CEFC China Energy Journal October 2015 Issue 5 by China Energy Fund Committee

CONTENTS

OCTOBER, 2015, Sixth Issue

Electric Power Development

36 6

Editorial 编者的话 Energy Sustainability as the Key to Energy Security: A Call for Global Cooperation 能源安全吁全球合作

6 Opinion 观点

20 Figures 数字

46 Technology 技术

Dialogue 对话

CCS-EOR: A Driving Force behind the Low-Carbon Oil Revolution 氧碳驱油：低碳石油革的驱动力

Planet 地球 Beijing Conserved More Water in 2014 2014 年京节水量创新高

Energy Security 能源安全

Foresight 前瞻 China 2030: Eight Insights on China’s Energy Transition 2030 年中国能源转型八大趋势

China’s Coal Mine Accidents Decline 中国煤矿故骤降

Coal Liquefaction and the Future of China’s Energy 煤制油寄托中国能源梦

Electric Power Development: Key Issues in the 13th Five-Year Plan 十三五电力发展重点

China to Intensify Construction of Charging Facilities for Electric Vehicles 中国拟加快电动汽车充电设备建设

Cover Story 封面文章

The Expansion of Large-Scale Energy Storage Systems Requires More Government Support 大规模扩充储能体系需更多政府支持

The AIIB and Belt and Road Initiative Will Reshape the Global Energy Market 亚投行和“一带一路”倡议将重塑全球能源市场

16 Policy 政策

Charging facilities for Electric Vehicles

Powering the Future We Want 能源可持续发展大奖

Important Role of Coal

Large-Scale Energy Storage Systems

3 52 9

Coal Will Continue to Play an Important Role in China 煤炭将在中国继续发挥重要作用

Business 商业 China’s Power Sector Reform Creates More Business Opportunities 中国电改创造更多商业机会

Coal Liquefaction Coal Mine Accidents Decline

Editorial

CEFC China Energy journal

Energy Sustainability as the Key to Energy Security: A Call for Global Cooperation

CEFC China Energy journal

In the 18th century, Thomas Malthus could only identify food as the limiting resource for human development. According to Malthus, when a population exceeded its food supply, famine, social disorder and war were all but guaranteed. In the 21st century, however, development is limited by three factors: the availability of food, fresh water, and energy. These three factors are interrelated and today could, in fact, be reduced to a single consideration: ENERGY! When a country seeks to establish its energy security, it concerns itself primarily with ensuring the availability of energy – the primary commodity necessary for development. Accordingly, since last century, the world’s international order has been dictated largely by the disposition of precious energy resources. Many of the challenges we face today continue to stem from the zero-sum game of capturing energy resources for the security and interest of individual countries. However, at the United Nations, we see ourselves as citizens of a global community. With that perspective, we see energy as belonging to everyone on earth, and understand that access to energy should be a basic universal right of every man and woman. There is enough energy to go around for everyone and their children. Energy security at the global level must transcend the traditionally insular, selfish, and private interest. Instead, energy security should be understood as the availability of energy for all humanity, not only as belonging to this generation, but future ones as well. On this scale, energy security is energy sustainability. ENERGY BELONGS TO ALL OF US, today, and tomorrow! And each and every one of us has the duty to use energy sparingly, wisely, and responsibly. Energy security is energy sustainability.

Guided by this vision, the China Energy Fund Committee is proud and pleased to join hands in partnership with UN DESA to launch this Energy Grant. Our Grant recognizes and rewards the exemplary works of individuals and organizations in shaping a better tomorrow through energy. The Grant’s award, a cash prize of 1 million USD donated by the China Energy Fund Committee, celebrates achievements that affect, directly and indirectly, the lives of many around the world – by deploying energy efficiency platforms, developing renewable energy sources, and accelerating energy and water access. We hope that this yearly grant will grow into a platform that inspires innovation, long-term vision and leadership in powering the future we want. We hope that it enables individuals, organizations, and nations from across the world to collaborate in developing solutions that meet growing energy demand while remaining faithful to the imperative of sustainability. It is the good practices and innovative solutions of today that will pave the way to a sustainable tomorrow. Global energy security is a global challenge, calling for global participation. Through the launching of this grant for innovative practices in energy for sustainable development, CEFC is sending out a strong and most sincere message of collaboration and partnership to all our friends from near and afar: we should work together in finding solutions for energy security by achieving energy sustainability. We invite you all to be part of this vision and commitment. I hope you will join us in realizing it. Editor’s note: The preceding were opening remarks made by Dr. Patrick Chi-Ping Ho at the UN-CEFC Grant Ceremony for Powering the Future We Want-Recognizing Innovative Practices in Energy for Sustainable Development. 5

Opinion

CEFC China Energy journal

he AIIB T and Belt and Road Initiative Will Reshape the Global Energy Market Zhang Li 张莉

“

Yang Guang 杨光

B eyond

shortterm financial aid offered to stabilize financial markets, the AIIB can provide countries with long term energy solutions that mitigate vulnerability to price luctuations.

Opinion

CEFC China Energy journal

On October 24, 2014, representatives from 21 nations, including China, India and Singapore, signed the agreement that established the Asian Infrastructure Investment Bank (AIIB). The Bank, a multilateral investment organization, focuses on supporting infrastructure development in Asia. By funding energy related infrastructure development and through other means, however, the AIIB also promises to reshape the global energy market. The recent fluctuations in international oil prices demonstrate the unreliability of current oil pricing mechanisms. Currently, oil prices are controlled by only a few economic powers. These few nations have a say in the economic well-being of the entire world. The prices they set often have serious repercussions, sometimes causing serious difficulties for many countries. This includes countries along the route of “Belt and Road” Initiative. It is beyond the capacity of the AIIB to completely remedy this situation. However, the organization can still help affected countries to some extent. Beyond short-term financial aid offered to stabilize inancial markets, the AIIB can provide countries with long term energy solutions that mitigate vulnerability to price luctuations. Specifically, the AIIB can provide financial assistance for infrastructure construction in countries along the “Belt and Road”. Such projects can greatly improve oil and gas delivery eficiency, as well as cut delivery costs, thus helping to tap production potential and stabilize prices. As a result, countries along the Belt and Road can have greater bargaining power in price determination on the international market. This is beneicial to other energy exporters and consumers around the world. By offering infrastructure construction services to countries in Asia, Europe and Africa –particularly countries which are mainly oil and gas exporters – 8

CEFC China Energy journal

theAIIB can help develop atrans-regional energy market. This has the potential to alter the world energy landscape. In this context, the strategic signiicance of the Belt and Road Initiative cannot be underestimated.

its neighbors might also be able to develop a more independent demand-supply chain. Addressing the imbalance in the current international energy landscape would benefit both the region and the global energy market.

