CEFC China Energy Journal May 2015 Issue 1 by China Energy Fund Committee

CEFC China Energy Journal MAY 2015 Issue 1 Presented by: Content Provided by:

CEFC 中华能源月刊 2015 年 5 月号总 1 期 China Energy Fund Committee 中华能源基金委员会 China Energy News 中国能源报社

Chairman of Editorial Board:

YE Jianming 叶简明

Members of Editorial Board:

HO Chi Ping Patrick 何志平 LO Cheung On 路祥安 XIE Shujiang 解树江

Editor-in-Chief:

HO Chi Ping Patrick 何志平

Executive Editor: Associated Executive Editors:

Editorial Assistants:

Hong Kong Ofice:

U.S. Ofice:

LO Cheung On 路祥安 LIU Yadong 刘亚东 ZHANG Ya 张雅 WANG Haixia 王海霞 WANG Dingli Leo 王鼎立 LEE Ching Hang Koch 李政恒 Daniyal NASIR 黎庭耀 CHENG Wai Kin Steven 郑伟健 34/F, Convention Plaza Office Tower, 1 Harbour Road, Wanchai, Hong Kong, China Tel +825-2655-1666 Fax +852-2655-1616 Email com@chinaenergyfund.org website:www.cefcej.com 25/F, 1100 Wilson Boulevard, Arlington, VA22209, U.S.A Tel +1-703-260-1828 Fax+1-703-666-8081

CONTENTS

对话

May,2015,The First Issue 6

中国将建大型空间

Editorial

22 Figures

编者的话

数字

Opinion

China plans to build massive power station in space

40 Dialogue

阳能电站

Why is Pumped Storage Developing Slowly in China 抽水蓄能

何在中国发展缓慢

Collaboration of Shell and CNPC on shale gas under pressure

26 Cover Story

观点

封面文章

The way out for China’s coal industry under the New Normal

China embraces slower but better growth in energy

壳牌与中石油页岩气合作：压力中前行

54 Planet 地球地球 Local governments take on greater environmental responsibilities 环境保护：地方政府的责任更大

44 Business 新常态下中国煤炭产业路在何方中国推进能源消费将减

优

China’s energy transition starts, but expect no “bon voyage”

Sinopec tries hard to avoid becoming a dinosaur

中国能源转型启程但很难“一帆风顺”

16 Policy 政策 China’s Energy Revolution is a focus of government 政府聚焦能源革命

Strict enforcement of environment law is a focus: Premier Li 李克强谈雾霾：严格执行⃯环境保护法⃰

Beijing wrote prescriptions for curbing smog 京出台新规治雾霾

商业

中石

34 Major Events 要事 China's PV industry benefits from t h e " B e l t a n d R o a d " initiatives “一带一路”创中国光伏产业良机

变革求新

China cuts power price to beneit enterprises 中国降低能源

格促进企业发展

48 Energy Security 能源安全 Central Asia Gas Pipeline—— “energy silk road” a powerful engine 中亚然气管道——能源丝绸之路强大引擎

52 Technology 技术

58 Foresight 前瞻 “China manufacturing 2025” strategy promotes the steady export of major equipment “中国制 2025”战略加备制业“走出去”

中国设

Editorial

CFFC China Energy journal

currently entering an unprecedented era of transformation, where in reforms of domestic energy markets, optimization of energy investment frame works, improvement of energy efficiencies and advancement in energy technologies are all developing at full steam. Revolutionary plans and policies aimed at improving the overall competency of the Chinese energy industries are fervently introduced one after another, signifying the Chinese government’s determination to transform its energy sectors into a competitive pattern that can effectively address the challenges of the carbon-constrained 21 st century.

Editorial Patrick, Ho Chiping Editor-in-Chief CEFC China Energy Journal Deputy Chairman and Secretary General of China Energy Fund Committee

GlobAl energy security, just like almost everything else happening in this globalized world today, has changed dramatically in recent years, driven by the twin forces of rising Asian energy demand and the unexpected boom in North American production of shale gas, tight oil, and oil sands, and coupled with the undercurrent of plummeting oil prices and the petrodollar. These changes in the energy equation have no doubt effected profound changes in the world energy markets as well as some of the premises of Asian energy security. According to the International Energy Agency (IEA), Asia will account for 85% of the growth in oil demand over the next twenty years. China is about to 6

become the largest oil-importing country. on the other hand, North America’s unconventional energy revolution has radically reduced their need for imported energy. The United States moves towards meeting all of its energy needs from domestic resources by 2035.

Given China’s energy transition toward an efficient and environmentally sustainable path and its growing influences to the global energy markets, any major shift in China’s domestic energy sectors today will likely wield long-term global influences. However, the number of existing channels we have that can reflect the clout of China in global energy markets largely remains limited. Real happenings and latest progresses of China’s energy development, though are widespread in medias in Chinese, were rarely accessible by the foreign communities, mainly due to the language barrier. While the global energy industries are increasingly interested to gain timely and insightful knowledge about China’s energy development, few media from China now are capable of providing such much desired information. In our engagement with foreign energy researchers and institutes, we have been impressed more than once that international energy sectors and research institutes are having difficulties in deriving irst-hand information and knowledge directly from Chinese parties covering China’s energy development.

Energy sector development in China is

Recognizing the growing demand for

English sources covering Chinese energy development and the insufficiency of Chinese media in providing such services, the China Energy Fund Committee (or CEFC), a Chinese non-governmental think tank enjoying special consultative status with the United Nations Economic and Social Council (ECoSoC), concluded an agreement with “China Energy News”, the most authoritative weekly publication dedicated to reporting energy related news and issues in China, and a subsidiary of People’s Daily of China, to launch this monthly energy magazine in English, “CEFC China Energy journal“, as a platform to introduce to the global community the most updated news and information, government policies as well as the market prospects of energy development in China. Being the irst of its kind, this magazine will be an effective English platform to facilitate the global understanding of China’s energy development and offers an ideal channel to foster cooperation between Chinese energy sectors and their foreign counterparts. by introducing China’s energy industries and markets to foreign energy professionals and investors, this CEFC China Energy journal also makes available firsthand information on the growing foreign investment opportunities in China’s energy industry. I am confident that through this Journal, more ields of common interests can be found between the Chinese and foreign energy industries, and more joint efforts between China and the outside world can be made in addressing the common impending energy challenges to the global communities. CEFC China Energy Journal is the revolving door for China’s energy industry and information to reach out to the international community, and also invites international energy stakeholders to reach out to the Chinese energy community as well. 7

Opinion

CFFC China Energy journal

h e w a y o u t f o r C h i n a ’s c o a l T industry under the New Normal Bu Chan价sen SINCE China’s coal industry slumped into a “freezing winter” in 2012, I have always asked how long the winter would last, what would be the new normal for this industry and how businesses would cope. To answer these questions, it is important to understand the situation coal producers find themselves in. First, competition has widened from local market to the national and even global ones. Starting from 2012, Chinese coal producers have experienced severe challenges from both inside and outside of the country. Domestically, there has been an oversupply of coal, and made worse by disorderly competition within this industry. Ill-disciplined, coal companies tend to undercut each other in the market and all end up as losers. on top of that, they have come under the onslaught of alternative energy. by the end of 2013, the installed capacity from hydropower, nuclear, wind and solar PV exceeded 385 million kilowatts. With that, non-fossil fuel accounted for 31% of the total installed generation capacity. Threat also comes from foreign coal, which has reached Chinese shores in great quantities. For three consecutive years, annual coal import have been around 300 million metric tons. It is competitive in price as well. In Guangzhou, for instance, the 5,500 kcal steam coal from the Port of Newcastle, Australia has been consistently cheaper than that from China’s northern port Qinhuangdao. In a sense, the domestic coal 8

and failed to keep abreast of changes in the market. Now it is different. They must set eye on resources that meet market demand and can be utilized in a clean manner.

appropriate. The more small and medium-sized mines produce, the more losses they incur. As such, they must increase and cut production as dictated by the market.

Third, a shift is now underway among coal companies to develop non-coal business into a strategic pillar. Coal used to dominate companies’ investment portfolios, while noncoal business was only a minimal and weak component. Going forward, companies need to cut backward production capacity and exit from ineficient sectors. As they continue to strengthen their coal business, they must also sharpen their strategic edge on non-coal business.

Under the new normal, Chinese coal producers, in my view, must make the following strategic adjustments.

Fourth, coal producers now plug along with increasing inancing dificulties, narrowing proit margins and rising labor cost. Fifth, policy and environmental pressure is mounting. The government has made policies to control coal consumption and restrict new coal mine development. Meanwhile, coal-fired power plants and industrial boilers have to meet higher technical standards. The coal chemical engineering sector has also been curtailed. As China is close to its environmental limits and under increasing international pressure, Chinese leaders have pledged to cap carbon emission by 2030.

Bu Chan价sen

market has been internationalized. Second, equal emphasis is laid on resources and market development. over the ten golden years, producers focused far more on coal itself

Sixth, the transition has taken place from a resource and labor-intensive model to a resourcesaving and technology-intensive one. China’s per capita coal production was less than 700 tons in 2013, far below the world’s average. Due to complicated geological conditions, Chinese coal mines have relied heavily on human labor instead of technologies. They must now focus more on eficiency to raise per-capita output. Seventh, production plans are calibrated as

First, large mines must be modernized on a priority basis to leverage their favorable locations and resources. Non-coal business must be developed to improve the entire industrial chain and pave the way for transformation. Second, inefficient business that does not fit into the overall development strategy must be stopped, so as to focus on the core business. old, loss-making mines that do not meet safety standards must be closed. businesses must steadily and prudently shed the social functions previously imposed on them. They must also reduce emissions to minimize the damage on the environment. Third, R&D must be enhanced to ensure green exploration, clean power generation and clean energy conversion. Management must be innovated to raise the efficiency in business operation and capital utilization. Workers’ professional capability must be improved to drive business growth. Corporate culture is also important, as it can foster synergy and motivation. Fourth, the focus must be shifted from scale to efficiency, aggregate to average, production to proit. Energy and resources must be utilized to the maximum to ensure business, social and environmental sustainability. (The author is the Chairman of Shandong Energy Group Co., Ltd.) 9

Opinion

CFFC China Energy journal

ome thoughts S on boosting China’s

nuclear development

Yangjiang nuclear plant in Guangdong province. Several new projects are expected to start construction this year to meet the government's target of having about 15 percent of non-fossil fuels in its energy mix by 2020

Wu Hao AS a practitioner in nuclear power industry, I have several thoughts on its development in China. Firstly, I believe that China’s nuclear power sector is poised for a rapid growth. Presently, nuclear has served as an indispensable energy choice, representing about 15 percent of the global installed electricity-generating capacity. Forecasted by International Atomic Energy Agency, electricity generated from nuclear plants altogether will account for at least 25 percent of the total global capacity by 2030. China’s resource endowment determines the dificulties to transform its coal-oriented energy structure from a long-term perspective. Heavily 10

reliant on external petroleum and natural gas, environmental carrying capacity in China has already reached its limits. We should hence make efforts to develop clean energy with a nuclear focus, marking a necessary alternative to safeguard China’s energy security and technological sustainable development. As an important strategic energy choice, multi-type nuclear power units have been established in China at present. However, due to a variety of constraints, neither corresponding capacities nor pertinent scales have been formed to boost the rapid development of nuclear industry. In spite of over thirty-year of development, merely 22 nuclear power reactors have been completed and put into operation,

which altogether generate electricity of roughly 20.1 GW, comprising 1.6 percent of China’s total installed capacity of 1,300 GW, far behind the world average level. It is estimated that China’s nuclear capacity will account for up to over 10 percent, as the total installed generating capacity reaches 3,000 GW in 2030. Given the potentials of generating additional 300-400 GW electricity, nuclear power can be therefore interpreted to embrace rapid growth in the next 15 years.

