinces powered by CSG (TWh) Table 3: Change in electricity consumption of the five provinces powered by CSG by 2015 and 2020 (TWh) Table 4: Installed capacity and development target of CSG (GW) Table 5: China s target for renewable energy power generation and the average annual utilization hours by 2015 (installed capacity: GW; electricity generation: TWh) Table 6: China s development targets for renewable energy power generation by 2015 and 2020 (installed capacity: GW; electricity generation: TWh) Table 7: Comparison among the status quo, targets and potential installed capacity of renewable energy of CSG (GW) Table 8: Changes in installed capacity (GW) and electricity output (TWh) of different power sources in CSG Table 9: Different scenarios in which non-hydro renewable energy power generation contributes 3% to the total electricity output of CSG by 2020 (electricity output: TWH; installed capacity: GW) Table 10: Installed capacity of thermal power and hydropower that can bring equivalent electricity output with the assumption that CSG could realize the national policy target regarding energy efficiency improvement and non-hydro renewable energy power generation by 2020 (electricity output: TWh; installed capacity: GW) 7

8 1 Forecast of CSG s electricity demand and output growth ( ) 1.1 Forecast of China s electricity demand Future electricity demand is usually projected based on the annual GDP growth rate, elasticity coefficient of power consumption 1 and electricity consumption in the starting year, because GDP and the elasticity coefficient of power consumption are the two most crucial factors that impact electricity demand. China s actual average annual GDP growth rate in the 11 th FYP period ( ) was 10.9% (compared to the target rate of 7.5% specified in the 11 th FYP, this is an increase of 45%), and in the same period the electricity consumption grew by 11.12% annually on average 2 ; accordingly, the elasticity coefficient of power consumption can be calculated as According to China Electricity Council (hereinafter referred to as CEC) estimates, the elasticity coefficient of power consumption 3 for China will be 1.0 and in the 12 th FYP period ( ) and the 13 th FYP period ( ) respectively. The average annual GDP growth rate set in the 12 th FYP period is 7%; however, based on the experience in the 11 th FYP period, the actual figure may be higher. According to IMF s estimate issued in October 2012, China s average annual GDP growth rate will rise gradually from a low of 7.83% in 2012 to around 8.5% from 2014 to , thereby leading to an average annual growth rate in of 8.48%. 6 According to the data provided in Low Carbon Scenario and Development Path up to 2050 for China, 7 this report assumes the actual average annual GDP growth rate of China during the 12 th and 13 th FYP period is 8.38%. Combined with the CEC s assumption that the elasticity coefficient of power consumption will be 1.0 and 0.8 in the 12 th and the 13 th FYP period respectively, and based on the fact that power consumption in 2010 amounted to 4,199.9TWh, a tentative estimate is that China s electricity demand will reach 6,280.4TWh and 8,685.8TWh by 2015 and 2020, respectively. In addition, the Measures for Demand-side Management of Electricity, published in November 2010 and put into effect on January 1, 2011, puts forward quantitative targets for power grids. According to this document, through various demand-side management measures, electricity saved each year by power grids shall be no less than 0.3% of the sales volume or 0.3% of the maximum load. The Measures for Demand-side Management of Electricity will play a significant role in China s efforts to reduce energy consumption per 1 This refers to the ratio of the average annual growth rate of electricity consumption to the average annual growth rate of GDP. 2 China s electricity consumption grew from 2,836.8TWh in 2006 to 4,199.9TWh in 2010, with the average annual growth rate of 11.12%. 3 This refers to the ratio of the average annual growth rate of electricity consumption to the average annual growth rate of GDP. 4 CEC: Research Report on the 12 th Five-Year Plan for Power Industry. 5 The data are taken from the World Economic Outlook Database (October 2012). Link: Acquired on April 17, According to the CEC s Research Report on the 12 th Five-Year Plan for Power Industry, China s average annual GDP growth rate in 2011 is 9.24%. 7 Jiang Kejun et al. Sino-Global Energy.No. 6,