China itself is lacking in its own regulations and laws to reduce the risk of its overseas energy investments. More must be done to safeguard China’s investments while maintaining regional cooperation.

In its 2013 “World Energy Outlook”, the International Energy Agency (IEA) indicated that oil reining and trading activities would eventually shift towards Asia. This change in the pattern of oil supply and demand is expected to bring about unprecedented challenges to refineries around the world. According to the Outlook report, India would become the largest single source of global oil demand growth after 2020, and China could overtake the U.S. as the largest oil consumer in the world around 2030. Besides China and India, countries in Southeast Asia, given their fast growing population and economic momentum, would also help to shift the center of gravity of the global energy system towards Asia.

China Should Lead Efforts to Develop Regional Cooperation Rules for Energy Development

Conditions vary among the countries along the “Belt and Road”. China must put more effort into market research and assume leadership in the development of favorable regional cooperation regulations on energy cooperation. Such regulations will also be of great benefit to countries along “Belt and Road”, and will help achieve common prosperity. A stronger region will have the effect of improving Asia’s bargaining power in the international energy market.

In recent years, China has substantially increased its overseas energy investment. As China begins to implement its Belt and Road Initiative, it is developing deeper energy cooperation with neighboring countries. In association with the Initiative, China has begun construction of power grids, telecommunications networks, oil and gas pipelines and other energy interconnection projects. Inevitably, there has been an increase in disputes related to trade and cross-border transport.

Most countries along “Belt and Road” are emerging economies in different stages of economic development. As China invests more in the Initiative, it should also improve its understanding

With the more recent participation of European countries, the AIIB is now able to connect the Pacific with the Atlantic. The AIIB is becoming a beneicial complement to the world economic order. More importantly, it has become a new platform where eastern and western countries can join hands to achieve common development. In doing so, the AIIB will help to assure prosperity of the Asian and global economy. In order to strengthen its role in global energy governance and enhance its bargaining power, China should work with its neighboring countries. Resource-wealthy countries, energy consuming countries and energy transit countries should be brought together under the Belt and Road Initiative. China and its partners could then use the opportunity presented by the Initiative to develop a fairer, more reasonable, and more efficient price determination mechanism for energy. China and 9

Opinion

CEFC China Energy journal

of the different governance and corporate cultures in its neighboring countries. China has to become more aware of local risks (political stability, presidential elections, party competition, policymaking and legal systems), geopolitical risks (such as the Ukraine crisis, ISIS terrorist attacks and South China Sea disputes), and global energy issues (energy price volatility, safety of sea transportation). Developing this awareness will be necessary to ensure the long term success of the initiative. The AIIB and Belt and Road Initiative Present a Strategic Opportunity for China’s Energy Sector China’s overseas enterprises have long been lacking support in credit service, insurance and other supporting business. These enterprises themselves are often badly in need of competent employees, experienced management, and effective implementation of information technology. China itself is still weak in its risk bearing capacity. For Chinese oil companies, the establishment and effective operation of the AIIB is a strategic opportunity. The 20 years’ of overseas experience accumulated by Chinese oil companies has enabled them to develop an oil equipment manufacturing system and acquire capacity to export in large q u a n t i t i e s . C h i n a ’s o i l c o m p a n i e s s h o u l d prioritize their operations towards capturing the strategic opportunities presented by the AIIB and Belt and Road Initiative. They should be fully prepared to further expand their businesses and operations abroad, so as to develop China’s energy security, create more job opportunities, establish infrastructure, and increase revenue. Chinese oil companies should increase their financial and technological aid to Belt and Road countries. They should assist the establishment of reineries and power stations, so that local gas and oil can also be turned into energy products for local 10

CEFC China Energy journal

development. This practice can ease the countries’ own energy shortfalls, as well as reduce political risks for Chinese overseas energy interests. Finally, Chinese oil companies should seize opportunity to design and develop an oil and gas derivatives market. In particular, they should accelerate the establishment of electronic and real goods trading platforms for oil and gas stock and futures trading, as well as the design natural gas spots and futures product markets. These actions will build a solid foundation for future development of a pricing center for the Asia-Pacific region, which will help to stabilize oil and gas prices.

Electric Power Development: ey Issues in the 13th Five-Year Plan

China’s economic development model is currently undergoing a period of readjustment. Important transformations are taking place. China is prioritizing its natural resources and environment, and is aiming to become an environmentally friendly society.

The Way Ahead for China and the Asia-Paciic Region China has already carried out extensive energy cooperation with countries along “Belt and Road”. China has been building channels for diversified oil and gas import, and is also developing as an oil and gas trading center. China has also pledged to be the largest energy export destination for resourcewealthy countries, and has been an engine for economic and technological energy development in the region. China will continue to deepen cooperation with Belt and Road countries in the oil and gas sector, seizing opportunities presented by the turbulent energy environment. Chinese infrastructure will create favorable conditions for oil and gas trading in the Asia-Paciic area as a whole, and will help other countries in meeting their own energy needs. As such, with the help of the AIIB and Belt and Road Initiative, China will play a crucial role in shaping the world’s energy future. This will not only provide stable and sustainable oil and gas supply for China and its neighbors, but also enhance China’s influence on regional and global energy governance.