Nuclear: A Major Actor in Clean Energy

22 In spite of over thirty-years of development, merely 22 nuclear power reactors have been completed and put into operation

From an economic perspective, all newly-built nuclear power units in China have since 2013 finalized their market prices, based on the lower between a benchmark price of CNY 0.43 yuan/ kWh and locally coal-fired power prices to grid. However, benchmarks set for thermal coal in all coastal and some inland areas to the south of Shandong Province are all priced higher than 0.43 yuan/kWh. besides, the gas-ired power price to grid 11

Opinion

CFFC China Energy journal

will double the nuclear benchmark prices in some regions, in that on-grid prices from natural gas are capped CNY 0.35 yuan/ kWh higher than local coal-fired or average on-grid benchmarks. Compared with other clean e n e rg y r e s o u r c e s i n t e r m s o f electricity generation, nuclear power also demonstrates high efficiency. Although project costs are on the decrease in recent years, on-grid prices of wind, solar and other renewable resources as yet remain at a relatively high level. Namely, benchmark prices for wind are set at 0.51-0.61 yuan/kWh, and a graduated solar power tariff maintains at 0.9-1.0 yuan/kWh. With its rapid growth and advent of scale effects, nuclear energy will become increasingly cost-efficient. Ta k e A P 1 0 0 0 n u c l e a r p o w e r technology as an example, where construction costs are targeted at 12,500 to 12,960 yuan/kw after standardization. Consequently, the average on-grid tariff in an economic phase would maintain at 0.385 yuan/ kWh, which is relatively lower than on-grid benchmark prices in most of provinces. In view of efficiency of power generation, restricted by geographic resources and natural conditions, clean energy such as hydropower, solar and wind may enjoy neither large scales nor long-time utilizing hours, while nuclear projects can be flexibly arranged with large capacities from each single unit 12

CFFC China Energy journal

0.385 the average on-grid tariff in an economic phase would maintain at 0.385 yuan/kWh, which is lower than ongrid benchmark prices in most of provinces.

and stable operations. According to China’s average statistics in 2014, under the same capacity level, the annual volume of electricity generated from nuclear power, is two times that of hydropower, 3.9 times of wind, and 5.7 times of solar. From the aspect of security, it is true that several accidents have taken place in history, but nuclear energy's attribute as a safe energy resource unchanged. Generation III AP 1000 nuclear technology (hereinafter referred to as “Generation III technology”), imported to China since the beginning of this century, has introduced passive concepts and installed passive nuclear safety systems, based on the mature generation II technology. The new technology has not merely comprehensively enhanced nuclear safety, but also substantiated a basis for large-scale development for nuclear energy, determining that nuclear power plays a major role in developing clean energy. To S t r e n g t h e n S e l f reliance Determination In pursuit of realizing nuclear self-reliance from a high standingpoint, the central government decided to introduce Generation III technology, remarking an opening curtain to China for a self-reliance agenda to import, digest, absorb, and redesign nuclear energy. The first AP 1000 nuclear power plant was established in 2009, and now has entered the systemic hand-over and testing stage. Self-innovated

CAP 1400 units, listed as a National Science and Technology Major Project, will recently inaugurate demonstration projects, with fruitful achievements in related works.

nuclear development is a matter of pressing concern.

During the AP 1000 project construction process, we have encountered some common difficulties for a firstly-constructed nuclear power unit, such as design delays, lagging-behind of component R&D and supplies. Presently, having made great efforts, most of the problems have been properly resolved, while the rest will be fully addressed in the short term, in that several components are just conducting the final-stage experiments based on original plans. So to speak, significant negative impacts would not be generated to the whole project, needless to say subversive problems.

As Generation III technology is approaching success, a holistic set of consecutive projects are expected to start up. Regarding how to maintain high-efficiency development on a basis of safety, we may learn from international experience through practices. US, France, Russia and other major p o w e r s i n d e v e loping nuclear energy, have all gone through a large-scale rapid growth cycle up to 10 to 20 years. During the same period, 35%-55% nuclear power units have been intensively installed nationwide, forming a certain scale in a relatively short run.

In the past two years, new nuclear power projects have no longer been initiated in China with various and complicated reasons, which unfortunately results in a delay for nuclear development. In face of increasingly deteriorating environmental pollutions such as smog, as well as pressures from reforming energy structure, to accelerate nuclear development has become a generally-accepted consensus in all walks of Chinese society. In this sense, based on scientific judgments, China has already been fully qualified to comprehensively initiate the consecutive AP 1000 projects with controllable risks. Thus, to speed up

To Accelerate Intensive Development

15% by 2020, nuclear power is targeted to generate electricity up to 100 GW, and 200-300 GW an additional before 2030, w h e n C h i n a ’s nuclear capacity will represent 15 percent of the current world average level.

C u r r e n t l y, C h i n a s h o u l d enhance nuclear capacity at an accelerated pace, reduce and replace the percentage of coal-ired power in energy mix. by 2020, nuclear p o w e r i s t a rg e t e d t o g e n e r a t e electricity up to 100 GW, and 200300 GW an additional before 2030, when China’s nuclear capacity will represent 15 percent of the current world average level. Follow-up measures thus should be taken to further raise that percentage to over 30, in order to fundamentally transform China’s energy structure. (The author is currently working at State Nuclear Power Technology Company) 13

Opinion

CFFC China Energy journal

hina’s energy transition starts, but C expect no “bon voyage” 天an价 Tao

Chinese) leadership is what is needed to pull together a global climate deal. Division remains between the Global North and South, and the path to Paris is set to be bumpy. However, the significance of the first ever U.S.-China joint climate announcement should not be overlooked, and given the particular circumstances, in which the two nations’ targets were set, the sincerity of both administrations to fulill their targets is still credible. on the U.S. side, debates will continue despite the President obama’s recent veto on the construction of Keystone Xl. other important issues include proposed power plant emissions standards and the latest initiative to address methane emissions from shale fracking.The obama administration is keen to explore more administrative options including executive orders to curb carbon emissions—paths that need no approval from the gridlocked Congress.

EXPECTATIoNS were very high after the milestone U.S.-China joint announcement of new climate pledges at the Asia-Pacific Economic Cooperation (APEC) summit held in beijing last November. The bitter reality of slow progress for lima’s climate negotiations disproved the idea that a form of G2 (U.S. and 14

In very different circumstances, President Xi jinping also has led a war against pollution in China. Improving the structural composition of the energy sector with a greater share of cleaner energy is a critical step to reducing air pollution and mitigating carbon emissions from coal, which constitutes the lion’s share of China’s current primary energy demand. Achieving 20 percent non-fossil energy in the primary energy demand by 2030 does not sound particularly ambitious, but it will be an impossible task if China’s energy demand continues to grow at

the pace it has been. Yet the war cannot be won without substantially reducing coal consumption. The latest air quality report released by the Environment Protection Ministry for 74 key cities in China has shown some slight improvements in 2014 from the severe air quality seen in 2013. This progress has resulted from massive efforts across China to shut down dirty, small-scale industries and to switch from coal to gas consumption for local heating needs. The urban centers of beijing, Tianjin, and surrounding Hebei province, however, despite a huge disruption to hundreds of millions of citizens’ daily lives that eventually brought about APEC-blue sky conditions last November, remain at the bottom of the list, with eight cities out of the ten worst. In 2014, the Chinese economy continued to slow down.Those provinces that used to top the GDP growth list fueled by rapid expansion in their coal, steel, and other heavy industries, have now sunk to the bottom. China’s coal consumption in 2014 started to fall. As a result, now one of every four kilowatt-hours in China is generated from non-fossil fuels that produce nearly no carbon emissions. In comparison, this mark equals that of the EU, which leads the world in this category, whereas the United States generates only 13 percent of its power from renewables. It is clear that profound economy and energyrelated structural changes are imminent in China. Growth boosted by heavy industrialization and massive infrastructure construction has trapped many Chinese provinces and sectors in a painful situation plagued byovercapacity and looming debt that they simply cannot keep accumulating as before. The anti-pollution war and carbon emission peak target are very much in line with the direction of upgrading the economy, improving social welfare, and other values that are core interests to President Xi’s administration and its governing stability.

but this does not necessarily mean “bon voyage” to China’s energy transition. Setting aside all the expected opposition from vested interest groups, success is not guaranteed, even with the best intentions and promise of economic instruments that are supposedly putting reasonable prices on pollution, such as the EU’s emissions trading scheme (EUETS). So far success remains uncertain: integrating massively upscale,intermittent renewable energy into a national power grid that is too large to be supported by neighboring regions is a major challenge. There are also important loopholes to be closed in China’s targets. In a recent piece with my colleague David livingston, we found that oil may slip through the cracks of the recent US-China climate announcement. Without its inclusion, the clean energy transitions in both nations could be seriously jeopardized. Increased reliance on unconventional oil in both countries also can prompt unintended consequences. An important example is petroleum coke, a byproduct in the bottom of oil barrel after the reining process. This substance has found its way into the boilers of many heavy industries in China, with a large proportion of such oil coming all the way across the Pacific from the United States. It becomes adirtier alternative to coal as China tries hard to cut its consumption of the latter. There is certainly no silver bullet for resolving China’s complex environment issues, and the battle of climate change cannot be fought alone by a non-existent G2 either. but the targets announced last November, coupled with persistent efforts and bilateral collaboration to deliver them, will certainly set both nations on very different development paths. (The author is Resident Scholar, CarnegieTsinghua Center for Global Policy) 15

Policy

CFFC China Energy journal

hina’s Energy Revolution is a focus C of government He Ying

AS delivered in his annual government work report Premier li Keqiang mentioned reform 86 times and regarded 2015 as the pivotal period for comprehensively deepening reform, stable growth and economic structural adjustments. Among multiple reforming tasks, the national energy industry has come under the spotlight once again . CEFC China Energy journal noticed that, reform in the energy industry is quite targetoriented, some unprecedented measures have been proposed such as speeding up system reform in the power sector and oil &gas industry. Meanwhile, the report explicitly points out that revolution in energy generation and consumption is vital to any country’s development and to the wellbeing of its people, responding positively to the Energy Revolution proposed by President Xi jinping last year. Hot discussion on Energy Revolution among delegates There are signs that the key focus for future energy work will be to comprehensively boost energy generation, consumption and system reform. Nur bekri, an NPC (National People’s Congress) delegate and director of the National Energy Administration elaborated specifically on the Energy Revolution when receiving an interview. He said energy work will actively adapt to the new normal and effectively boost the 16

energy generation and consumption revolution. besides, one or two typical provinces (region or municipality) will be chosen as pilot regions for the energy generation and consumption revolution within the year. Annual government work report on March 5 outlined the energy work this year-In China, we will put great weight behind the development of wind power, PV solar, and biomass energy, work actively to develop hydropower, stress safety in developing nuclear power. Comparing with the report last year, expression for these forms of energy is to “encourage”. According to some foreign media, the changes in expression means China will revolutionize renewable energy industry. In a panel discussion, several NPC delegates and CPPCC˄Chinese People’s Political Consultative Conference˅members unanimously agreed that upcoming revolution in energy generation and consumption marks that China will undergo a fundamental change in energy strategy. During an interview with CEFC China Energy journal, Wu Xinxiong, a CPPCC member and former director of the National Energy Administration pointed out, major moves are to be made in the energy generation and consumption revolution, such as the industrial economy, ecology and cleanness in energy generation revolution and eficient utilization in

consumption generation. I am full of conidence in the energy revolution. Some delegates held the view that the current energy system is not so compatible with productive forces, mainly manifested as the unreasonable price formation mechanism. The annual government work report has thus stated explicitly that we will take timely action to accelerate price reform, expand the trials of pricing reforms for electricity transmission and distribution, improve the pricing of resource products and fully implement a system of tiered pricing for electricity, water, and natural gas used for household purposes. Moreover, the report pointed out to upgrade coal-burning power plants to achieve ultra-low emissions, and strive for zero-growth in the consumption of coal in key areas of the country. Zhao Tiechui, the president of China Association of Work Safety commented that it corresponds well with the reality of energy structural adjustments in China. Referring to energy management system reform, li Xiaopeng, the governor of West C h i n a ’s S h a n x i P r o v i n c e e x p r e s s e d h i s comprehension that the rapid growth in the past ten years has concealed some system drawbacks of coal industry management. Since Shanxi province has been trapped by low coal prices, it will seize this opportunity to accelerate resource distribution, project review and approval, investment reform in coal market. We hope to develop a management revolution in the coal sector including system reform in coal sale, coalelectricity integration, enterprise reform and so on.

in the world, China has a large demand for energy; however, there are many limitations on the level of supply. The damage to the environment caused by energy production and consumption has become severe. In other words, energy revolution is both the subjective requirements for industry development at the current stage and a necessary measure to curb air pollution. The Energy Development Strategy Action Plan (2014-2020) issued last November is a concrete and speciic roadmap to the Energy Revolution. In reality, since President Xi jinping proposed Four Revolutions covering energy consumption, supply, technology and system reform and one Cooperation referring to strengthen international cooperation, the energy revolution has been put into practice. With the central government’s top-level design and vigorously promotion over the last six months, many reform difficulties baffling the energy industry are begining to be resolved including the biggest concern in power sector reform. According to Wang Yumin, a CPPCC member and deputy director of the National Energy Administration, the new power sector reform plan approved in principle by State Council executive meeting at the end of last year will come into effect in the near future.