9 unit of GDP by If the target of saving electricity by 0.3% each year can be achieved, we can approximately estimate that electricity demand in 2015 and 2020 will amount to 6,186.2TWh and 8,425.2TWh respectively, which is consistent with CEC s projection (2011) that China s electricity demand will be 6,020-6,610TWh in 2015 and 8,000-8,810TWh in Forecast of electricity demand of the provinces powered by CSG To discuss CSG s construction scale of power plants, it is necessary to first forecast the electricity demand of the five provinces powered by CSG by 2015 and In the same way that national demand is estimated, future electricity demand for the five provinces is estimated based on assumptions of the average annual GDP growth rate and elasticity coefficient of power consumption in the same period. We assume that the annual GDP growth rate of the provinces in will be equivalent to the target set in their 12 th Five-Year Plan for National Economic and Social Development, and the annual GDP growth rate in will be 1% lower. 8 The elasticity coefficient of power consumption of the provinces is assumed to be the same as that of the whole country, which is 1.0 for the 12 th FYP period and 0.8 for the 13 th FYP period. Table 1 represents the estimated electricity demand in the five provinces. Table 1: Forecast of electricity demand by 2015 and 2020 in the five provinces powered by CSG (TWh) Guangdong Guangxi Yunnan Guizhou Hainan Total Average annual GDP growth rate ( ) (%) Average annual GDP growth rate ( ) (%) Electricity consumption in Electricity consumption in There is no reference for the GDP growth rate of the provinces during the 13 th FYP period. However, since the GDP growth rate of the provinces during the 12 th FYP period is usually 1% lower than that in the 11 th FYP period, we assume that the GDP growth rate during the 13 th FYP period is also 1% lower than that in the 12 th FYP period. 9

10 Elasticity coefficient of electricity consumption ( ) Estimated electricity consumption in ,094.6 Average annual GDP growth rate ( ) (%) Elasticity coefficient of electricity consumption ( ) Estimated electricity consumption in ,509.4 Source: Compilation of Power Industry Statistics 2010, CEC; Annual Report on Electricity Regulation (2011), State Electricity Regulatory Commission. Considering the quantitative requirement on the electricity to be saved annually by the power grids stated in the Measures for Demand-side Management of Electricity, we hold that the total electricity consumption of CSG in 2015 and 2020 will be a bit lower than the figures in Table 1, reaching 1,091.6TWh and 1,505.1TWh respectively. 9 According to the official estimate of CSG, the total electricity consumption of the five provinces will reach 1,082TWh in 2015 and 1,380TWh in 2020, 10 which is 9.6TWh and 125.1TWh less than our estimated amount, respectively. If CSG s estimate is taken as the benchmark, then our estimate is 0.89% and 9.07% (absolute value) higher for 2015 and 2020 respectively. As the figure indicates, the difference between CSG s estimate and our estimate for the electricity consumption in 2020 is relatively large, the reason for which may be that the average annual GDP growth rate and the elasticity coefficient of power consumption of the five provinces during the 13 th FYP period assumed by CSG are lower than the national average that this report assumes, and CSG also factors other measures into energy efficiency improvement and energy saving. Since the forecast of electricity consumption is of key significance for the analysis hereafter, 9 The annual electricity consumption of the five provinces from 2011 to 2015 can be calculated based on the data in Table 1. In line with the requirement of demand-side management that the electricity saved should be no less than 0.3% year on year, we can figure out the total amount of electricity saved in and the electricity consumption of the five southern provinces in 2015, which is less than 1,094.6TWh as indicated in Table Strategic Thought on Development Plan of CSG in the 12 th FYP Period, issued on April 5, 2012, on Refer to for details. Acquired on October 11,

11 the report will take both CSG s estimate and our estimate into consideration and thus put forward that the total electricity consumption of the five provinces powered by CSG will be 1,082-1,091.6TWh in 2015 and 1,380-1,505.1TWh in Regional imbalance of electricity generation and consumption in CSG The five southern provinces vary in the amount of energy sources and the level of economic development they enjoy, which is the fundamental reason why the project of West-to-East Electricity Transmission (transmitting electricity from Yunnan and Guizhou to Guangdong) has been implemented. Table 2 shows the difference in electricity generation and consumption of the five provinces, which shows the regional imbalance in this regard. Yunnan and Guizhou are net exporters of electricity, and Guangxi sees a similar amount in generation and consumption; Guangdong consumes the largest amount of electricity and its consumption accounts for over half of the Grid s total. As a result, Guangdong s electricity supply cannot satisfy its own demand; the demand-supply gap was 91.4TWh in 2010 and 68.6TWh in Hainan is the smallest in the area covered by CSG in terms of electricity generation and consumption. As an island completely isolated from the mainland, it is relatively independent geographically and the electricity demand is mainly satisfied by its own power plants. Table 2: Comparison of electricity generation and consumption in 2010 and 2011 among the five provinces powered by CSG (TWh) Electricity generation in 2010 Electricity consumption in 2010 Electricity generation in 2011 Electricity consumption in 2011 Guangdong Guangxi Yunnan Guizhou Hainan Total Source: Modified from data provided in Compilation of Power Industry Statistics 2011, CEC. 11 Calculated based on the data provided in Table 2-4 and Table 2-5 in Appendix 2 of Annual Report on Electricity Regulation (2011). 11