Statistics from recent years evidence this trend. The slowing growth in national power consumption demonstrates a shifting of focus in China’s economy. Secondary industries have decreased their consumption, while that of third sector industries has increased. Accurately Assessing Structural Adjustments in Electric Power Demand

▲ Yuan Jiahai 袁家海

Yu a n J i a h a i – A s s o c i a t e Professor of North China Electric Power University

China’s biggest power consumers are mainly concentrated in the Eastern coastal areas and the Pearl River Delta Region. An analysis of changes in power-consumption by percentage in these areas is illustrative of China’s transformation. Although development levels vary in different parts of China, we can refer to statistics of more developed regions in Eastern China to understand the nationwide trend. In these areas, power used by industry dropped to 72.81% in 2012 from 78.22% in 1990. Household consumption, on the other hand, went up to 12.50% 11

Opinion

CEFC China Energy journal

in 2012 from 7.72% in 1990. Per-capita power consumption in more developed areas in Southeast China reached approximately 700kWh. In irst-tier cities like Beijing and Shanghai, per-capita power usage increased to 790kWh. After comparing power consumption by citizens in more developed regions like Beijing, Guangdong to that by citizens from other areas during 2000 and 2013, one inds that household power consumption in less developed regions had been growing steadily at a rate of 10% every year. In developed regions, the rate of increase was slower, as the starting point was relatively higher. The next 10 to 15 years will be critical for China. The country will be transforming from a middle-income economy to a high-income economy. Simultaneously, judging from the development path of Beijing, Guangdong and Shanghai, the rate of increase of household power consumption will also signiicantly slowdown in that period.

CEFC China Energy journal

Accordingly, during the period of the 13th Five-Year Plan, we can expect demand for power to grow at an intermediate speed of around 4% every year. After 2020, the rate of increase will decrease to within 3%. Then, after 2030, it will enter the stage of slow growth, with an increase rate of only about 1%.

energy source. Instead, the country tends to seek greater power generation. Policies concerning energy efficiency have not received effective enforcement. Currently, Chinese grid companies only need to complete the annual goal of saving power by 0.3%. This falls far behind the United States’ and Europe’s criteria.

Recommended Adjustments for

To address this problem, improving energy efficiency should be highlighted as a means to optimize the electric power sector in the 13th Five-Year Plan. Energy savings should become a principle of electric power planning, and energy efficiency should be integrated in the nation’s strategic plans.

Electric Power Planning Thus far, China’s electric power sector has met growing demand for electricity by increasing power generation. This kind of development model, however, has to be changed. First, energy saving should be seen as an important source of energy. The United States and European countries have achieved a goal of energy savings of 1% or more each year, accomplished primarily by raising energy efficiency. In China, energy saving has not yet been considered as an

In the case that the actual demand growth is faster than expected, China should dedicate even more attention to energy efficiency. The country may consider pursuing a target of 0.6%1% energy savings for total energy consumption. D o i n g l e s s r i s k s a c c e l e r a t i n g t h e n a t i o n ’s carbonization trend. Second, China needs to engineer a fundamental adjustments to its coal-based planning. Coal power generation has always played a dominant role in China, not only because the country is abundant in coal, but also because of coal’s reliability and controllability. Admittedly, as the nation’s main power source, coal has made unparalleled contribution to China’s economy. On the other hand, coal has also lead to the deterioration of the environment and a high production of greenhouse gases emissions. The costs of renewable electricity have reduced signiicantly. The time is nearing for China to make a fundamental shift in choosing renewable energy for power generation. Clean energy should be given priority as the new means for power generation. Coal should be a supplementary, rather than primary, source of power.

Finally, although state policies have continually supported clean energy, there does appear to be some abandonment of wind, hydro, and solar power. In 2014, the average utilization of grid-connected wind power was reduced by 120 hours, reaching 1905 hours. In jilin and Gansu provinces, the average utilization time was less than 1600 hours. As a result, these power installations were running at a deicit. They still are, and likely will continue to do so for some time. Experts predict a further slowdown for renewable power demand in 2015. If things continue as they are, it is likely that China will see decreasing tendency to utilize wind, hydro and solar power. China needs to conduct a comprehensive analysis of its institutional mechanisms, particularly in its power generation planning. China needs to seriously ponder and resolve the following questions, which regard prominent problems in its planning mechanisms: (1) Should power generation planning be government-led, demand-driven, or a combination of the two? (2) How should the country coordinate its planning for power generation with its planning for power grids? In particular, what is the best way for a large-scale renewable energy base to be connected to the grid, so as to satisfy demand? In the cases where renewable energy power is to be consumed locally, how should the grids be planned? (3) If renewable energy is to be connected to the grid in large quantities, what is the best way to assign resources to the supply and demand chains, so as to ensure that the power system is both reliable and lexible? (4) Who should be responsible for power planning? What steps should be taken, and 13

Opinion

CEFC China Energy journal

what adjus tments made, in the pro ces s o f implementation? During the 12th Five-Year Plan, China’s electric power industry lacked a sector-wide plan. In 2014, the power to approve new power projects was transferred to local governments. Consequently, electric power sources and power grids developed separately. There is a lack of systematic planning, since local governments go their own way. Limited Options for Clean and Eficient Development of Coal Power China’s abundance in coal contributes to the status quo. Coal power continues to play a dominant role. Even if the position of coal power is adjusted, it will likely remain an important element of the Chinese economy. In recent years, especially since the implementation of the 12th Five-Year Plan, China’s GDP growth has gradually slowed down from 9.48% in 2011 to 7.4%. As the economy eases its pace, power demand has also foregone rapid growth.

CEFC China Energy journal

However, planning has not been adjusted timely. If power growth continues to develop at the current pace, a massive surplus of coal power is likely to occur. China risks creating significant trouble in its future if it continues building more coal power stations despite a new economic status quo. First, building coal power plants at a large scale goes against the nation’s ambition to achieve a composition of 15% non-fossil energy of total energy by 2020. Furthermore, to achieve a composition of 20% non-fossil energy by 2030, the targets for low-carbon development will be raised after 2020. Building more coal power plants now will raise the cost of transforming China into a low-carbon economy later. In the meantime, such construction amounts to a huge waste of resources. Second, utilization rates of power plants have already been in the decline in recent years. In 2014, the average utilization hours of coal power plants were around 4700. judging from the statistics in the irst half of 2015, this year’s igure will decrease to 4500.