Energy revolution has been set off As the largest energy producer and consumer 17

Policy

CFFC China Energy journal

trict enforcement of environment S law is a focus: Premier Li Xinhua News Agency

eijing wrote prescriptions for B curbing smog Hu Jun

If heavy smog continues for more than three days Beijing will launch top level emergency efforts to reduce pollutant emissions

SMoG is the headache of beijing. Recently, Beijing inally found the major source of smog formation, and wrote prescriptions for curbing smog.

"STRICT enforcement of law will be a focus in the environmental protection efforts this year, and the cost on those involved in illegal production and emission will be too high to bear." Premier li Keqiang said in March. During a press conference following the end of the annual parliament session, the premier said more support would be given to the environmental law enforcement departments, including assistance in capacity building. "No one is allowed to use their power to meddle with the enforcement of the law," li said when replying to a question if Sinopec and PetroChina, as accused in a documentary, impose obstacles to the introduction of policies 18

on environment protection and law enforcement in the sector. "The environmental protection law is an ultimate weapon instead of a cotton swab." "The Chinese government is determined to tackle smog and environmental pollution as a whole and tremendous efforts have been made in this regard. but the progress still falls short of the expectation of our people," the premier said. "last year in the work report I said we have declared a war against smog. We are determined to carry out our efforts until we achieve our goal." He also said that the goal in the energysaving and emission reduction sector has been placed high on the agenda in this yearâ&#x20AC;&#x2122;s government report.

If heavy smog continues for more than three days, beijing will launch top level emergency efforts to reduce pollutant emissions, including restricting half of private vehicles on the road based on their license plates. This is one of the major changes in the capital's updated emergency plan, released in March by the beijing Municipal Government. The plan lowers standards for launching alerts when severe air pollution shrouds the capital, said Yao Hui, deputy head of the beijing Municipal Environmental Protection bureau. Under the new plan, the municipal government can issue the red alert when severe air pollution is forecast to extend for more than three days. last year the capital suffered severe air pollution on 45 days but no red alert. based on statistics, the capital would

release red alerts two or three times a year after standards are lowered, which may last for 10 days in total, said Zhang Dawei, director of the beijing Municipal Environmental Monitoring Center. Four-tier alerts-blue, yellow, orange and red-will be issued on "heavy pollution" days. An air quality index of over 200 is defined as "heavy pollution". orange and red alerts will be issued 24 hours before the heavy pollution days, according to Yao. When an orange alert is issued, all the industrial factories will be closed except those necessary to maintain the operation of the city. Construction sites will be shut down. If a red alert is issued, the government will impose the toughest restrictions on pollutant emissions. For example, use of half of private vehicles will be restricted based on odd-and-even license plates but new energy vehicles will be excluded. In addition, vehicles for government departments and institutes will have extra restrictions with 30 percent of vehicles will be banned. Vehicle emissions are the top pollutant in beijing, said Wu Xiaoqing, vice minister of Environmental Protection, at a national 19

Policy

CFFC China Energy journal

Beijing will reduce coal consumption by 4 million tonnes in 2015

of 93 micrograms was still nearly three times higher than the standard level.

Vehicle emissions are the top pollutant in Beijing

environmental monitoring conference in earlier March. beijing is not an exceptation. Motor vehicles are also the primary source of pollution in Guangzhou, Hangzhou and Shenzhen, Wu cited an analysis of pollution sources in nine major Chinese cities. China had 264 million motor vehicles on roads at the end of last year, including 154 million automobiles, next only to the United States. There are about 5.6 million motor vehicles in beijing, with an average of 63 cars among 100 households. The analysis is aimed at helping authorities customize measures for air pollution control, according to Wu. Shanghai, Tianjin and Ningbo's top pollutants are dust and industrial emissions, while Shijiazhuang and Nanjing's top pollutants derive from coal burning, the analysis report showed. Wu said China will complete the pollution source analysis for 26 major cities within this year. 20

According to statistics released by the Ministry of Environmental Protection, all 74 major Chinese cities subject to air quality monitoring of PM2.5, carbon monoxide and ozone reportedly met the national standards for clear air on 241 days on average last year. Exhaust fumes, factories, coal-burning and dust are the main sources of air pollution in most cities, accounting for 85 to 90 percent of the total pollutant source. A mechanism for cross-regional cooperation, involving both short-term emergency measures and long-term institutional endeavors, is taking shape. For the beijing-Tianjin-Hebei area, which has been plagued by frequent and severe smog in recent years, the figure was 156 days. The concentration of PM2.5 in the beijing-TianjinHebei area was reduced from 106 micrograms in 2013 to 93 micrograms over the same period. Such monitoring data indicate that the country's tough pollution ight throughout 2014 is beginning to take effect. However, despite the decrease in PM2.5 concentration, the igure

In addition to the above methods, beijing will reduce coal consumption by 4 million tonnes in 2015, said li Shixiang, executive vice mayor of beijing. The city has closed or removed 294 polluting factories in 2014, but will still use 15 million tonnes of coal this year even after the reduction. Recently, beijing has stepped up its efforts to switch to clean energy after it shut two large coalired power plants that supply power to the city. Prominent among them is the 66-yearold thermal power plant operated by the Stateowned Guohua Electric Power Co, which will be replaced by a gas-fired plant, according to a statement by the beijing Commission of Development and Reform. The 400-megawatt plant has been running since 1949 in the east of the capital's financial district, along Chang'an Avenue, which passes Tian'anmen Square in the heart of the city. The closure, which will cut coal consumption by at least 1.3 million tons a year, came a day after a 93-year-old thermal power plant run by beijing Energy Investment Group closed its doors in western beijing. There were four major coal-fired power plants in beijing to provide electricity as well as heating during cold winter. but the capital

has charted plans to shut them down completely by 2016 as the city has been frequently clouded by dirty smog. The irst plant that was shut was the 50-year-old Gaojing Thermal Power Plant operated by the State-owned China Datang Corp, which was closed in july 2014. The fourth plant - the Huaneng Thermal Power Plant - is expected to be shuttered next year. By replacing the coal ired power plants with gas-fired ones, the city hopes to cut emissions of 10,000 tons of sulfur dioxide, 19,000 tons of nitric oxide and 3,000 tons of dust every year. He jiankun, director of the institute of low carbon economy at Tsinghua University, said that the initiative to use more clean energy is a reflection of the government's resolution to combat air pollution. "Gradually, all the coal-fired power plants will be phased out in beijing and replaced by either gas-fired or other clean energy-powered plants," said He, who is also the vice-chairman of the national experts' panel on climate change. "This is a good thing for the development of clean energy, industrial upgrading and innovation on clean technologies in the ield of energy," he said. Smog and other air pollution issues damage the international image of beijing, especially when it is biding for the 2022 Winter olympics together with Zhang jiakou, a city of Hebei province. The International olympic Committee evaluation commission left beijing in March after offering praise for its bid for the 2022 Winter olympics, although the air pollution is widely considered as a weak point for beijingâ&#x20AC;&#x2122;s olympics bid. 21

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19.81 million kilowatts

60%

China's installed wind power capacity hit record high in 2014

China's dependency on foreign oil nears 60% in 2014 China's dependency on imported oil and natural gas grew to about 60 percent and 32.2 percent respectively in 2014, according to a report released by a research team with the country's largest oil and gas producer. China imported 308 million tons of oil and 59 billion cubic meters of natural gas last year, according to a report released by China National Petroleum Corporation (CNPC) Economics & Technology Research Institute. The report put China's annual energy consumption at 3.85 billion tons of standard coal last year, growing slower at 2.7 percent year on year. Coal consumption is estimated to stand at 2.46 billion tons of standard coal, down 0.5 percent year on year, marking the first dip since 2000. Electricity consumption is estimated to grow 3.7 percent in 2014, the slowest growth since 2009. China also saw less consumption of fossil fuels. Coal's share of total energy consumption was reduced to 63.9 percent last year, down 2.1 percentage points year on year, according to the report. China completed six national strategic oil reserve bases and 25 commercial reserve bases by the end of last year, with a reserve capacity of 141 million barrels and 307 million barrels respectively, the report said.

China's newly installed wind power capacity jumped to a record high of 19.81 million kilowatts in 2014, according to an industry brieing by the National Energy Bureau (NEB).

6.3% Feb power consumption falls YOY 6.3%

Electricity consumption fell 6.3 percent year on year in February, reaching 359.5 billion kilowatt hours (kwh), the National Energy Administration announced recently. This brings the total power consumption of the first 2 months of the year to 845.4 billion kwh, up 2.5 percent year on year. During the period, power use in primary industries fell 2.5 percent while secondary industries saw an increase of 1.5 percent; and usage by the tertiary industry surged 8.1 percent. Meanwhile, residential power consumption grew 2.6 percent year on year.

Wind power generated 153.4 billion kilowatt hours of on-grid electric power in 2014, contributing to 2.78 percent of the country's total generated electricity, said Shi lishan, deputy director of the NEb's new and renewable energy department. The year saw more wind power construction and development, with newlyapproved wind power capacity reaching 36

million kilowatts, a year on year increase of 6 million, Shi said. The average usage of wind power in 2014, however, slumped to 1,893 hours from 2,074 hours in the previous year, partly due to weak wind conditions throughout the year, Shi added. The wind power sector generated 134.9 billion kilowatt hours of electricity in China in 2013, making it the country's thirdlargest source of electricity, after thermal power and hydro power.

The Dabancheng No. 2 Wind Farm in Xinjiang accommodates 157 units of turbines totaling 82.8 MW in capacity. It is one of the earliest and largest wind power generating plants in China.

During the first 2 months, newly installed power generation capacity hit 13.42 million kilowatts, mostly thermal (7.87 million kw). Newly installed hydro-power capacity was 1.39 million kw during the period. 23

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10.6 Million Kilowatts Grid-connected PV Power Generation Increased by 10.6 Million Kilowatts in 2014

Recently, the National Energy Administration (NEA) held a PV industry news brieing. In the brieing, Liang Zhipeng, deputy director of New and Renewable Energy Department of NEA, said that China’s grid-connected PV power capacity had increased by 10.6 million kilowatts, taking up about 1/5 of the total newly installed PV power capacity in the world and using 1/3 of the output of solar panel modules in China.

Thus, according to liang, we have achieved the goal of increasing PV power generation capacity by 10 million kilowatts per year, which was made by State Council in “opinions Concerning Improving the Healthy Development of PV Industry”. Among the 10.6 million kilowatts increased capacity, 8.55 million kilowatts are generated by new PV power stations, and 2.05 million kilowatts are scattered around.

Surges China's electric car production surges China's new energy vehicle production jumped threefold to 25,400 vehicles year on year in the irst quarter of 2015, the Ministry of Industry and Information Technology said on April 9.

Intense promotion by the government has brought more new energy vehicles onto China's roads, saving energy and combating pollution.

The output of pure electric passenger cars rose 400 percent from a year earlier to 11,000 cars, with plug-in hybrid passenger cars rising nearly 500 percent to 7,257 in the three months of this year.