12 As Table 2 indicates, in 2010 and 2011, CSG s electricity generation was basically equal to its consumption, which implies that CSG s electricity consumption is mainly satisfied by generation in the five southern provinces. The gap between power generation and consumption of CSG only constituted 0.09% and 0.35% of the total power consumption in 2010 and 2011 respectively, both of which are far less than 1%. CSG only buys a small amount of electricity from the neighboring grids such as the Central China Grid affiliated with the State Grid. For instance, in 2010, CSG bought 30.5TWh from other power grids and sold 7.8TWh, 12 so the net power import was 22.7TWh, occupying only 3.2% of the total electricity consumption in that year. According to our estimate about the electricity demand of the five southern provinces (without considering the requirement that through demand-side management, the electricity saved should be no less than 0.3%), the scenario for electricity demand of the five provinces by 2020 remains unchanged. Yunnan, Guizhou and Guangxi are similar in demand, Hainan has the smallest demand and Guangdong remains the largest electricity consumer, with a demand of approximately 600TWh by 2015 and 783.4TWh by Table 3: Change in electricity consumption of the five provinces powered by CSG by 2015 and 2020 (TWh) Guangdong Guangxi Yunnan Guizhou Hainan Ways to meet electricity demand Usually there are two ways to meet the electricity demand: to have more electricity trade and to increase power generation. Increasing power generation can be achieved either by building more power plants and power grid facilities or through improving the efficiency of existing power plants and grids. To meet the electricity demand of CSG by 2015 and 2020, it is necessary to increase electricity generation. However, more detailed analyses are needed to weigh the two options of improving efficiency and building new facilities in terms of their costs and benefits. Even for building more power plants, it should be determined which energy source should be prioritized: whether it is hydropower, wind power, solar PV or biomass energy? If active 12 Acquired on September 6, 2012 from the official website of CSG concerning illustrations on electricity trade in the item of Business Center. For details, see 12

13 efforts are made from now to 2020 to develop wind power and solar PV, can this help to moderately alleviate CSG s dependence on thermal power and hydropower? To answer those questions, it is necessary to find out the priority sequence in developing power facilities by following the principle of developing a low-carbon, efficient and clean energy system for the future. This report believes that, to meet the increasing demand for electricity, first and foremost, efforts should be made to improve the production efficiency of the existing power plants and the transmission efficiency of the power grids with the view to enhancing the overall energy efficiency of the power system; secondly, against the background of climate change and environmental protection, priority should be given to developing power generation from renewable energy so as to facilitate the transformation into a low-carbon power system. By contrast, building more traditional power generation facilities, such as the coal-fired power plants, should be the last option. Discussion in this report centers on the potential of CSG to improve its efficiency and generate power from non-hydro renewable energy. With regard to energy efficiency improvements, focus will be given to combined heat and power and demand-side management. In terms of the development of renewable energy sources, this report mainly discusses wind power, solar PV and biomass energy. As to the potential of improving the transmission efficiency of the power grid, the line loss rate set by CSG in its target will see rather little change during the 12 th and 13 th FYP period, because the line loss rate of CSG was 6.28% in 2010 and will be reduced to 6.2% by 2020 according to its target, 13 representing a very small change of 0.08% in ten years. Therefore, the improving transmission efficiency or decreasing the line loss rate can hardly make any impact to the power supply of CSG and thus will be ignored in this report. 1.5 Construction of power plants in CSG Thermal power and hydropower remain the focus for electricity development in the five southern provinces during the 12 th and 13 th FYP period. Meanwhile, development of nuclear power is being accelerated. The share of nuclear power, pumped storage and non-hydro renewable energy in total installed capacity is on the rise; however, since installed thermal power and hydropower capacity has been rather large, it will occupy 84.31% of the total installed capacity of CSG in 2020 and continue to be the dominant energy sources. Table 4: Installed capacity and development target of CSG (GW) Change of share in the total installed capacity in With regard to CSG s target of line loss rate, please refer to CSG Says Line Loss Rate Will Be No Greater than 6.2%, China WTO Tribune (December 8, 2012). For details, see Acquired on December 26,