Third, operational efficiency will continue to deteriorate if China continues building new stations, while turning a blind eye to eficiency optimization. Coal development is facing other challenges and constraints. Most notably: coal plants cause serious air pollution. Pollutants like sulfur dioxide, nitrogen oxides and particulate matter, among others, are behind notorious scenes of smog. Considering coal’s negative impact on the environment, it is only a matter of time until the country restrains its construction of coal plants, with repercussions on the entire power industry.

There is no reason to pursue the development of coal plants any longer. Pursuing other forms of power generation will help in both addressing smog and optimizing China’s energy system. To realize the country’s goal of 15% non-fossil energy by 2020, coal power will have to peak in 2020 with a capacity of 970 million kilowatts. This means an installed capacity of only 1.92 billion kilowatts, since alternative energy sources are expected to replace 60 billion kWh of coal energy by that date.

A less well known problem is that most of China’s newly-planned power plants are set to be located in China’s large coal bases, where water shortages have been common.

By 2020, the size of the energy sector is expect to grow by 50 million kilowatts, or 100 million tons of standard coal capacity. This means that alternative energy has left a large growth space for coal power. Even so, however, relying on coal for electric power will lead to environmental problems, including those related to greenhouse gas emissions.

Carbon emissions pose another serious challenge for the future of the coal industry. Even in the case that emissions are reduced through carbon capture and storage, risks and costs will remain high.

Thus, the conclusion can only be that the permanent, effective solution, or say, is to increase the utilization of renewable energy. This will require an inevitable transformation of China’s power system and power planning.

Policy

CEFC China Energy journal

China, the worldâ&#x20AC;&#x2122;s largest automobile market, is intensifying its efforts to construct charging networks for electric vehicles. It hopes this will spur demand and development for electric vehicles. The General Office of the State Council recently released its Guideline for Accelerating the Construction of Charging Facilities for Electric Vehicles. According to the document, by the end of 2020 China will complete a charging network that can service 5 million electric cars and plug-in hybrids. The State Councilâ&#x20AC;&#x2122;s guideline requires that all parking lots at newly built apartments must offer charging facilities, or ensure that such facilities can be installed at a later date. 10% of public parking lots will also have to install charging facilities. The guideline also requires the adoption of innovative measures to encourage the implementation of public-private partnerships (PPP). The goal is to enhance subsidies and develop a working pricing mechanism, so as to allow private capital to funnel into the construction and operation of charging facilities. Rationalization of Vehicle/Pile Ratio

China to Intensify Construction of Charging Facilities for Electric Vehicles Zhong Yinyan

The limited amount of charging facilities has been one of the main constraints on the development of electric vehicles. Statistics show that a total of 123,500 electric vehicles have been produced in the irst eight months of this year â&#x20AC;&#x201C; a three-fold growth over the same period last year. By the end of August 2015, the total number of electricvehicles reached 240,000 units nationwide. There were, however, only 30,000 charging piles in the country. In other words, there is just one

Policy

Policy CEFC China Energy journal

CEFC China Energy journal

charging pile for every eight vehicles.

to truly promote demand for electric vehicles.

Mr. Zhang, a resident of Chaoyang District in Beijing, said that his interest in acquiring an electric vehicle was driven mainly by favorable subsidies and policies. He was, however, also concerned about the shortage of charging facilities: “I have two worries with electric vehicles. One is insuficient charging piles, and the other is the short range. When you drive in big cities such as Beijing, your journey is usually quite long.” Mr. Zhang said that a well-developed charging infrastructure would dismiss both concerns.

To help achieve that ration, the State Council’s guideline requires public charging station to be built for every 2,000 electric vehicles produced. It also recommends the construction of integrated parking and charging functions. By 2020, the total number of charging piles is estimated to be 4.5 million nationwide.

Beijing, which is leading in the construction of charging facilities, possessed a total of 21,500 electric vehicles and 10,100 charging piles at the end of August 2015. In other words, the ratio of vehicles to piles is approximately 2:1. Industry insiders say that a ratio of 1:1.5 would be necessary

PPP Model Aids the Development of Charging Facilities Statistics also indicate that within the next ive years, the number of charging piles will increase 150-fold, with an annual increase of 900,000 new charging piles. If the average construction cost of a charging pile is 20,000 yuan, and the average cost of a charging station is three million yuan, the estimated market size will be 124 billion yuan.

Given the scope of this investment, the State Council’s guidelines encourage the implementation of a PPP model, in order to mobilize capital for the construction of charging stations. The PPP model is also expected to improve the overall efficiency of project construction and operation, as well as reduce transaction costs. Services permitted to charge reasonable fees can create value and incentivize investment, particularly through innovative business models such as crowdfunding. Currently, most of the construction cost for charging piles is borne by the government. By introducing a PPP model, more charging piles can be built while using less public funds. The PPP model also integrates market mechanisms, offering more flexible and efficient approaches for the constructionof charging piles. The government, by comparison, is often reluctant to adjust its budgets without considerable planning. Technical know-how is essential to ensure the safe functioning of charging piles. Industry experts have expressed concern that management companies, which maintain the charging piles after construction, lack the technical knowledge necessary to respond to safety contingencies. Under the PPP model, construction and management will be handled by the same entities. This is expected to improve system stability and ensure operational safety. Complicated approval procedures and endorsement from multiple authorities usually results in higher transaction costs. To deal with this problem, the guideline creates a fast track to expedite the construction of charging piles. It accomplishes this through a variety of measures, such as simplifying the construction approval process, prioritizing in land allotments, and enhancing grid access service.