In March, the Ministry of Transport (MoT) set a target of having 300,000 new energy vehicles on China's roads by 2020.

The output of pure electric and plug-in hybrid commercial vehicles went up by 500 percent and 61 percent, respectively. In March alone, Chinese carmakers produced 13,500 new energy vehicles, increasing threefold compared to March 2014. 24

Its guideline, encouraging the production and purchase of new energy vehicles, set a target of 200,000 new energy buses and 100,000 new energy taxis and delivery vehicles by 2020. China will continue to encourage the construction of charging facilities for new energy vehicles in cities and implement tax exemptions and subsidies for car purchases, said the MoT. 25

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CFFC China Energy journal

hina embraces slower C but better growth in energy

A ff e c t e d b y t h e c o u n t r y ' s e c o n o m i c slowdown and consumption-driven growth transformation, energy demand, especially power consumption in some provinces, is weakening. For instance, Chu Yanfang, deputy general manager of the Sichuan subsidiary of State Grid Corp of China, the largest power provider, said that hydropower-rich Sichuan has installed 78.74 million kilowatts in total hydro power capacity, but the peak power demand in the province is only 37.2 million kW. Even taking sales to other provinces into account, Sichuan will still likely have an excess of up to 21.8 billion kilowatt-hours power supply this year. In 2014, the province wasted 18.7 billion kWh of electricity generation, she said.

China's economy has entered the new normal period, during this phase, China's energy consumption growth will slow down but the quality will be better, the same as the traditional Chinese Tai Chi, slow and gentle but has good effect.

Hu jun CHINA'S energy consumption has entered medium-low growth as the economy heads toward a more sustainable model, according to the country's new head of the National Energy Administration (NEA). Growth of average consumption of primary energy is expected to drop to 3.4 percent per year through 2020 and about 2.3 percent by 2030, said Nur bekri, head of the NEA, in a report in the organization's in-house publication. Since 2000, China's energy use has grown at a pace of 7.9 percent annually, but as China 26

producer and consumer of energy. one of the NEA's major tasks this year will be to formulate a strategic energy plan that will guide the country's energy development to 2030. In an action plan on energy development for 2014-2020, which was released last November by the State Council, China promised more efficient, self-sufficient, green and innovative energy production and consumption. It also set a cap on annual primary energy consumption to 4.8 billion tonnes of standard coal equivalent by 2020. That means the annual growth of primary energy consumption must be limited within 3.5 percent for the next six years.

China's electricity consumption, a key indicator of economic activity, rose 3.8 percent year on year in 2014, the NEA said on jan 16.

In addition to controlling the volume of energy consumption, the NEA is also stepping up efforts to reduce coal consumption and boost the share of non-fossil fuels.

The growth marked a sharp slowdown from the 7.5 percent gain seen in the previous year as the country's economic strength remained subdued.

Currently, China's coal consumption accounts for about 66 percent of the primary energy use, 35 percent higher than the world average.

Nur was the chairman of the resourcerich Xinjiang Uygur autonomous region in northwestern China before being appointed as head of the NEA and deputy chief of the National Development and Reform Commission, the country's top economic planner.

China has to strike a balance between growth and structural optimization as it is now entering a state of "new normal", featuring moderate economic growth. The world's second largest economy finished 2014 with a 7.4 percent GDP growth rate, the weakest annual expansion in 24 years. Its growth target for this year has been further lowered to 7 percent.

In order to lower the share of coal in energy consumption, China will increase construction of natural gas pipelines in order to reach a total length of 120,000 kilometers, said Nur.

He said that in the past, it was usually the big energy consuming provinces in eastern China that came for NEA's approval to purchase coal, power and gas from energy producing provinces such as Shanxi, Sichuan and the Inner Mongolia autonomous region.

"As the Chinese economy has phased into a 'new normal', the energy consumption growth rate should also shift gears," said Nur, indicating China will spare no effort to further optimize the country's energy structure as the world's largest

embraces slower growth and higher quality, energy use will also cool down, Nur said.

He reiterated the goal of nuclear power expansion to 58 GW by 2020, in which 30 GW or more are already under construction. Installed capacity of hydropower, wind and solar power are expected to stand at 350 GW, 200 GW and 100 GW, respectively. "Geothermal energy consumption in China will hit a scale of 50 million tons of standard coal equivalent." He added. 27

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CFFC China Energy journal

liu Zhenya, president of State Grid, said in an earlier interview that extra-high-voltage transmission lines will help solve China's energy delivery imbalances.

composition committee under the China Meteorological Society, said at a seminar last December that excessive use of "unclean" energy, such as coal, is the real culprit of recurrent smog.

State Grid plans to invest 420.2 billion yuan ($67.29 billion) in 2015, up 24 percent from last year, and the power transmission lines will be the core component of the investment, according to the company.

only eight of the 74 major Chinese cities that monitor PM2.5 met the national air quality standard for clear air in 2014, according to the Ministry of Environmental Protection.

China aims to bring the share of non-fossil energy to 15 percent by 2020 and 20 percent by 2030.

li pledged to upgrade coal-fired power plants to achieve ultra-low emissions and strive for zerogrowth in the consumption of coal in heavilypolluted areas.

According to the annual government work report delivered by Premier li Keqiang, the Chinese government plans to reduce the energy intensity, or units of energy per unit of GDP, by 3.1 percent in 2015, lower than the 3.9 percent goal in 2014. Although previous government work reports had set the target for energy intensity, it has never been placed in such a priority in the government work report before. Premier li also pledged to further reduce the emission of major pollutants. This year, China will cut the intensity of carbon dioxide by at least 3.1 percent, reducing both chemical oxygen demand and ammonia nitrogen emissions by around 2 percent, and reducing emissions of sulfur dioxide and nitrogen oxides by around 3 percent and 5 percent respectively. Environmental scientists have suggested that the low efficiency of energy use has close links with smog that repeatedly troubled China's megacities including the capital. Zhang Xiaoye, director of an atmospheric 28

The country will promote the use of newenergy vehicles, reduce vehicle exhaust emissions, raise the national fuel quality standard and provide motor gasoline and diesel fuel of higher quality. All highly polluted vehicles registered before 2005 will be banned from the road. li promised to promote clean energy. China will "put greater weight" behind the development of wind power, photovoltaic p o w e r, a n d b i o m a s s e n e r g y, a n d w o r k "actively" to develop hydropower and "stress safety" in developing nuclear power, in addition to exploiting shale gas and coal-bed methane(CbM). The year of 2015 is the last year for the government to meet the targets set by the country's 12th five-year national development plan, which includes the reduction of energy intensity by 16 percent and carbon dioxide emission per unit of GDP by 17 percent from the 2010 level. Energy intensity has dropped by 4.8 percent in 2014, the biggest decline in the past few years.

The NEA will also map out an action plan on energy production and consumption for the Silk Road Economic belt, focused particularly on green-energy pilot projects, Nur said. lin boqiang, director of the China Center for Energy Economics Research at Xiamen University, said the country's "one belt, one Road" strategy will play a central role in shaping China's long-term energy plans, adding that the slowing demand highlighted by Nur will also help with the country's planned shift from fast expansion toward improved eficiency. Nur said the NEA is mapping out feasibility studies for projects including hydro power development in Southwest China, nuclear reactor construction, unconventional and

offshore oil and gas exploration, and more use of clean coal. He said he expected China to improve its domestic oil output by developing at least nine new 10-million-ton oilfields, both onshore and offshore. Cao Xianghong, an academician at the Chinese Academy of Engineering, said China must strengthen its national strategic oil stock reserve system to improve energy security. This january, the National Development and Reform Commission announced that it planned for the first time to set a minimum inventory level for commercial crude oil to keep the domestic oil market stable. All crude oil refineries must keep their inventories above 15 days' average processing level, and no less than

Experts Perspective In China, the fall in oil prices, the shift of economic growth speed and the upgraded economic structure are witness to the dynamic nature of energy markets. In a time of so much uncertainty, understanding the implications of the shifting energy landscape is vital. Therefore, we invited a few experts to make projections on the trajectories of fossil fuels, renewables, and energy efficiency in the near future.

Wang Zhiyuan

Secretary General, China Electricity Council

From the current stage of development, energy and electricity demand in China will keep growing. It is expected that in 2020 the installed power generation capacity of China will reach 2 billion kilowatts while the total electricity consumption will be 8.5TWh. 2015 is the last year of the â&#x20AC;&#x153;12th Five-Year Plan.â&#x20AC;? The power industry is facing challenges on safe and clean development as well as market reform. The power industry should fully acknowledge that the inluence of the economic "new normal" to the p ower supply and demand sceneries. Promoting energy revolution will have a crucial impact to the scale, structure and quality of energy industry development. Restore the commercial attribute of energy is critical for China's energy market. 29

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CFFC China Energy journal

THE year 2015 is “the best window of opportunity” for implementing the systematic reform of oil industry in China. Firstly, the Third Plenary Session of the 18th Central Committee of the CPC stated that market shoul d play a decisive role in the allocation of resources, which indicated that the market-oriented reform of oil industry in China will be irreversible and pointed out the practical direction of the reform. The Forth Plenary Session of the 18th Central Committee of the CPC decided that the reform should be guided by rule of law, which provided the policy basis for China’s social reform. Secondly, the supply of crude oil in the international market is expected to be adequate in 2015. The price will continue to decline and will remain low over a period of time. This is a good time for our country to accelerate the marketization of the oil industry and promote the energy price reform. T h i r d l y, a l l s o c i a l communities, especially private oil companies, are calling for the system reform of oil industry more and more 30

strongly.

Zhang Yue

Chairman, China Chamber of Commerce for Petroleum Industry

I think we should introduce diversified market competitors. We should ensure that new market entities can get rid of dependency on the two major stateowned groups, and have their own independent rights in trading crude oil, selling products and developing enterprises. We should establish a fully competitive oil market with diversified market entities. I appeal for the relevant government departments to clean up and abolish documents which are out of date and are obstacles to the reform. The National Development and Reform Commission, the Ministry of Commerce and other relevant government departments should further abolish all kinds of rules and regulations associated with the abovementioned documents. The government should relinquish its monopoly of importing and exporting of crude oil and refined oil. The crude oil import quota system for private oil enterprises by the Ministry of Commerce should also be abolished.

CHINA is the largest developing country in the world and also the largest energy producer and consumer. I n 2 0 1 3 , C h i n a ’s t o t a l economic output accounts for about 12.3% of the world, but it consumes 22.4% of the world’s energy. Its per unit GDP energy consumption is only about half of the world average level. With the development of urbanization and industrialization, the e n e rg y c o n s u m p t i o n w i l l continue to rise in our country. Facing the serious situation of tight resource constraints, environmental pollution and ecosystem degradation, we have to promote low carbon green development, which is the only way for China’s economic and social development.

Jia Fusheng

Director,National Energy Conservation Center

IN 2015, there will be a major breakthrough in nuclear power technology. It is expected that “Hualong one”, China’s current nuclear technology with independent intellectual property rights, will be started to construct. This is not only an achievement that several generations in nuclear industry are looking forward to, but also a new major breakthrough of self-developed MWe nuclear power technology after the 300 MWe Qinshan Nuclear Power Plant Phase and the 600 MWe Qinshan Nuclear Power Plant Phase.CAP1400, which is based on foreign technology and innovated and designed by ourselves, will be launched soon. In 2015, we wish that Chinese nuclear power will make significant progress in “going out.”britain, Argentina, Romania, South Africa will be the market focus for Chinese enterprises.

For future energy conservation, we need to pay attention to system construction and measure arrangements simultaneously, covering the whole process and every single session. We have to control the increase of energy consumption while supervise the energy stock. In this way, we can strengthen control of energy consum p t i o n d e p e n d i n g o n energy evaluation system and market instruments. We have to further improve the law and regulation system while establishing an energy conservation standard. So that we can promote and supervise energy conservation according to laws and regulations. We have to set up an on-line energy monitoring and evaluation system while building a total consumption predictive warning system.