14 Thermal power % Hydropower % Nuclear power % Pumped storage % Wind power % Solar PV 4.83 Biomass energy Total Source: Compilation of Power Industry Statistics 2010, CEC; Annual Report on Electricity Regulation (2011), State Electricity Regulatory Commission; CSG s Social Responsibility Report Average annual utilization hours of power generation facilities for different power sources Power generation facilities for different power sources vary remarkably in the average annual utilization hours; therefore, there is a huge difference in the annual electricity generation among power plants that have the same installed capacity but utilize different power sources. The 12 th Five-Year Plan for Development of Renewable Energy, issued by the National Development and Reform Commission (NDRC) in August 2012, puts forward the installed capacity and electricity generation targets for hydropower, wind power, solar power and biomass energy by 2015, based on which average annual utilization hours of the corresponding energy source can be calculated, as shown in Table 5. Table 5: China s target of renewable energy power generation and the average annual utilization hours by 2015 (installed capacity: GW; electricity generation: TWh) Installed capacity Annual electricity generation Average annual utilization hours Hydropower (pumped storage not included) ,146 Grid-connected wind power ,900 14

15 Solar power ,190 Biomass energy ,000 Source: Calculated based on The12 th Five-Year Plan for Development of Renewable Energy issued by NDRC and the analysis in this report. China s average annual utilization hours of thermal power in averaged 5,147, 14 which will be used in the discussion about the electricity output of different electric systems in CSG hereafter. 14 Calculated based on the data concerning the technical and economic indicators of power generation in provided in CEC s Compilation of Power Industry Statistics 2010, pp

16 2 Considerable room for energy efficiency improvement in the five provinces powered by CSG The target set in the 12 th and 13 th FYP to reduce China s energy intensity is the main policy incentive for provinces and power grids to enhance energy efficiency. China aims to reduce energy consumption per unit of GDP (or energy intensity) by 16% by 2015 compared to 2010 levels. To be specific, the five provinces powered by CSG set their respective targets to reduce energy intensity as follows: 18% for Guangdong, 15% for Guangxi, 15% for Guizhou, 15% for Yunnan and 10% for Hainan. 15 Improvement in energy efficiency 16 involves various aspects of society and the economy, spanning such big sectors as industry, construction and transportation. Investment in energy efficiency played a key role in helping China achieve its goal of reducing the energy consumption per unit of GDP by 19.1% during the 11 th FYP period. In the five years between 2006 and 2010, the total investment in energy efficiency across the country reached billion RMB, which included investment from the central finance, local finance and social capital amounting to billion (12%), billion (5.7%) and billion (82.3%) RMB respectively. Energy saved during those five years is equivalent to that generated by 340 million tons of standard coal (Dai Yande et al., 2012a). Calculated accordingly, the average benefit of the total investment in energy efficiency during the 11 th FYP period was 2,490 RMB per ton of standard coal. In terms of the electricity generated by a ton of standard coal, 17 3,000KWh was saved for every 2,490 RMB invested in energy efficiency. Therefore, with the total investment of billion in energy efficiency during the 11 th FYP period, the amount of electricity saved was equal to 1,020TWh. According to the estimate made by the Energy Research Institute of NDRC, during the 12 th FYP period, the total demand of China for investment in energy efficiency will be around 1,525 billion RMB, with the central finance, local finance and social capital contributing 153 billion, 160 billion and 1,212 billion RMB respectively (1:1:7.9) (Dai Yande et al., 2012b). Compared to the figures for the 11 th FYP period, contribution of the central finance, local finance and social capital will rise by 50.5%, 233% and 73.9% respectively, which indicates that the local finance and social capital will play a more significant role in the investment in energy efficiency during the 12 th FYP period. During the 11 th FYP period, the provincial governments of the five southern provinces invested a total amount of 2.46 billion RMB in improving the energy efficiency, and the ratio of the contribution of provincial finance to that of municipal finance was 1:1 (Dai Yande et 15 Circular of the State Council on Printing and Issuing the Plan for Controlling the Greenhouse Gas Emission during the 12 th Five-Year Plan period. Browse for details. Acquired on November 8, Energy efficiency refers to the ratio of the service provided by use of energy to the amount of used or input energy. To improve energy efficiency is to input less energy but enjoy equal or even more services. 17 According to the data provided in CEC s Compilation of Power Industry Statistics 2010 (p. 18), the nationwide standard coal consumption for power supply is 333g standard coal per kilowatt hour, which means 1kg standard coal can bring about electricity supply of 3kWh, so a ton of standard coal can supply 3,000kWh. 16