Assurance on Both Quality and Quantity In order to create a successful charging network, there needs to be a certain number of charging piles. However, it is just as important to develop and ensure the quality of the piles and the overall charging system. The experience of some developed countries is illustrative. During the initial phase of marketization, some countries provided subsidies and also set low technical thresholds. This spurred a signiicant amount of private sector interest, and many charging piles were constructed. However, several quality issues arose out of many of these projects, especially those where construction had not been monitored well. As a result, some charging piles had to be abandoned. Zheng Shanjie ( 郑栅洁 ), Deputy Director of the National Energy Administration, explained that four actions will be taken to standardize future charging facilities. First, the government will release a revised draft of key national standards, including the charging interface for electric vehicles and relevant communication protocols. Second, existing charging facilities will be upgraded to the new national standards. Third, the government will formulate charging standards for emerging technologies, such as inductive charging. Fourth, the government will standardize operation and management services for maintenance and billing. To successfully implement these actions, Mr. Zheng had three recommendations. First, he said, resources and forces should be focused by setting up a national alliance for the promotion of the development of charging facilities for electric vehicles. Second, he suggested setting up an information service platform based on an alliance for charging facilities. Finally, he said that subsidies could be used to ensure that various national standards are met during project execution. 19

Figures

CEFC China Energy journal

China’s Energy Savings and Environmental Protection Industry Will Create 4.5 Trillion Yuan in Output by 2015

China’s Electricity Consumption Growth Rate Drops to a Record Low in 2015 China’s electricity consumption, a key indicator of economic activity, is expected to grow by only 2% compared to last year. According to Wang Zhixuan ( 王志轩 ), the Secretary-General of the China Electricity Council, this is the slowest growth rate in seventeen years. Mr. Wang said that the slowdown is attributable principally to China’s slowing economy.

Mr. Fan added that this high output not only offers capital and technical support for China’s goal

of an “ecological civilization”, but also contributes to the development of the national economy as a whole. Mr. Fan said that the industries will be a source of technological and design innovation, and will also spur creation of green jobs and products. The industries will also help China achieve lower energy consumption and pollution. This will have positive consequences for the health of the Chinese people.

power system focused on energy savings and emissions reduction, in order to enable low carbon development.

The drop in electricity consumption also relects other problems faced by the power industry. These problems include poorly coordinated development of power infrastructure and grids, as well as unbalanced regional development.

Mr. Wang explained that the principal task of power development is to meet the developmental needs of the national economy. The long-standing shortage of power supply in China has, however, been an impediment to the country’s economic development for many years. Since 2012, the mismatch between power supply and demand has been eased to some extent. According to public statistics, China’s power consumption grew by 11.9% in 2011, 5.6% in 2012, 7.5% in 2013, and 3.8% in 2014.

To overcome these problems, Mr. Wang recommended several strategies for power development to be incorporated into the 13th FiveYear Plan. These included: developing a “smart grid”, curbing unnecessary construction of power facilities, and optimizing China’s power system. He also recommended the establishment of a new

The country is now aiming to cut energy consumption by 16% in 2015, compared to 2011 levels, which was 0.793 tonnes of standard coal per 10,000 yuan (1,570 US dollars) of GDP. In the irst half of 2015, power consumption rose only by 1.3%, while economic growth remained steady at 7% year-on-year.

According to the “12th Five-Year Energy Saving and Environmental Protection Industry Development Plan”, China’s energy saving and environmental protection industry will reach 4.5 trillion Yuan in output by the end of this year, said Fan Hengshan( 范恒山 ), the Deputy SecretaryGeneral of the National Development and Reform Commission.

Figures

CEFC China Energy journal

Chinese Nuclear Company Builds 18.6% of Global Installed Nuclear Power Capacity

China’s Coal Imports Slump by 40% Since the second half of 2012, China’s coal industry has experienced a major slowdown. The discrepancy between demand and supply of coal is expected to increase. As estimated, coal imports this year will decrease by roughly 80 million tons, compared to the 2014 igure.

a “new normal”, the coal industry is still struggling with overcapacity and low coal prices. From 2010 to 2014, while China’s growth rate fell from 10.4% to 7.4%, total coal production rose from 3.2 billion tons to 3.8 billion tons, constituting a 19% increase over four years.

According to statistics released by the General Administration of Customers of China, China imported 7.2 million tons of steam coal, 5.16 million tons of bituminous coal, and 2.04 million tons of sub-bituminous coal in April of this year.

Due largely to slow-moving inventory, coal prices have plunged to record lows. For example, the price of Qinhuangdao 5500 kcal/kg steam coal dropped from 860 Yuan/ton to 400 Yuan/ton from 2011 to 2015.

Bituminous coal experienced a 24.4% drop, year-on-year. The numbers in April demonstrate a 1% increase (80,000 tons) month-on-month – the highest level recorded over the last four months. In the first eight months of 2015, China imported 56.67 million tons of steam coal, 40.5% lower than the same period last year. Peng jianxun ( 彭建勋 ), Deputy Director of the China National Coal Association (CNCA), explained that the coal industry is under great pressure from shrinking demand, excess production capacity, and tightening environmental protection regulation. While China’s economy continues to settle into 22

Coal is expected to account for 62%, 55% and 50% of primary energy consumption in China in 2020, 2030 and 2050 respectively. Although the growth of coal demand is likely to decrease, the total amount is expected to steadily increase.

On September 29, China General Nuclear Power Corporation (CGN), the world’s largest nuclear power construction company, announced that it had generated more than 700 billion kilowatt-hours of on-grid electricity to date. This figure amounts to 550 million tons of reduced carbon dioxide. The announcemen t was made in conjunction with CGN’s 21st anniversary. Hu Guangyao ( 胡光耀 ), CGN’s spokesman, explained that the installed nuclear power capacityof CGN has reached 29.37million kilowatts, including reactors in operation and under construction. By enhancing its strength in developing nuclear power and accelerating its expansion overseas, CGN has become a competitive player in the international market. According to public reports, CGN operates 14 nuclear reactor units, with installed capacity of 14.92 million kilowatts. This accounts for 60.5% of the total installed capacity in operation in China. CGN has also built and operated 6 nuclear power bases, with 12 reactor units under construction,

providing an installed capacity of 14.45 million kilowatts. This makes up 52.4% of the total installed capacity under construction in the mainland China, and accounts for 18.6% of global installed capacity. Moreover, construction of phase two of the Fangchenggang nuclear power is expected to begin this year. Located on the eastern side of the Qisha Peninsula, Guangxi Zhuang Autonomous Region, the project is a pilot for China’s indigenous Hualong One technology. According to Mr. Hu, CGN has also set ambitious targets to expand its business abroad, including the United Kingdom, Romania, Kenya, South Africa, Thailand, Indonesia and Kazakhstan. At the moment, CNG has won the bid to cooperate with Romania to implement the Cernavoda nuclear project. Furthermore, CGN has endeavored to negotiate with energy related departments and enterprises in Thailand, Indonesia, Malaysia, Laos, and Kazakhstan, among others, for cooperation and coordination in the area of clean energy development.