Shen Lixin

Deputy Secretary General, Chinese Nuclear Society 31

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CFFC China Energy journal

CURRENT science and technology has proved that hydropower is undoubtedly the most ideal substitute for fossil fuel energy in China and the world. In 2014, Xiluodu, Xiangjiaba and jinping, the second, third and fourth largest hydropower projects in China, have been put into full operation. The transmission channels and the accommodated capacity of the Western hydropower both meet some difficulties and limitations. Yunnan and Sichuan, the two national hydropower bases, both have serious problems with water surplus . by establishing an energy conservation standard system, we can promote and supervise energy conservation according to laws and regulations. We have to set up an on-line monitoring and evaluation system while building a total consumption predictive warning system. We have to strengthen the energy conservation supervision while improving the energy conservation management and service. Construction of major reservoirs which possess enough water resource for regulation and adjustment is significant for water safety. 32

Zhang Boting

DeputySecretary General, China Society for Hydropower Engineering

Nowadays this is exactly the weakest aspect for water resources conservation in our country. However, in recent years China has huge investment in hydropower, it has few new projects put into operation. The major reason is that the government has left hydropower investment to market forces and those water projects which have extremely high comprehensive energy eficiencies are all classiied as market-based programs. As a result, those water projects of weak social effects and low economic returns are fully developed, while those of good social effects and high economic returns are not able to have enough development. Those water conservantion projects are highly important for social welfare. They ought to be synthetically planned and developed by the central government. Experiences from both domestic and abroad have proved this. For international experience, successfully development of hydropower in the United States is attributed to government monitoring in the construction of hydropower plants across major rivers. The Chinaâ&#x20AC;&#x2122;s Three Gorges dam and Xiaolangdi dam also serve as good examples for reservoir construction.

ACCoRDING to my understanding, energy revolution is a fundamental shift of the energy consumption model from high carbon to low carbon until zero carbon. To realize the revolution, firstly, we need to increase the usage of renewable energy. We need to replace fossil energy with clean energy until it is completely phased out. Secondly, we need to expand the electrification level of terminals and expand the s c o p e o f e l e c t r i c p o w e r, like buildings and traffic, especially the popularization of electric vehicles which will extend the usage of electricity from traditional industry to communication and build

Qin Haiyan Sectary General, C h i n e s e Wind Energy Association

clean transportation system. Therefore, the reconstruction of power system is particularly important and will decide the success of energy revolution. The future power system we want to build will have the renewable energy such as wind power and solar power as its core. It will be characterized as intelligent, informative and decentralized. It will be an interactive power system supported by internet. Such a power system will ensure that our country will be leading the development of power technology for years.

Major Events

Major Events CFFC China Energy journal

CFFC China Energy journal

China's PV industry beneits from the "Belt and Road" initiatives Wang Haixia

一带一路 IN the past, Chinese photovoltaic products exported to Europe, mainly through shipping, usually takes 40 days, but now, thanks to the belt and Road initiatives, the opening of the China-EU PV trains enable China's PV products exports to European for less than 17 days. Such convenience is only a microcosm of the beneits brought by the belt and Road initiatives for the Chinese PV industry. on March 31, the first China-EU PV train arrived in Hamburg, Germany, transporting six containers totaling 1 MW of Yingli "Panda" high-efficiency solar PV modules for the first time by rail to Europe. “Rail transport is a better way to speed up

delivery, moreover, this method can meet different customers' needs, at the same time, it can also improve the competitiveness of Chinese PV products.”said Moche , manager of Yingli Green Energy Group ‘s European branch. Actually, after years of development, China already has the world's largest solar module production capacity. Unfortunately, large export amount of PV production is followed by frequent trade frictions. Countries, such as the United States, Canada as well as the EU have allegations against China's PV products “Double-anti-” Survey (anti-dumping and countervailing investigations).

“

China has advantages in output, research and development of leading technologies in the global photovoltaic market

on May 19, the Australian anti-dumping goods Committee will make the inal decision on whether to charge Chinese solar products antidumping duties. In addition to the efforts of expanding the domestic market, the belt and Road initiatives also bring new business opportunities for the PV industry. "China has advantages in output, research and development of leading technology in the global PV market,."Gao jifan, the head of the China Photovoltaic Industry Association said on March 30 during the boao Forum for Asia (bFA).

▲ Gao Jifan, the head of the China Photovoltaic Industry Association in this alternative power," Gao said. In recent years, PV power plants have been installed in Southeast Asia, India, the Middle East, Central Asia, Africa and other regions or countries. All over the world, PV solar is experiencing explosive growth and has bright market prospects. The belt and Road initiatives were established on the four principles of openness and cooperation; harmony and inclusiveness; market operation; and mutual beneits.

According to Gao, the installation price for PV power stations dropped from a level of 20,000 yuan per kilowatt five years ago to around 9,000 yuan now.

Policy coordination, connectivity, unimpeded trade, inancial integration and people to people bonds are the five cooperation priorities of the initiatives.

"PV power stations are no longer a luxury. Developing countries will now be able to invest

Gao believes that these principles will help China's PV products to break into new markets.

One aerial picture of a PV power plant in Xinjiang Autonomous Region (Photo/Fu Yongmin) 34

Major Events

Major Events CFFC China Energy journal

CFFC China Energy journal

hina's nuclear power plants get a C fresh impetus Zhu Xuerui

CHINA'S nuclear energy development plans got a fresh impetus after the State Council gave the green light for new reactors at the Hongyan River nuclear power plant. Dalian city is an important heavy industrial base of the Northeast China, and the Hongyan River Nuclear Power Plant is located in this city. on March 29, the 5th unit of the Hongyan River Nuclear Power Plant started construction, which became the first nuclear power plant construction project after the central government required to accelerate coastal nuclear power projects last year. Units 5 and 6 of the Hongyan plant got construction approval just before the Chinese lunar New Year, said an industry expert. "It is a big step forward for China to revive the industry and more nuclear projects are expected to start construction this year. However, the official documents are yet to be finalized", the expert of nuclear power industry told media. Due to the mounting pressure from sever air pollution, the central government has to optimize the energy structure to improve environment quality. In this process, nuclear 36

power is considered to be an irreplaceable part of curbing smog. During the Two Sessions in early March, the Chairman of China General Nuclear Power Group He Yu said that the central government should further clarify the pillar status of nuclear power in Chinaâ&#x20AC;&#x2122;s energy structure optimization, and enlarging the scale of nuclear power is a powerful way to replace fossil energy sources. Tang bo, an official at the National Nuclear Safety Administration, said earlier that the regulatory body has been working on the environmental impact assessment and safety inspection of nuclear projects including the Hongyan River nuclear project, the Shidao bay nuclear demonstration project in Shandong province and units 5 and 6 of the Fuqing nuclear power plant in Fujian province. Following the Hongyan River nuclear project, units 5 and 6 of the Fuqing nuclear power plant are the next possible candidates for approval, the expert said. The equipment purchase order for units 5 and 6 of the Fuqing nuclear power plant, which uses the Hualong one reactor design,

Four units of the Hongyan River nuclear power plant are concurrently under construction at the same time File

known as the third-generation nuclear technology, is nearly complete, the source said. China, with the world's largest number of nuclear power plants under construction, is now pushing ahead to embark on a program of new nuclear projects to reduce the proportion of fossil fuels in its primary energy consumption. last year, the State Council rolled out an energy plan to have a more efficient, selfsufficient, green and innovative energy production and consumption mechanism.

The plan aims to have 58 GW of nuclear power in operation by 2020 and at least 30 GW under construction. To meet that target, China needs to add at least another 10 gW of installed capacity with approval of six to eight reactors each year, according to estimates from industry experts. After the Fukushima Daiichi nuclear disaster in japan in 2011, China suspended approval for nuclear plants in order to revise its safety standards. However, it lifted the ban on new nuclear power stations at the end of 2012, and said it would only approve projects proposed for coastal areas in 2015. 37

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CFFC China Energy journal

hanghai approves oil & gas trade S center Zhong Yinyan THE Shanghai oil and Gas Trade Center officially settled in lujiazui Shang Hai as the company completed registration at the inancial district with a registered capital of 1 billion yuan . The trade center is formed under a strategic alliance between the Xinhua News Agency and the National Development and Reform Commission (NDRC), the nation's top economic planner. It is established by ten enterprises including China's oil and gas giants like the PetrolChina Company limited, the Sinopec Corp and the China National offshore oil Corporation (CNooC) Gas and Power Group. The center is a platform for spot trade of natural gas, unconventional gas, liquefied petroleum gas, petroleum and other energy products. It operates under the guidance and supervision of the NDRC, the National Energy Administration and municipal administrative departments of the spot commodities market.

In the future, the trading center will establish an oil and gas trade and settlement platform as well as its online service system. The center aims to position itself as a gas trading hub for China similar to the Henry Hub in the US or the National balancing Point in the UK, and over time develop into an Asia-Pacific oil and gas pricing center. The establishment of a trading center with international influence is an important part of China's strategy for future energy development, and an important step forward in the nation’s energy industrial market reform, according to insiders. lujiazui was chosen as the location of the trade center because the area has a wellestablished inancial market system, advanced financial infrastructure and a sound financial environment. Meanwhile the district gathers many other trade centers and has convenient public transportation.

▲At Hanergy’s exhibition booth, visitors are interested in the portable solar charging equipment for camping and other uses. (Photo/ Fu Yongmin )

Clean Energy Expo in Beijing AS one of the China power industry’s highest standard expos, the 2015 Clean Energy Expo China was held in beijing during April 1-3. It is considered to be a showcase of the latest developments from enterprises in clean energy industries including smart grid, wind power, solar power, distributed energy, natural gas and biomass energy technologies and equipment.

▲

Nearly 300 companies from 11 countries, including Turkey, Austria, Australia, Canada, Malaysia, France, Germany, USA, Italy, Russia participated in the expo. North General Power Group CO., LTD, a subsidiary of the China North Industries Group, brought its emergency generator to the Clean Energy Expo. (Photo /Fu Yongmin) 38

Dialogue

Dialogue CFFC China Energy journal

CFFC China Energy journal

Grid and China Southern Power Grid. As there is no effective competition, it is not surprising that the industry is not booming.

hy is pumped storage developing W slowly in China Jia Kehua IN 2014, national policies favored pumped storage in China and people in the industry also believe that pumped storage has a promising future. So what is the status of pumped storage development in China? What obstacles are blocking this energy storage pattern? CEFC China Energy journal recently had an exclusive interview with Peng Cheng, Party Secretary and Vice President of China Renewable Energy Engineering Institute. Q: What does pumped storage mean to the whole power system? A: In a society, demand for power can be divided into different categories, like power for industry, for agriculture and power for civil uses. Influenced by various factors, including social demand, the law of natural and industrial facilities etc., demand for power of each category is fluctuating at different times of a day, thus forming peaks and valleys of power consumption. As for the power system, to make sure that people have access to power at the peak of power consumption and to ensure the stability and safety of other power sources at the valley of power consumption, we need to construct a device that consumes power by pumping up water at the valley hours and releases water to generate power at the peak hours. by doing so, we can better guarantee the safety of the power system, and this is called pumped storage hydroelectricity. besides, the power system is enormous which requires devices like frequency modulation (FM), phase modulation 40

Q: What suggestions would you give to promote the healthy development of this industry? A: Regulations should be implemented regarding the prices of pumped storage power. And Pilot projects should be launched as soon as possible.