17 al., 2012c). Based on this, we know that investment in energy efficiency by the provincial and municipal governments of the five southern provinces totalled 4.92 billion RMB. Assuming investment in energy efficiency of the five provinces during the 12 th FYP period will increase by 233% to reach billion, and based on the above-mentioned proportion of contribution of different capital sources which is 1:1:7. 9, we can estimate that the social aggregate investment in energy efficiency will amount to billion RMB in this period. Assuming that the benefit from energy savings due to investment in energy efficiency is the same as that in the 11 th FYP period, namely 2,490 RMB per ton of standard coal, (and in CSG a ton of standard coal can bring about electricity supply of 3,030KWh according to the data of ), then the investment of billion RMB in energy efficiency during the 12 th FYP period would save million tons of standard coal for the five provinces, which is equivalent to 197.4TWh in terms of power supply. It should be noted that improvement of energy efficiency is not only required in the power sector, but in other sectors. Nevertheless, based on the proportion of the standard coal used for power generation across the country in the total amount of energy consumption, 19 we can simply estimate that the investment of billion in energy efficiency could directly save 62TWh for CSG. The analysis above indicates that CSG enjoys a rather large potential for improving energy efficiency. In the following section, room for CSG to improve energy efficiency will be discussed in two aspects: combined heat and power and demand-side management. 2.1 Potential of combined heat and power Combined heat and power (CHP) is a typical method used by the power plants (i.e. powergenerating enterprises) instead of power grids to improve energy efficiency. Since it satisfies electricity demand by improving the operation efficiency of power plants and avoiding construction of new plants, it exerts a positive impact on the operation of power grids. CHP refers to the cogeneration of heat and power in one power plant, in which the heat that should have been released to the natural environment is used for heating in industries and households at a low price, thereby considerably improving heat efficiency. Efficiency of ordinary thermal power generation is about 35-45%. In comparison, CHP plants make use of steam turbines to generate power and the exhaust steam is used to further heat up the boilers, 18 According to the standard coal consumption for power supply of the five southern provinces in 2010 provided in CEC s Compilation of Power Industry Statistics 2010 (p. 18) and the electricity output of the five provinces in 2010, we can figure out the standard coal consumption for power generation of each province, which is summed up and divided by the aggregate electricity output of the five provinces, thus turning out that the average standard coal consumption for power generation is 330g standard coal per kilowatt hour. Accordingly, a ton of standard coal can bring about electricity supply of 3,030kWh, which is 1% higher than the national average of 3,000kWh. 19 According to the data provided in CEC s Compilation of Power Industry Statistics 2010, China s energy consumption in 2010 amounted to 3.25 billion tons of standard coal, in which 1.02 billion tons are used for power generation, accounting for 31.4% of the total energy consumption. 17

18 so the overall efficiency can reach 80% (Lu Youhong, 2012). Fuel for CHP plants can be a variety of energy sources including coal, natural gas and renewable energy sources such as biomass and biogas. To improve energy efficiency, it is an effective measure to transform large thermal power units to cogeneration units. In 2007, the National Energy Administration (NEA) of NDRC planned to transform power units with an installed capacity of 5GW. However, the actual amount is much larger; according to the estimate, up to now, thermal power units with an installed capacity of nearly 30GW have been transformed into cogeneration units. In order to get an idea of the transformation feasibility, NDRC entrusted China International Engineering Consulting Corporation and China Power Engineering Consulting Group Corporation to conduct a feasibility study of transforming pure condensing power units in operating plants near cities to cogeneration units. Key targets of the study were operating power plants in the neighbourhood of medium and large cities, relatively big counties and industrial parks, particularly coal-fired power plants near cities where thermal loads are relatively concentrated. According to the report, technological transformation is feasible and can turn out favorable results in energy conservation. 20 Moreover, this transformation will require only a small investment and short time span. It is estimated that even if the transformation costs for the heating network s major piping materials, construction and installation are all considered, the unit cost is still far less than the unit investment to build new cogeneration units. The feasibility report also points out that the 86 operating power plants that can be transformed are distributed among 23 provinces (regions or municipalities) with a total installed capacity of about 63.47GW. Among those, there are a total of 141 installed units in Northeast China Grid, North China Grid and Northwest China Grid, with an overall installed capacity of GW. The remaining GW is the capacity of 103 installed units in East China Grid and CSG. If East China Grid and CSG each represent 50%, power units with an installed capacity of about 9GW in CSG can be transformed. If the efficiency could be doubled after transformation, then the 9GW capacity would be turned into 18GW, which means the construction of a thermal power plant with an installed capacity of 9GW or a hydropower station with an installed capacity of 14.72GW could be avoided. 2.2 Potentiality of demand-side management of electricity For the electric system, energy efficiency on the demand side can be improved by reducing installed capacity consumption (kw) and power consumption (kwh). To reduce installed capacity consumption, the electricity sector needs to improve the internal efficiency of 20 There are 103 pure condensing power units (with the installed capacity of 18.8GW) in the East China Grid, Center China Grid and CSG that can be transformed. It is projected that the transformation will result in a capacity of nearly 3,100m 3 /h in steam supply. Estimated accordingly, about 2.2 million tons of standard coal can be saved, and emission of 44,000 tons of SO 2 and 11,000 tons of dust can be avoided. 18