Mr. Peng believes that in the coming years, as China’s economy transits from an era of rapid growth to one of more moderate growth, annual coal consumption will eventually peak at 200 million tons. For now, coal enterprises continue to lose money, and some may drop out of the market. It is a dificult period for China’s coal industry. 23

Cover story CEFC China Energy journal

Powering the Future We Want

Cover story CEFC China Energy journal

New York, September 14, 2015 – the irst US$1 million UN-DESA Energy Grant was awarded to We Care Solar, a non-proit organization, to enhance and expand the use of its “Solar Suitcase”. The solar suitcase is a simple, accessible and affordable device that provides electricity for medical procedures during childbirth. Fielded in many developing countries, the suitcase has reduced lifethreatening complications for mothers and children. The UN-DESA Energy Grant is a capacity building initiative launched and managed by the United Nations Department of Economic and Social Affairs (UN-DESA) in collaboration with the China Energy Fund Committee, a Hong Kong based NGO with consultative status at the United Nations Economic and Social Council (ECOSOC). The initiative, known as Powering the Future We Want, offers a grant in the amount of one million US dollars to fund capacity development activities for energy in sustainable development. The grant is awarded annually to individuals, institutions or partnerships based on past and current achievements in leadership and innovative practices in advancing energy for sustainable development. For its irst award, the UN-DESA Energy Grant received over 200 applications from all over the world. Finalists for the award include Eco-Fuel Africa, the Electricity Regulatory Authority of Uganda, and MicroEnergy International, among others.

▲ (From left to right) Dr. Laura Stachel, the Co-founder of We Care Solar, H.E. Ban Ki-moon, UN Secretary-General, H.E. Sam Kutesam, President of the 69th Session of the UN General Assembly, 24

After rigorous review and objective assessment undertaken in multiple stages, guided by the award’s Advisory Council and Steering Committee, the 2015 UN-DESA Energy Grant was awarded to We Care Solar. The UN-DESA Energy Grant also awarded Masdara special award, and Build Your Dream (BYD) a special recognition.

Cover story

Cover story CEFC China Energy journal

▲ Laura Stachel

Dr. Laura Stachel, the Cofounder of We Care Solar

“

have had the privilege of working with hundreds of health workers who have seen the miracle of light and power in saving lives, and we have much more work to do. This award is the beginning of a brighter future for women everywhere. No woman should die giving life.”

CEFC China Energy journal

Remarkable Performances Celebratedby the Grant

future for women everywhere. No woman should die giving life.”

We Care Solar has made remarkable achievements in reducing maternal and infant morbidity in more than 20 countries. According to public statistics, worldwide maternal mortality accounts for 300,000 deaths a year. 99% of these deaths occur in underdeveloped countries. For every maternal death, at least 20 women suffer severe complications from childbirth. However, with prompt, appropriate and reliable medical care, these complications typically do not result in loss of life.

A Special Award was given to Masdar, the Renewable Energy Company of Abu Dhabi, for its leadership, vision, innovation and long-standing work in advancing clean energy around the world. “I am honored that Masdar has been recognized for our achievements in making the goal of providing greater access to energy worldwide a reality,” said Dr. Nawal Al-Hosany, Director of Sustainability at Masdar. “Masdar represents the embodiment of the United Arab Emirates’ commitment to advancing safe, clean and secure energy, and to transitioning from a resource-based economy to a knowledgebased economy. We are committed to continuing to collaborate with local, regional and global partners to forward the sustainable energy agenda worldwide.”

“We Care Solar” designs and builds portable, cost-effective “Solar Suitcases” that power critical lighting, mobile communication and medical devices. The suitcases are fielded in areas that lack reliable electricity. In close collaboration with its local partners, We Care Solar also trains health workers in the areas of solar energy utilization, installation and servicing, so as to ensure the long term impact of the solar suitcases. With the help of the Grant, We Care Solar will be able to bring the project to scale, maximize its effectiveness, and participate in capacity building activities. “The United Nations is shining a light on an area that has all too often been overlooked – the lack of reliable electricity in health facilities,” said Dr. Laura Stachel, a co-founder of We Care Solar, after receiving the award. “I have had the privilege of working with hundreds of health workers who have seen the miracle of light and power in saving lives, and we have much more work to do. This award is the beginning of a brighter

BYD, a Chinese high-tech automaker, also received special recognition for its dedication to the promotion of clean technologies in the area of public transportation, which accounts for onethird of transportation related pollution. To date, BYD’s electrified transportation fleets have been adopted in over 150 cities in 36 countries. Brendan Riley, Vice President of BYD United States, expressed his appreciation for BYD’s recognition. “From renewable energy generation and storage, to the better use of clean energy, to developing and fielding convenient charging solutions, BYD spares no effort in promoting Electrified Public Transportation to achieve sustainable development in urban mobility.” UN-DESA Energy Grant a Unique Undertaking In his opening remarks, Secretary-General Ban Ki-moon described sustainable energy as a key priority for the United Nations. Sustainable energy, said Secretary-General Ban, connects economic growth and social equity with climate stability and a

healthy environment. “Energy underpins our efforts to achieve development objectives – from reducing extreme poverty to enhancing food security, from powering essential health services to providing electricity for education,” he said. Despite strenuous efforts by the international community, one person in five still lacks access to electricity; more than a third of humanity still relies on wood, charcoal, animal and crop waste for cooking and heating; and some 4 million people die each year from the effects of indoor air pollutants. The Secretary-General commended the event as going beyond a symbolic ceremony and as celebrating the initiatives and actions of all selected grant applicants. Sam Kutesa, the President of the 69th session of the General Assembly, saw the Grant as “an opportunity to show the world the best examples that demonstrate how science, technology and innovation can be put into practice to induce change and to transform the world.” He also noted that the Grant was a unique undertaking, in that it focused not only on the need for innovation but also undertook its own capacity building on energy for sustainable development. Wu Hongbo, Under-Secretary-General for Economic and Social Affairs, expressed his deep gratitude to the Grant applicants. He said that they had demonstrated, through their initiatives and actions, their contribution to the United Nations vision of sustainable energy. He also recognized the leadership of CEFC, whose funding support made the Grant possible. “Energy belongs to everyone on this earth, and access to energy should be a basic human right for every man and woman. There is enough energy to go around for all of us,” said Dr. Patrick Ho, Secretary-General of the China Energy Fund Committee. 27