(PM) and black-start. As pumped storage power stations can be started and stopped easily, it has become the irst choice. In recent years, new energy like wind energy has been developing fast. but wind is intermittent, which results in the intermittence of wind energy and brings about new challenges to the grid. As a result, we need to upgrade the responsiveness of the grid, and better peak load regulation devices will be needed to that end. Pumped s t o r a g e , h o w e v e r, a g a i n c o m e s i n t o o u r sight as a primary choice because of its cost effectiveness, environmental friendliness and low carbon emissions. Generally speaking, pumped storage power stations mean a lot to optimizing Chinese energy structure and stabilizing the power system. Q: According to the “The Twelfth Five-year Plan on Energy Development”, the pumped storage capacity under construction will reach 40 million kilowatts in the twelfth five-year period. by the end of 2015, installed capacity of pumped storage will reach 30 million kilowatts, and by the end of 2020, the figure will be at 70 million kilowatts. but the present situation is not looking good. A: Yes, there is a significant gap between reality and the plan. In the irst four years of the “twelfth ive-year” period, 14.6 million kilowatts were being constructed and 2015 can witness another 9.35 million kilowatts under construction

Peng Cheng at best. And we estimate that a total capacity of 23.95 million kilowatts will be under construction by the end of the “twelfth five-year” period, which is only 60% of the original plan. It is predicted that by the end of 2015 and 2020, the total capacity of pumped storage power stations that go into operation will reach 23.35 million and 35 million respectively, which is only 78% and 50% of the goal made in the “twelfth ive-year plan”. As we can see from the statistics, the rate of progress we are making in pumped storage is not looking good. Q: Why is construction lagging so much behind of the plan? A: First of all, the core issue that hinders the development of pumped storage is the pricing mechanism. Without a competitive price, companies are not motivated and as a result, pumped storage is progressing laboriously. Secondly, the companies that develop pumped storage are not diversified. Unlike regular hydropower generation, pumped storage power stations are mainly constructed by State

Second, the National Energy Administration should make regulations about tender invitation and submission. only in this way can social capital flow into the pumped storage field. And pilot projects should be chosen and promoted. Third, while we are pushing forward with the development of pumped storage, we should also keep order in the industry. We should choose sites and make plans in stages according to the needs. And the legal validity of the official reply by the government to the chosen sites should be further enhanced, which is the basis for the orderly development of pumped storage power stations. Some preliminary work before a site is chosen should be compulsory, like getting a project approval. Fourth, a new round of choosing new sites for pumped storage power stations should be launched. As we are making some readjustments to our energy structure, significant changes will occur in our power structure in the future. The proportion that new and renewable energy (wind energy, solar energy, and nuclear energy) takes will increase dramatically, especially after 2030. To guarantee the stable and economical operation of the power system and the development and utilization of new energy, we need to construct a batch of pumped storage power stations that are responsive, clean and can be started and stopped easily. 41

Dialogue

Dialogue CFFC China Energy journal

CFFC China Energy journal

ollaboration of Shell and CNPC C on shale gas under pressure Qin Wenting SHEll has been regarded as the pioneer for establishing a collaboration with CNPC. For the last 6 years,the collaboration has been mainly focused on the Shale Gas Exploration, Development and Production at Sichuan Fushun and Yongchuan concession. based on mutual benefits, the collaboration leads to prosperity for both of these two corporations. However, many would arouse the doubt whether it is economically viable to develop shale gas under the inluence of low oil price. It is questionable that the grim oil market would make any negative impact on the relationship between the CNPC and Shell, when it comes to Shale Gas Development in China. Thus, we asked Wells Staff Development Manager Gerard de blok to offer his insight into this topic. Q: Qin Wenting China University of Petroleum (beijing) A: Gerard de blok, Wells Staff Development Manager, Shell China E & P Co. ltd Q: based on your personal point of view, can you make any comments regarding the collaboration between Shell and CNPC for shale gas development? A: The collaboration between Shell and CNPC remains strong. but the shale gas development projects have come under some significant pressure. both companies will have to ascertain that on the one hand there is a significant reimbursement in terms of meeting 42

long term gas production targets and on the other hand that there will be a return on investment. At present（ shale gas is in abundance, also in Sichuan, where Shell China has been appraising the Fushun concession since December 2010, but making the wells produce sustainable quantities of gas has been a challenge and an accurate determination of the ultimate recovery is still being studied as we speak. one thing is for certain, wells must be drilled and stimulated with utmost efficiency and cost awareness and it is encouraging that marked progress has been made in that area. Q:During your time working side by side with CNPC employees as a Shell employee, did you identify any obstacles related to the two companies’ collaboration? A: Sure, there were occasional differences of opinion, but then again I don’t think there were any obstacles that could not be bridged. The cooperation between the two companies is built on trust and a long–lasting relationship that dates back many, many years. There will always be ups and downs in terms of activity, but these are usually more influenced by global circumstances beyond both companies’ control. Collaboration does not mean that we should link it to success in shale gas development in China as this source of gas development will be more a matter of time. There are also many other undeveloped shale gas accumulations outside China, opening up

prospects for collaboration that have not yet been pursued to date. Q: When the oil price is down, like it is now, do you think there would be any kind of major impact on the collaboration between those two companies? A: Again, I would not expect that the collaboration would suffer if both companies remain focused on what they have previously agreed. We all know that the oil price is a cyclic event and often providing companies with a justifiable reason to better understand and then control the costs associated with projects on the ‘less profitable’ end of the business. It is widely believed that the oil price will recover over the next 1 to 1 . 5 year, to a level of let say 90 US$/barrel, which is more in line with supply and demand. The risk may be that older and experienced staff may leave the industry prematurely, which make it rather a daunting challenge for the younger staff to pick up the business when it matters. but then again, we have faced these challenges in the past. Q: In the U.S., some forms of regulations for hydraulic stimulation have already been established. Do you think it is necessary to implement such regulation for China's shale gas development? If not, then how, in your opinion, should the Chinese regulate the shale gas development? A: Indeed, the U.S. is regulating hydraulic fracturing, but as far as I know, only for Federal State concessions. It has already been widely criticized, as is often the case when ‘big brother’ is trying to inluence the industry, which, as can be expected, has already set its own strict and commonly adhered rules before the regulator makes a move. I do believe that regulation will ultimately be advantageous if the public at large is able to regain the trust in hydraulic fracturing.

The industry has done a lot of self-regulation and will therefore find it hard to comply with rules set by regulators, without providing the insight and know-how the industry already has for many years. Nonetheless, I believe that this will smoothen itself out over time. As for China, I think we should apply similar regulation as in the US, but not without consulting the industry and independent stimulation specialists on how all stakeholders can benefit from this, as well as those living within or in the vicinity of shale gas development projects. Regulation for the sake of regulation will not serve anyone in the long run. Q: China is now starting an ‘energy revolution’; so what are your expectations on how this will evolve? Do you think it will have a negative or positive impact on the relationship between Chinese state owned oil companies and the foreign oil corporations? A: The demand for energy for the next decades and beyond remains a big challenge, but I have confidence that China will be able to face this challenge. Diversity in energy supply has to be the key phrase in all of this. over the next 20 years or more gas will become one of the largest constituents of China’s energy supply, be it from coal, from natural gas, from shale gas or otherwise. It is my strong conviction that the current robust collaboration between Chinese state owned oil companies and foreign oil companies is built on the understanding that both parties ‘must’ benefit. Any technological application can be applied quicker and more efficiently if there is collaboration. but I also believe that it should not remain within the constraints of Chinese borders. A global and more intense collaboration outside China will allow the Chinese stated owned oil companies to reap similar beneits back home in China on a much wider scale than what is possible right now. 43

Business

Business CFFC China Energy journal

CFFC China Energy journal

inopec tries hard to avoid becoming S a dinosaur Wu Li

The completion of stake subscription is a concrete step toward a inal mixed-ownership of Sinopec's lucrative oil sales arm. The announcement showed the 25 partners have paid 105.04 billion yuan of 107.09 billion yuan agreed in a previous deal to Sinopec's sales subsidiary. one of the investors failed to fully pay due to a lack of suficient capital.

CHAIRMAN of China's top oil refiner Sinopec Fu Chengyu used a vivid metaphor to describe now Sinopec is facing great pressure due to the new normal and low oil prices, just like what dinosaur experienced during the Triassic period. Fu said “The traditional oil industry transformation is imminent and currently Sinopec is an elephant. If we do not reform as soon as possible, the elephant will become a dinosaur, and the days left for us are numbered.” “Vigor” is a word used frequently by Fu on many d i ff e r e n t o c c a s i o n s . I n his opinion, “state-owned enterprises represent the economic strength of China, and private enterprises represent the economic vigor of China, and together, they constitute the economic competitiveness of China. Introducing social and private capital can help the state-owned economy play a better leading role, boost its vigor and enhance its control and influence,

company ownership.

Sinopec did not reveal further details and promised to publish any progress in the cooperation in a timely manner. The company was not available for immediate comment. Sinopec unveiled a plan last September to sell 29.99 percent of its sales arm for 107.09 billion yuan to 25 domestic and overseas companies. Among those were 11 private companies that were supposed to put in a total of 38.29 billion yuan, accounting for 35.8 percent of the new investment, according to the plan. As China's first state company to pioneer a mixed-ownership reform, Sinopec announced last February they would solicit private capital as encouraged by the government in a bid to reshufle and reinvigorate state-owned assets.

Fu Chengyu is a competent “guide” of Sinopec .

and meanwhile, capital of different ownership can complement each other and develop together so as to arrive at a win-win result.” Sinopec announced recently that 25 companies have paid to buy stakes in the energy giant as part of an effort to diversify state

Sinopec’s reform has been the capital increase and share expansion of the largest scale so far in Chinese energy industry, which, people say, will deinitely be a wind vane because its reform model represents the future reform tendency of stateowned enterprises. Zeng Xingqiu, the vice president of Energy Research Center of The Investment Association of China, said: “Implementing a mixed ownership reform in the Sinopec sales

section can be used as a reference by stateowned enterprises in future reforms. And as for Sinopec, they should make a good top-level design. Changing concepts and the management model are two good ways to guarantee the smooth implementation of the reform, whose significance is to make sure that the economic strength of state-owned enterprises and the vigor of the private sector can be more effectively combined to make state-owned capital inlationproof or realize its increment.” “As for the petroleum industry, mixed ownership reform is a process that takes different steps of experimentation. The reform in the oil products sales sector of Sinopec surely is a sample. Non-oil products still have large space to expand. Sinopec is trying to transform from an oil supplier to a supplier of comprehensive services. However, the market is full of uncertainties. Whether the reform can live up to their expectation is still hard to say.” added Zeng. Similarly, what is also noteworthy is that Sinopec tries to propel the mixed ownership reform through capital increase and share expansion, which means attracting capital from the private sector. The sector of sales of oil products opens more to the market, and it takes a small proportion in the whole Sinopec businesses. Whether its core businesses like upstream exploration and exploitation, oil refining and chemicals can be influenced or not will be the focus of attention. It can be said that for the gigantic Sinopec magnate, Fu Chengyu is a competent “guide”. Since he presided over Sinopec in 2011, Sinopec Reinery Product Sales Company Limited, Sinopec Engineering Group Company limited and Sinopec Great Wall Energy and Chemical Company limited have been established, thus realizing the integration of sales businesses, regrouping of the reinery and engineering sectors and the professional development of coal chemical industry. Up till now, Sinopec has laid a clear path for professional development. 45

Business

Business CFFC China Energy journal

CFFC China Energy journal

hina cuts power price to benefit C enterprises

hina's first biomass-solar power C plant begins initial operation

Yuhuan

Xinhua

CHINA will lower prices of coalfired power and power consumption for industrial and commercial purposes to reduce business costs, the State Council said on April 8.

A farmer from L o n g q u a n C i t y, Zhejiang, got 1,500 yuan for selling saw dust to the power plant.

Price for coal-fueled electricity will be cut by around two yuan (0.33 U.S. dollars) per 100 kWh and commercial electricity consumption will enjoy a same lower price as industries with a reduction of about 1.8 yuan per 100 kWh, said a statement released after an executive meeting of the State Council presided over by Premier li Keqiang. The adjustment aims to reduce business cost amid falling coal prices and sluggish production activities. China's benchmark power coal price dropped 10 yuan/tonne in April 1-7 to average at 459 yuan/tonne, according to the latest bohai-Rim Steam-Coal Price Index published on Wednesday. bohai-Rim Steam-Coal Price Index has continued declining for 14 weeks in a row with a total decrease of 66 yuan/tonne. The government will continue to charge more for large energy consumers and enact harsher electricity price penalties for high 46

Proile picture energy consuming and polluting productions, the statement said.