19 electric equipment or optimize the technological process. For example, we can use highly efficient motors, air conditioners with a high energy-efficiency ratio, and energy-saving lamps and home appliances. To reduce power consumption, it is necessary to reduce the time of electricity use. For instance, we can use lamps that are automatically switched on and off and use electricity in non-peak time. Demand-side management (DSM) of electricity means the supply party and demand party jointly manage the electricity market so as to improve the reliability of electricity supply, reduce energy consumption and lower costs for both parties. Due to the relatively high benefit-cost ratio of DSM, 21 China promulgated a regulation on DSM with quantitative binding targets in According to the Measures for Demand-side Management of Electricity, which was put into force on January 1, 2011, power grid companies are required to achieve electricity savings of no less than 0.3% in terms of power supply through implementing various DSM measures. Based on data, which shows the five southern provinces consumed 705.1TWh in 2010, we can calculate that through DSM a total amount of 12.68TWh can be saved in the period between 2011 and 2015 and 19.93TWh saved in Therefore, the amount of electricity saved in ten years is about 32.6TWh, equivalent to the aggregate electricity output in ten years of a hydropower station with the installed capacity of 1GW or that of a thermal power plant with the installed capacity of 600MW. As pointed out in CSG s Social Responsibility Report 2011, CSG helped its clients to save 1.975TWh in that year; however, the Report does not explain what kind of specific measures CSG adopted to make this achievement. Supposing this is mainly achieved through DSM measures, in the light of the requirement that the electricity saved annually should be no less than 0.3% of the power supply in the previous year, CSG should have saved 2.12TWh in Since power consumption is on the rise year by year, the amount of electricity saved each year should also increase accordingly. In view of the target of saving 32.6TWh in , CSG still needs to strengthen its input in DSM. 21 Taking the US for example, in 2000, USD1.56 billion was invested in DSM and remarkable achievement was scored, saving 53.7TWh in electricity use with the peak load dropping by 22GW 21. Assuming the average electricity price in the US in 2000 was 0.075$/kWh, USD4.03 billion was saved in electricity cost. A simple calculation based on this tells us that the ratio of investment to benefits is 1:2.6, let alone the huge amount of investment in electricity industry saved as a result of 22GW drop in the peak load. Acquired on September 6, 2012, from the official website of CSG: Electricity Knowledge - Green Power Grid - Demand-side Management. For details, browse 19

20 3 Huge potential for non-hydro renewable energy in the five southern provinces 3.1 National plan for development of renewable energy and incentive policies Targets With large-scale exploitation and utilization of wind power, solar energy, nuclear power and hydropower, China s energy structure will see certain changes during the 12 th and 13 th FYP period. Coal will represent a smaller percentage in the primary energy consumption and thus play a less important role in electricity consumption, while hydropower, nuclear power, wind power and solar energy will account for a bigger share. The Mid- and Long-Term Plan for the Development of Renewable Energy released by NDRC in 2007 states that by 2020 renewable energy will contribute 15% to the total energy demand. 22 Active development of renewable energy is one of the major ways for China to realize its strategy of energy conservation and emission reduction. In order to continuously lessen the energy intensity and CO 2 emission intensity, the government of China started to identify a goal to reduce the energy consumption per unit of GDP in the 11 th FYP period, 23 and further set the goal for CO 2 emission reduction in the 12 th FYP period. According to the objectives, China s CO 2 emissions intensity will drop 40-45% by 2020 compared to 2005 levels; by 2015,energy consumption per unit of GDP will be 16% lower than in Based on the mandatory objectives above, the government identified the major targets for 2015 and 2020 regarding the development and utilization of renewable energy in The 12 th Five-Year Plan for Development of Renewable Energy. Since this report is an analysis about CSG, only the targets of installed capacity of power units will be mentioned here, while the targets of gas supply, heating and refrigeration as well as transport fuel will not be covered. Table 6shows the development targets of power generation from the major renewable energy sources by 2015 and Table 6: China s development targets of renewable energy power generation by 2015 and 2020 (installed capacity: GW; electricity generation: TWh) Installed capacity Annual electricity Installed capacity Annual electricity generation 22 It refers to energy sources except the fossil energy and nuclear energy, including hydropower, wind power, solar energy, biomass energy, ocean energy, etc. 23 According to the target, energy consumption per unit of GDP should drop by 20% from 2005 to 2010, but it was reduced by 19.1% in fact. 20