Cover story

Cover story CEFC China Energy journal

CEFC China Energy journal

Electricity Regulatory Authority of Uganda The Electricity Regulatory Authority of Uganda strives to be an effective regulator that promotes safe, efficient, reliable and sustainable electricity supply. It regulates the electricity industry in accordance with applicable laws, policies, standards and international best practices. Since 2012, and in cooperation with the Government of Uganda and KreditanstaltfĂźr Wiederaufbau, it has developed the Global Energy Transfer Feed-in-Tariff Program. The goal is to attract private capital investments and increase Ugandaâ&#x20AC;&#x2122;s energy production to mitigate possible power supply shortages.

Other Finalists Eco-Fuel Africa In the past ive years, Eco-Fuel Africa has been working with local communities in Uganda to convert locally sourced biomass waste into clean and affordable cooking fuel - green charcoal - using local technology. The aim is to halt deforestation, reduce climate change impacts and indoor air pollution, and boost rural employment. Green charcoal has the advantages of burning longer and cleaner, while costing 50% less that charcoal made of wood. In five years, Eco Fuel Africa has managed to expand its customer base to over 115,000 households, leading to household savings of over 28

â&#x2013;˛ Green charcoal is a carbon neutral cooking fuel that is made from renewable biomass waste like sugarcane waste, coffee husks and rice husks. For decades, solutions like clean coo-stoves and solar ovens have been promoted in Africa. Unfortunately, adoption rates for these solutions have remained so low because they require signiicant initial financial investment and require users to change their traditional cooking methods.

The program aims to fast-track development of

renewable energy generation projects, each promoted by private developers. To date, the program has facilitated the development of 17 renewable energy projects, with a combined generation of 128 MW of small hydro, biomass, solar photovoltaic and bagasse generation projects, estimated to yield 8 metric tons of CO2 emissions reductions. MicroEnergy International When striving to adopt sustainable and clean energy technologies, the first and crucial obstacle households and small and middle size enterprises faceis securing reliable and affordable financing. The mission of MicroEnergy International is to address economic, social, health, and ecological problems that arise from energy poverty in the developing world by combining financial and energy inclusion.

200 dollars in energy costs per year. In addition, it has created 4,840 direct jobs, by establishing a network of women micro-entrepreneurs who sell the green charcoal and earn average annual incomes of close to 1,400 dollars. 29

Cover story

Cover story CEFC China Energy journal

CEFC China Energy journal

Founded in 2004, MEI has extensive experience in collaborating with numerous microfinance institutions, energy providers, international development actors and research institutions. MEI provides microcredit financing, especially to women, in more than 30 countries in Latin America, Africa, Asia, and Europe.

Pact Institute

Its proprietary technology platform and business model enable the financing, monetization, and management of distributed micro-grid solutions. Key innovations include remote monitoring and operations capabilities, integration with mobile money, cost-minimizing design, and theft detection. Since 2012, Powerhive’s subsidiary, Powerhive East Africa Ltd, has generated, distributed and sold electricity to around 300 households, small businesses, and schools in Kenya, thus improving life for about 1,800 people.

Pact Institute, an international development institution, has been working since 1998 to create lasting impact in the areas of health, economic livelihood and natural resource management through capacity development, governance, and business and market cooperation with local partners.

Powerhive is planning to move into new markets, including by licensing their technology to a micro-grid developer in India. It also plans to enter in joint development agreements for activities in the Philippines, Tanzania, and other areas in SubSaharan Africa and Southeast Asia.

In the South East Asian country of Myanmar, nearly 75% of the population has no electricity. Rural people are particularly affected, with only about 14% of them having electricity. This energy poverty greatly constrains development opportunities for tens of millions of rural citizens.

Self-Employed Women’s Association, Bharat (SEWA Bharat)

One of MEI’s focus countries is Ethiopia, an African country with one of the lowest scores globally on access to modern fuels for cooking, per capita residential electricity consumption and commercial energy use.

In Myanmar, Pact has established a revolving fund to finance sustainable energy and lighting solutions. The goal is to reach one million people living in Myanmar’s Central Dry Zone by 2020. Currently, over 100,000 people have gained access to clean electricity with off-grid photovoltaic systems provided by Pact.

▲ SolarAid, an international charity that combats poverty and climate change, are providing access to solar lights in some of the most remote regions of the world and building a movement to eradicate the kerosene lamp 30

producers to provide access to productive, affordable, and reliable micro-grid electricity for millions of rural homes and businesses.

Powerhive F o u n d e d i n 2 0 11 , P o w e r h i v e h a s b e e n partnering with utilities and independent power

Approximately 304 million people lack energy access in India. Women are particularly affected, as they are mainly burdened with the household chores. A t t u n e d t o I n d i a n w o m e n ’s n e e d s a n d problems since 1984, the Self-Employed Women’s Association, Bharat, has worked passionately to promote women workers’ rights, livelihoods, financial independence, education, energy access, health and social security. Since its inception, SEWA Bharat has provided 75,000 women workers with small loans to purchase renewable energy products. It has sold customized renewable energy products and provided after sales service to lower income households, aided 5,000 31

Cover story

Cover story CEFC China Energy journal

CEFC China Energy journal

households with energy efficiency measures, and created an Innovation Center for the Poor to help its members meet their energy needs.

has provided more than 10 million people with solar lights - 90% of whom live below poverty line. By doing so, it has averted the emission of 900,000 tons of CO2.

SolarAid

Since 1990, the Solar Electric Light Fund has undertaken replicable and scalable clean energy projectsin remote and impoverished areas in 20 countries in Africa, Asia and Latin America. These projects have provided access to quality health services, clean drinking water, modern education, and sustainable sources of food.