CHINA's first power plant producing electricity both from biomass and photovoltaic power started its irst phase operation on April 2.

hours of electricity a year to the power grid, which is equivalent to the thermal power generation of burning 430 tonnes of coal.

The Zhejiang longquan biomass Power Plant in east China's Zhejiang Province began operating its two biomass power generators, which boast a total installed capacity of 162 million kilowatt-hours of electricity a year.

on April 2, ji Maoqing, a farmer from longquan City, Zhejiang, sent a truck of saw dust to the power plant. After going under scalage, the waste earn him 1,500 yuan .

The price cut is expected to ease structural problems to encourage more environmentally friendly power generation methods to reduce emission and air pollution.

To reach the capacity, the generators need to consume 250,000 tonnes of biomass fuel, which is processed from rural waste.

Saw dust, along with straw and other agricultural waste, is the main raw material that the plant purchases from farmers to fuel the biomass power generation.

China cut coal-fired power prices both in 2013 and 2014 to encourage power plants to employ more de-nitration, de-dusting and other environmentally friendly technologies in electricity generation.

The plant will see the installation of its 1.44-megawatt photovoltaic power generation system later this month. It is expected to go into operation 4 months later. The solar power generation is able to add 1.3 million kilowatt-

If recycled, rural waste has the potential to produce biomass energy equivalent to thermal power generation from 656 million tonnes of coal a year, or half of the country's annual coal output. 47

Energy Security

CFFC China Energy journal

entral Asia Gas Pipeline—— C “energy silk road” a powerful engine

Cui Mo

能源丝绸之路

THE Central Asia-China Gas Pipeline, an energy artery, undulates through Central Asia and extends westwards along the ancient Silk Road until it reaches China and brings China an incessant supply of natural gas, which is also called “blue Gold”. And today, a historical opportunity presents itself in front of the pipeline—the construction of an economic belt along the Silk Road. both the nation and people have high expectations. According to the statistics released by the National Development and Reform Commission, in the winter of 2014, China’s total demand for national gas reached 88.2 billion cubic meters, while the total supply fell short at 82 billion cubic meters, causing a demand-supply difference of 6.2 billion cubic meters. Faced with challenges like an increase in the delivery capacity and coordination of different gas sources, CNPC(China National Petroleum Corporation ) hosted the 11th coordination conference that involved 4 countries and many parties in Alma-Ata in September, 2014. During the conference, a total supply amount 48

for the winter was decided and also each gas source’s monthly supply plan for the winter was also agreed upon. Ever since the beginning of “winter supply” until 9 March, a total amount of 12.59 billion cubic meters of natural gas has been delivered through Central AsiaChina Gas Pipeline, out of which 11.9 billion was sent to China, which means a year-on-year growth of 23.2% and

500

million

over 500 million people and 25 provinces, municipalities and the Hong Kong Special Administrative Region have benefited from clean energy from Central Asia

30.6% respectively and takes up 32.7% of domestic pipeline gas consumption. Up till now, over 500 million people and 25 provinces, municipalities and the Hong Kong Special Administrative Region have beneited from clean energy from Central Asia. 10 billion cubic meters of natural gas is equal to 13 million tons of coal. As a result, burning 10 billion cubic meters of natural gas can reduce carbon dioxide emission by 14 million tons and sulfur dioxide emission by 219,000 tons.

to the daily consumption of the entire Shangdong Province. At the same time, the combined delivery capacity of the 3 lines has reached 130 million cubic meters a day at the peak, with a year-onyear growth of 46%. besides, CNPC has been improving its maintenance capacity nonstop in order to guarantee gas supply. Maintenance capacity includes staff, equipment, materials, machines and tools, plans and drill. Under extreme circumstances, g a s s u p p l y c a n b e resumed in 72 hours. Management and control of key equipment is in place with a reliability of over 98%. Risk management is divided into different levels and categories; measures to deal with hidden dangers are in place. Everything mentioned above is to guarantee the safe and stable operation of the pipeline.

In order to optimize operation, Central Asia-China gas pipelines make sure that 36 units can run at the same time, and an optimum joint operation of line A/b and line C is made on the basis of monthly gas supply plan. Thus, gas supply becomes more lexible and stable. line C of Central Asia-China Gas Pipeline went into operation in june, 2014. Ever since then, a daily delivery capacity of line C has arrived at over 20 million cubic meters, which is equal

million

Daily delivery capacity of line C has arrived at over 20 million cubic meters, which is equal to the daily consumption of the entire Shangdong Province

It is because of these measures that this energy artery ran smoothly during the “winter supply” period. As the demand

130

million

The combined delivery capacity of the 3 lines has reached 130 million cubic meters a day at the peak, with a year-on-year growth of 46%

billion

When the construction of line D is completed, its annual delivery capacity will be at 30 billion cubic meters

Energy Security

CFFC China Energy journal

is high, the efforts to increase the delivery capacity of Central Asia-China gas pipelines will not slacken. In 2015, the annual delivery capacity of line C will increase to 21 billion cubic meters, providing a good basis for “winter supply” in 2015. Complementing each other’s advantages and win-win cooperation are the secrets to how Trans-Asia Gas Pipeline Company limited (TAPlINE), a subsidiary of CNPC, has taken root in Central Asia for many years. With the help of Central Asia-China gas pipelines, several enterprises from Kazakhstan have been developing.

billion cm

In 2015, the annual delivery capacity of line C will increase to 21 billion cubic meters

on September 7th, 2013, the irst phase of southern Kazakhstan gas pipeline went into operation after 14 months of construction. The project, which depended on Central Asia-China gas pipelines, sent a total amount of 1.8 billion cubic meters of the abundant gas in western Kazakhstan to its southern part for daily uses, beneiting 14 cities and towns and millions of people along the line. Although Central Asia-China gas pipelines merely pass through the territories of Kazakhstan and Uzbekistan, it has become an important economic engine in the two countries. Statistically speaking, the investment required for line C of the Central AsiaChina gas pipelines is as much as the total yearly foreign direct investment in Uzbekistan, while 50

1/3 Countries along Silk Road produced 1074.4 billion cubic meters of natural gas in 2013, taking up 1/3 o f t h e w o r l d ’s production.

in Kazakhstan, it accounts for 26% of the foreign direct investment in 2011. At UCS1/UCS3 station on line C, we can see many Uzbeks busy working on the construction sites, maintenance rooms etc. According to the statistics, the project hired as many as 400 local people at one point in different positions, like documentation, HR, HSE, finance, administration and construction etc. So it played a positive role in the local economy. For five consecutive years, the project has arranged 106 Uzbeks to receive training in technology and management in China, and these people would play pivotal roles in supporting the development of Uzbekistan. The key to constructing an economic belt along the Silk Road is the Energy Silk Road. Take natural gas for example. Countries along Silk Road produced 1074.4 billion cubic meters of natural gas in 2013, taking up 1/3 of the world’s production. And they exported 27.4 cubic meters of natural gas to China in the same year, which accounted for over 1/2 of China’s gas imports. on September 13th 2014, line D of Central AsiaChina Gas Pipeline started

construction in Duschanbe, the capital of Tajikistan. The construction of line D is another shot of adrenaline to the energy artery.

line D will bring about 1 billion dollars of investment to Uzbekistan, Tajikistan and Kyrgyzstan

line D passes through Tajikistan and Kyrgyzstan. line D, together with lines A, b and C, which are located in Turkmenistan, Uzbekistan and Kazakhstan, form the Central Asia-China gas pipeline network. The natural gas corridor going from south to east embraces China with open arms and connects China closely with the 5 countries in Central Asia, thus strengthening the energy cooperation between China and Central Asian countries. When the construction of line D is completed, its annual delivery capacity will be at 30 billion cubic meters, which can further ease the tension of gas supply in China and improve our energy structure. At the same time, a new passageway for importing resources from Central Asia will be opened, which can help to diversify our natural gas import sources so as to better guarantee the safety of national energy supply. by then, the annual delivery capacity of Central Asia-China gas pipelines will have reached 85 billion cubic meters, making it the biggest natural gas delivery pipeline network in Central Asia. It will be able to satisfy 20% of our national gas demand.

billion dollars

line D will bring about 1 billion dollars of investment t o U z b e k i s t a n , Ta j i k i s t a n and Kyrgyzstan. In the 30 years of its operation, the line will create thousands of jobs and realize another 1 billion dollars of benefits to the 3 countries. The highest international standards and regulations will be introduced in the construction of line D, which can help the countries along the line to accumulate precious experience in pipeline construction and train capable technicians. And at the end of the day, it will result in the boom of the natural gas industry in these countries.

20% It will be able to satisfy 20% of our national gas demand.

“Promoting the construction of the Silk Road Economic belt and the cooperation along st the 21 Century Maritime Silk Road” have become the focuses of the nation. With this opportunity, Central China-Asia gas pipelines will help energy stand out among many other industries. 51

Technology

Technology CFFC China Energy journal

CFFC China Energy journal

hina plans to build massive power C station in space solar power system. After devoting more than half a century to space technology research, Wang, 93, an advocate for the station, says: "An economically viable space power station would be really huge, with the total area of the solar panels reaching 5 to 6 square kilometers."

(imaginary)

That's equivalent to 12 times of beijing's Tian'anmen Square, the largest public square in the world, or nearly two New York Central Parks.

Zhu Xuerui To eliminate smog caused by burning fossil fuels, reduce emissions of greenhouse gases, and solve the energy crisis, experts have suggested that China should build a solar power station in a geosynchronous orbit 36,000 kilometers above the Earth. once realized, this would be the most ambitious space project ever, far exceeding the scale of the Apollo program and the International Space Station. The idea of building a power station in space is not a sudden inspiration. In 1941, US science fiction writer Isaac Asimov published the short story "Reason", in which a space station transmits energy collected from the sun to various planets using microwave beams. According to Wang Xiji, an academician of the Chinese Academy of Sciences (CAS) and a member of the International Academy of Astronautics, Asimov's iction has a scientiic basis. In 1968, US scientist Peter Glaser published an article in the journal Science claiming a feasible design for the space 52

"Maybe people on Earth could see it in the sky at night, like a star," says Wang. Researchers in many countries have drawn dozens of designs, with square, round and bowlshaped stations. but why build a power station in space? Wang says the electricity generated from the ground-based solar plants fluctuates with night and day and the weather, while a space-based generator can collect energy 99 percent of the time. Space-based solar panels can generate ten times as much electricity as ground-based panels per unit area, says Duan baoyan, a member of the

Chinese Academy of Engineering (CAE). The world has recognized the need to replace fossil fuels with clean energies. However, the ground-based solar, wind, water and other renewable energy sources are too limited in volume and unstable. "The world will panic when the fossil fuels can no longer sustain human development. We must acquire space solar power technology before then," Wang says. "Whoever obtains the technology irst could occupy the future energy market. So it's of great strategic signiicance," Wang says. "Construction of a space solar power station will be a milestone for human utilization of space resources. And it will promote technological progress in the fields of energy, electricity, materials and aerospace," says Wang. Countries such as the United States and japan have studied a space solar power station. japan is leading in the development of wireless power transmission technology. Some Chinese research institutes and universities have also conducted studies related to space solar power technology in recent years. Members of the CAS and CAE wrote a report in 2010, suggesting that China should build an experimental space solar power station by 2030, and construct a commercially viable space power station by 2050. However, many huge hurdles lie ahead. For instance, a commercially viable space power station would weigh more than 10,000

tons. but few rockets can carry a payload of more than 100 tons to low Earth orbit. "We need a cheap heavy-lift launch vehicle," says Wang, who designed China's first carrier rocket more than 40 years ago. "We also need to make very thin and light solar panels. The weight of the panel must be less than 200 grams per square meter." He also points out that the space solar power station could become economically viable only when the efficiency of wireless power transmission, using either microwave or laser radiation, reaches around 50 percent. However, he is confident that China can build a space solar power station. li Ming, vice president of the China Academy of Space Technology, says, "China will build a space station in around 2020, which will open an opportunity to develop space solar power technology." The space station could surport experiments on the key technologies of constructing space solar power station, li says. China is also expected to develop a new generation of heavy-lift launch vehicle, he adds. "When space solar energy becomes our main energy, people will no longer worry about smog or the greenhouse effect," says Wang. "The development of wireless power transmission technology will be a great advance. After the technology is applied, power cables will not be needed anywhere in the world. just imagine what a world it will be," he says with a smile. 53