21 generation Hydropower (pumped storage not included) , Pumped storage Grid-connected wind power generation Solar power generation Biomass power generation Total 424 1, ,854.5 Source: NDRC: The 12 th Five-Year Plan for Development of Renewable Energy (issued in August 2012) Incentive policies Policies supporting the development of renewable energy are mainly included in the Renewable Energy Law of the People's Republic of China issued in 2005 and the relevant rules for implementation. Among them, a fixed feed-in tariff is the most important incentive. To cope with the problem that the cost of renewable energy power generation is higher than that of conventional energy power generation (e.g. coal power, hydroelectricity, etc.), the government provides a long-term stable tariff for renewable energy. By collecting a certain amount of surcharge in the electric charges, the government subsidizes the on-grid power tariff of renewable energy so as to support the long-term development of renewable energy power generation. As the installed capacity and power generation of renewable energy are growing, the government needs more capital to subsidize its development, so the surcharge 24 According to the data provided in CEC s Compilation of Power Industry Statistics 2010, we estimate that the average of the average annual utilization hours of hydropower generation units around the country in is Supposing it remains the same in 2015 and 2020, we can figure out the hydropower output in 2015 and 2020 based on the installed capacity. 25 As the load reserve, electricity generation of pumped storage is adjusted according to the electrical load at the time, so it is uncertain. 26 See above. 27 Estimated based on the relative ratio of the installed capacity to electricity generation in 2015 and Wang Zhongying et al., 2012c. 29 Estimated based on the relative ratio of the installed capacity to electricity generation in 2015 and

22 has been increased twice. In 2009, it was increased to RMB/kWh from RMB/kWh in 2006, and was further raised to RMB/kWh at the end of Assuming the total electricity consumption in 2012 amounted to 4,370TWh, the surcharges for renewable energy would be about 35 billion RMB, which can be used to further provide effective capital support for the development of renewable energy power generation. Requirement for the share and quota of renewable energy power generation is a mandatory policy targeting power-generating enterprises and power grids, which will also encourage the development of renewable energy power generation. The Mid- and Long-Term Plan for the Development of Renewable Energy requires that, in the regions covered by large power grids, the share of non-hydro renewable energy power generation in the total generation amount should be no less than 1% and 3% by 2010 and 2020 respectively. For the power-generating enterprises that have an installed capacity of over 5GW, the installed capacity of non-hydro renewable energy power units should represent over 3% of its total installed capacity by 2015 and more than 8% by Development of non-hydro renewable energy in the five southern provinces Resource potential CSG enjoys huge potential in developing non-hydro renewable energy. According to the Green Development Report of CSG, 31 in the five southern provinces, the amount of technically exploitable onshore and offshore wind power resources is 9.5GW and 113GW respectively; in terms of the amount of potentially developable resources, there is 27GW for solar energy, 5GW for biomass energy, 2.06GW for geothermal energy and 1.04GW for ocean energy. This report holds that, if 10% of the potential of the above-mentioned wind power, solar power and biomass energy can be exploited in a large scale by 2020, which means the installed capacity can reach 12.25GW (wind electricity), 2.7GW (solar PV power generation) and 810MW (power generation from biomass energy, geothermal energy and ocean energy), then the total installed capacity will amount to 15.76GW. Table 7: Comparison among the status quo, targets and potential of the installed capacity of renewable energy of CSG (GW) Resource potential 30 Surcharge in Electric Charges for Subsidizing Renewable Energy Increased to RMB/kWh, December 20, Acquired on September 21, 2012 from For details, refer to 31 The report can be downloaded at Acquired on October 11,

23 Pumped storage Wind power (including offshore wind power) Solar power Others (including biomass energy, geothermal energy, ocean energy, etc.) Source: CSG s Social Responsibility Report Solar PV power generation Among the five southern provinces, Yunnan and Hainan enjoy the richest solar energy resources: in over half of Yunnan and the western and southern part of Hainan, the amount of solar energy resources ranks second in China after the Qinghai-Tibet Plateau (Wang Zhongying et al., 2012a). Other provinces in CSG also enjoy favourable conditions in using solar energy. Particularly, in such big developed cities as Guangzhou and Shenzhen, there is huge potential for rooftop solar PV power generation systems installed on top of buildings. 90% of the grid-connected PV power generation system in the world is installed on buildings and mainly in cities with high levels of economic development (Wang Zhongying et al., 2012a). As the technology of solar PV power generation continues to develop, and the PV power generation is becoming more efficient and less costly, there will be more room for its development in the five southern provinces. We can get an idea about the potential for solar PV power generation in the five southern provinces by looking at related research. According to The Renewable Energy Industrial Development Report 2011, 32 it is estimated that by 2030, 30% of the rooftop areas in Guangzhou and Shenzhen can be installed with PV system, which will jointly bring about a potential electricity output of 7.99GW. Currently, rooftop PV power generation in China is still in the primary stages of development, so such obstacles as difficulty in grid connection and few market incentives are unlikely to be removed within a short period. This report projects that rooftop PV power generation will not see a large-scale market development before 2020, and the period from 2013 to 2020 will be a demonstration stage with a moderate amount of total installed capacity. Supposing that by 2020, the installed capacity of rooftop PV power stations can reach 10% of the market potential anticipated for 2030 as mentioned above, Guangzhou and Shenzhen would have an installed capacity of 800MW in rooftop PV with 1.03TWh electricity output in 2020, 33 accounting for nearly 12.5% of the total electricity 32 See page 71, Table 17: Potential in rooftop PV development in major cities of China in Estimated based on the data in Table 5-1, China Solar PV Outlook 2011, p

24 use of urban and rural residents of Shenzhen 34 and 2.6% of the total electricity use of the whole city of Guangzhou in In other words, this figure is equal to the annual electricity output of a hydropower station with the installed capacity of 330MW or that of a thermal power plant with the installed capacity of 200MW Wind power generation The ten years between 2011 and 2020 should be the period when the five southern provinces give priority to wind power generation. In 2010, the installed capacity of grid-connected wind power in the five provinces only amounted to 620MW, while the technically exploitable onshore wind power resources exceeded 9GW. In , the key areas for wind power development were Northwest China, Northeast China and North China, which enjoy the richest wind resources and relatively low cost of exploitation. Since 2011, many wind turbine manufacturers have developed onshore wind turbines which can be used in the regions with medium or low wind speed, and marine wind turbines that can be used in offshore area and coastal mudflat, thereby laying the foundation for large-scale wind power development in the eastern and southern part of China where wind resources are less abundant (Li Junfeng et al., 2011; Xue Chen, 2012). If the slow development of wind power in the five southern provinces during the 11 th FYP period is due to this relative disadvantage in wind resources and the low technological level of wind turbines, then with the continual decrease of the unit cost and the improvements of wind turbine technology that can be applied to the areas of low wind speeds in the 12 th and 13 th FYP period, there are excellent opportunities and favourable conditions to develop wind power in these provinces, in particular major coastal areas of Guangdong, coastal areas of Guangxi and west Hainan, and the central and southern part of the Yunnan-Guizhou Plateau. As what is mentioned earlier, the technically exploitable onshore wind power resources had exceeded 9GW by 2010; if the technically exploitable offshore wind power that exceeds 100GW is also taken into account, then considering the current low installed capacity of grid-connected wind power in the five provinces, wind power generation in this area still remains at the starting stage Biomass power generation By the end of 2010, the aggregate installed capacity of biomass power generation of China amounted to 5.5GW, which will be increased to 30GW according to the policy target; therefore, the five southern provinces will be motivated to make more efforts in promoting the development of biomass power generation. By April 1, 2013, among China s 127 biomass power generation projects that have applied for carbon credit trading in the UN Clean Development Mechanism, only four are from the five southern provinces powered by 34 Estimated based on XI. Urban Construction, Environment and Work Safety, Statistical Communiqué of Shenzhen on the National Economic and Social Development in For details, browse Acquired on December 27, Calculated based on the data provided in Table 4 in Statistical Communiqué of Guangzhou on the 2010 National Economic and Social Development. For details, browse Acquired on April 21,