Planet

Planet CFFC China Energy journal

CFFC China Energy journal

ocal governments take on greater L environmental responsibilities Jia ke hua

AFTER a lapse of five months, the Chinese Ministry of Environmental Protection devolved more power to local governments for environmental impact assessment (EIA) approval. According to the newly revised catalog of projects subject to EIA approval released by the ministry on 16 March, coal-fired power plants, thermal power plants, iron and steel works, nonferrous mills, national highways, automobile factories and large-scale theme parks have to be approved by provincial environmental authorities. This is another big move by the ministry after it released to local governments the power to assess the environmental impact of projects in 25 categories . Such power devolution, however, has met with mixed responses. Some expect huge benefits for businesses. Some accuse the ministry of shifting its responsibilities. Still others worry that local environmental authorities would fail in their duty. As the power to a ppr ove projects is devolved, so is the EIA's authority. This time, the environment ministry has acted in lockstep with the State Council, which published on 31 october 2014 the catalog of investment projects subject to government approval. 54

In 2014, the State Council slashed many items that required its approval. Take the energy sector for example. The authority to approve coal-fired plants now lies with provincial governments, while thermal and hydro projects need the consent of governments of lower levels. This policy change will, as is widely expected, give a boost to the energy sector. Yet, some energy experts have voiced their concerns. EIA is an essential step pending inal project approval. If such power is withheld by the environment ministry, investors still need to come to beijing and go through the cumbersome and ineficient procedures to get the green light for their projects. The good news is that the recent devolution

of EIA power has addressed those concerns. “The delegation of EIA power speaks to the commitment of the central government to streamlining administration. This ensures that local authorities have the inal say in approving coal-fired and thermal plants, including the authority to make environmental impact assessments, ” said Chen Zongfa, board member of the China Energy Research Society and Director of legal Affairs of China Huadian Corporation. Such a view is shared by lin boqiang, Director of the China Center for Energy Economics Research at Xiamen University, who believes it will save businesses time and effort and improve their operational eficiencies.

“It is an exaggeration to say businesses will benefit enormously from the devolution of EIA power. It only has some influence on the approval process, ” Mr. Chen added. For a power generation group, its regional ofices and subsidiaries will assume primary responsibility for the environmental impact assessment of its projects. Environmental responsibilities are reassigned between central and local authorities. The EIA power delegation not only has an impact on energy and other speciic sectors, but also helps reassign environmental rights and responsibilities society-wide. 55

Planet

Planet CFFC China Energy journal

CFFC China Energy journal

oN 28 october 2002, the National People Congress (NPC) passed the law on Environmental Impact Assessment, which entered into force on 1 September 2003. “We were all aware of the importance of such a law when we drafted it. before that, we had focused on how to clean it up after the pollution occurs. EIA means there must be a shift our attention to the source of pollution before it happens, ” said Xu Xiaodong, research fellow at the Councillor ’s office of the State Council, a policy advise body, and former director of the research office of the NPC Environment and Resources Conservation Committee. “This law imposes stricter environmental standards, w h i c h , h o w e v e r, t u r n o u t to be difficult to enforce on the ground. one reason is the mismatch of power and responsibility. The law puts local governments in charge of environmental protection within their jurisdiction, but keeps EIA power in the hands of the central government,” Mr. Xu explained. When the environment is damaged, local authorities may blame the central government for approving the culprit project in the first place. “Now with the EIA authority released to provincial governments, power and responsibility are 56

well matched. Those who approve investment projects are held accountable for possible environmental damage. The law will thus be effectively enforced to protect the environment at the source,” he added.

natrual. “I don't anticipate an overenthusiastic response from local environment departments, as they now have new responsibilities that they won't be able to escape from.”

Local gover nments ar e held accountable

The environment ministry won't sit idly by

local authorities are in the driver's seat for environmental protection, and the central government makes rules and plays a supervisory role. This is how things should be, said Professor liu Yijun from the business School of China Petroleum University.

“Power deldegation does not mean we will be hands o ff , ” C h e n l i f e n g , D i r e c t o r General of environmental impact assessment of the environment ministry said in an interview. The ministry will introduce a full range of measures to ensure local environment departments effectively play their roles. As part of improved macro-regulation, binding environmental targets will igure more prominently in policy development.

“Power devolution reduces the pressure on the Ministry of Environmental Protection, which has to handle incessant EIA requests from local governments,” Mr Chen said. on the other hand, enpowered local authorities now face a new challenge. They need to grow the economy while simultaneously protecting the environment and cleaning up pollution, a balance that is not easy to work out. Zhu Rongfan, former President of China Guodian Corporation, also expressed his concern in an interview with us during this year's parliamentary session. “local authorities are reluctant to take the power released from the central government. An energy project may need investment of several billion yuan. Preparations must also be made for the environment and residents have to be relocated. These were responsibilities of the central government, which paved the way for local governments to receive investment. Now, the responsibilities are shifted to local oficials, who are not ready to take on such a major role.“ Xu Xiaodong, however, inds this completely

The environmental impact assessment law and the regulation on environmental protection of construction projects will be amended to bring them up to date with the new law on environmental protection. Irregularities in construction will be punished to the fullest extent of the law and perpetrators will be held accountable. local environment departments are mandated to exercise more effective oversight on the ground. The environment ministry, for its part, will establish a database on environmental impact assessment, set out EIA principles, and train local EIA oficials in standardized procedures. 57

Foresight

Foresight CFFC China Energy journal

CFFC China Energy journal

' hina manufacturing 2025' strategy promotes the steady export of major equipment

中国制造2025

suggested that China would speed up its "goingout" strategy, promoting China’s railway, electric power, communication and other equipment to the world. Soon after the Two Sessions, the “China Manufacturing 2025" strategy was unveiled. Promoting the "going out" of China's major equipment and comparative advantage and optimizing the structure of foreign trade, will not only promote the transformation and upgrading of domestic industries, but is also of great signiicance to building a new pattern of mutual beneits and win-win relations. Expor t financing guar antee scheme Since the second half of 2014, the State Council executive meeting has convened several times to speed up the "going-out" of the equipment for railways, nuclear power, and building materials. Under the push of the government, the equipment manufacturing industry has gradually become the new economic growth pole in our country. At present, a series of encouraging and supportive policies have been released, and parts of the initial exploratory projects have also come one after another.

He Ying FRoM electricity generation to nuclear power, high-speed railways, telecommunications and new energy, Premier li Keqiang frequently plays the role of a "super salesman" when he visits foreign countries. li spares no effort in 58

endorsing "made in China" technologies and products globally. In the Government Work Report (hereinafter referred to as "the report") Premier li Keqiang

Dat a s h o w s t h a t e x p o r t s o f C h i n a ' s equipment manufacturing industry reached 2.1 trillion Yuan in 2014, accounting for 17% of the total export revenues. As for nuclear power, China's cooperation with Pakistan has built six PWR nuclear power units, with a total installed capacity of 3.4 million kilowatts; cooperation with China's nuclear power companies in Canada, UK, Romania, France, Spain, Kazakhstan and other countries has smoothly advanced. In addition, Hualong I reactors, the third-generation of nuclear power of our country's independent research and development,

have been exported to Argentina successfully. The State Council conference held on january 28 stressed that driving the "going-out" of China's equipment and launching international capacity cooperation are the inevitable demand of China's recent economic development. This is not only beneficial to promoting the economic development, but also to promoting transformation and upgrading of industry, and a big opportunity to promote China's economy from the low-end to high-end. To accelerate the implementation of the “going-out” strategy, Premier li stressed in the conference of the government work report that it would “expand the scale of export credit insurance and exports of complete sets of equipment ”. Economist Qinghui Song pointed out that commercial banks would play a crucial role in supporting the whole industrial chain of major equipment design, manufacture and so on. besides, inancial institutions like policy Banks and others, through funds, bonds and other means, would ensure that our country's manufacturing industry "goes overseas", and provide support in terms of long-term foreign exchange funds. Tow a r d t h e h i g h - e n d o f t h e industrial structure The report also pointed out that it would vigorously adjust the industrial structure; support the development of strategic emerging industries like mobile Internet, highend equipment and so forth. At the same time, it would promote industrial structure toward the high-end. Manufacturing is an competitive industry in our country. The report calls for implementing the "made in China 2025" strategy, to insist on innovation 59

Foresight CFFC China Energy journal

driven, intelligent transformation, strengthening fundemental and green development, and accelerating the more from a major manufacturing country to a strong nation. based on the success of the export of China's high-speed rail, the nuclear power equipment manufacturing industry in our country started the transformation from “product output" to "industry-oriented" exports. Xiaotao Wang, deputy director of the National Development and Reform Commission, said it would take the lead to develop the international market of railways, nuclear power and other major equipment, and at the same time, support the export of other equipment for international capacity cooperation. In order to promote the technical transformation of traditional industry, according to the report, it would adopt the measures like discount rate, accelerated depreciation, adhere to the policy of protection and pressure at the same time, solve the problems of excess capacity, support enterprise mergers and restructuring, and let the ittest survive in market competition. And it would further promote the deep fusion of industrialization and information, the development and utilization of networks, digital, intelligent technology, and strive to get a head start and breakthroughs in some key areas. Promoting overseas rights and interests protection To allow Chinese enterprises to "go out" steadily, the report stressed that it should pay attention to risk prevention, and improve the capacity for safeguarding overseas rights and interests. The “one belt and one Road” strategy provides a broad market space for Chinese 60

enterprises, and also helps China’s equipment like high-speed rail and nuclear power "go out" faster. because most countries along the “one belt and one Road” are still in the initial stage of industrialization, a lot of countries' economies are highly dependent on energy and mineral resources. In this situation, China is relatively high in the industry chain and has the ability to provide various kinds of machinery and transport equipment, to these countries. Equipment manufacturing, transportation, infrastructure construction, construction materials and other industries will directly benefit from the “one belt and one Road”strategy. Under the support of the “one belt and one Road” strategy, the "going-out” of enterprises will undoubtedly enjoy a more stable and solid pace. However, as the” one belt and one Road" quickens the pace of chinese enterprises’ overseas investment, geographical, political, legal and many other risk factors are continuously emerging. Qinghui Song told the reporter: “there are three main aspects of risks and dificulties. Firstly, there are a political credit risks, risks of overseas listing, merger and acquisitions risks; secondly, there are language dificulties, legal restrictions, etc; thirdly, there is project termination, breach of promise, kidnapping, etc. This means domestic enterprises face a big loss.” He said, we must be prepared for responding to these risks while overseas. “The occurrence of these risks is often the result of enterprises’ unfamiliarity with overseas investment strategy, lack of international operational experience, insufficient investment decision-making mechanisms and risk prevention consciousness. It has a lot to do with the lack of professional talents.” Qinghui Song also pointed out that this related to system deiciencies, which should be further improved by our government in order to guide enterprises when going overseas.

China Energy Fund Committee (CEFC) is a non-governmental, non-profit civil society organization. It also serves as a high-end strategic think tank engaged in energy strategy research, energy and public diplomacy, as well as global energy cooperation and cultural exchanges. CEFC is dedicated to fostering international dialogue and understanding of cultural values, regional cooperation, energy security, and issues relating to China’s emerging place in the world. We aim to promote international cooperation and mutual respect through public diplomacy. We believe an enhanced understanding of one another’s historic legacy and cultural values would lead to a more accurate interpretation of our respective actions. The Committee is supported by a special private grant fully sponsored by China Energy Fund Co., Ltd. The Committee is an NGO with Special Consultative Status, the United Nations Economic and Social Council (UN ECOSOC). Registered in Hong Kong, the Committee obtains tax exemption under Section 88 of the Inland Revenue Ordinance as a charitable organization. Also registered in Virginia, the United States, the Committee obtains tax exemption under Section 501(c)(3) of the Internal Revenue Code as a public charity.

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