It is estimated that more than 250 million households worldwide rely on predominantly kerosene-powered lamps. H o w e v e r, h o u s e h o l d kerosene use is associated with health impacts, environmental pollution, safety concerns, and high costs.

Solar Electric Light Fund (SELF)

Due to its geographical location, Benin is characterized by unusually dry conditions, resulting

in low amounts of rainfall throughout the year. This leads to low food production and insecurity, especially for rural populations. In Benin, SELF’s Solar Market Garden program combines reliable, solar-powered, low maintenance pumps with eficient drip irrigation to provide year-round food production. The program has grown to 11 half-hectare gardens managed by 30 to 40 women gardeners each. They produce up to 2 tons of produce each month, thus generating valuable income for each grower. Str athmor e Ener g y Resear ch Centre (SERC), Centre for Research in Energy and Energy Conservation (CREEC) and Village Energy Since 2001, the Centre for Research in Energy

The international d e v e l o p m e n t a g e n c y, SolarAid, aims to eradicate kerosene lamps in Africa by 2020. Founded in 2006, SolarAid operates in Kenya, Malawi, Tanzania, Uganda and Zambia striving to end poverty and climate change. Solar Aid’s wholly owned social enterprise, Sunny Money, targets schools to build trust, raise awareness, and disseminate the solar light. It is considered to be the leading distributor of solar lights in Africa. To date, Sunny Money 32

▲ SELF recently completed the installation of new solar systems to power six primary schools and one junior high school in the Boucan Carré district of Haiti’s Central Plateau.

Cover story

Cover story CEFC China Energy journal

and Energy Conservation has been working to become the leading centre of excellence for renewable energy in East Africa. In 2011 and 2012 respectively, Strathmore Energy Research and Village Energy joined

CEFC China Energy journal

forces with the Centre for Research in Energy and Energy Conservation. They promote rural electrification, household energy access, and energy entrepreneurship through partnerships and collaborations with academic institutions, governments, and the private sector.

SERCâ&#x20AC;&#x2122;s Kenya Climate Innovation Centre finances entrepreneurs who develop innovative solutions in energy, water and agribusiness to address climate change challenges. Strathmore University is the first university

in East Africa to invest in a 600kW grid-tie rooftop solar PV to meet all daily energy needs for the next 20 years. Village Energy is the first company in East Africa focused on solving the after-sales bottleneck that limits solar adoption in rural areas.

About the Grant Powering the Future We Want offers a grant in the amount of one million US dollars to fund future capacity development activities in energy for sustainable development. The Grant is awarded to individuals, institutions or partnerships based on past and current achievements.

â&#x2013;˛

â&#x2013;˛ SELF has completed installation of a 12.5 kW solar micro-grid in Sabana Crespo, a traditional village in the Sierra Nevada Mountains of northern Colombia with a population of 300,000.

MicroEnergy International is dedicated to mobilizing and supporting financial, technical and scientific actors to provide households and microentrepreneurs at the Base of the Pyramid with reliable, affordable and sustainable energy solutions.

At the Rio+20 Conference in 2012, Member States acknowledged insufficient progress and setbacks in the integration of the three dimensions of sustainable development. Progress towards this integration had been aggravated by multiple financial, economic, food and energy crises, which had threatened the ability of all countries, in particular developing countries, to achieve sustainable development. The Member States committed to reinvigorating the global partnership for sustainable development and to working together with major groups and other stakeholders in addressing implementation gaps. Among other thematic areas, Member States identiied energy as one of the priority areas. The Member States thus called upon the United Nations system, in cooperation with relevant donors and international organizations, to coordinate and provide information on toolboxes and best practices for advancing thegreen economy. The Member States stressed a focus on poverty eradication and sustainable development.

In this context, and recognizing the importance of advancing implementation in sustainable development through partnership initiatives to address gaps in implementation, the Department of Economic and Social Affairs and the China Energy Fund Committee, agreed to collaborate on the Energy Grant. The joint project seeks to promote success stories and best practices in the priority challenge areas of food security and sustainable agriculture, energy, sustainable cities and urbanization, and transport. As part of the promotion of best practices, which facilitates south/south sharing of experiences, grants will be provided to individuals and institutions which have demonstrated leadership and ingenuity in promoting sustainable development, with the objectiveof replication and scaling up. The project will run for an initial period of 5 years, from 2014 to 2019. A small Secretariat to support the implementation of the project has been established within UN-DESA. This supporting structure carries out all activities related to the project, including the preparation of Advisory Council and High-level Steering Committee meetings, and the implementation of capacity building and training activities. The project is funded exclusively through extra-budgetary contributions, with the initial contributions provided by the China Energy Fund Committee. 35

Dialogue

Dialogue CEFC China Energy journal

CEFC China Energy journal

claimed that the current inefficiency in renewable energy production can be resolved by using largescale energy storage technology. To successfully field such technology, strong backing from the government in business operation and electricity pricing policy will be essential, particularly during the initial stages of ielding. Q: What is the present situation of renewable energy use in China? How should the reform of renewable energy development be undertaken? A: Large-scale renewable energy development is the only solution that can halt the growth of China’s carbon emissions and meet the country’s everincreasing energy demand. However, renewable energies, such as wind and solar, are now facing their own set of operating dificulties in China.

The Expansion of Large-Scale Energy Storage Systems Requires More Government Support An Interview with Lu Qiang ( 卢强 ), Professor, Department of Electrical Engineering, Tsinghua University; Academician, Chinese Academy of Sciences. Cheng Sisi Since the beginning of the 12th Five-Year Plan, China has been vigorously promoting the development of renewable energy systems. However, due to the intermittent nature of renewable energy, the slow response in addressing 36

problems, and the lack of large-scale energy storage facilities, eficiency remains low. In an interview with the CEFC China Energy journal, Lu Qiang, Professor at the Department of Electrical Engineering of Tsinghua University, and Academician at the Chinese Academy of Sciences,

Wind is an illustrative example. China now ranks as irst in the world in total installed capacity, with 100 million kilowatts. However, 77% of this energy is being wasted during the energy generation process – also the highest percentage of energy waste in the world. In some highly illuminated areas, 30% of solar energy being abandoned. This is a distressing number. Therefore, reform should focus first on tackling energy waste, which has long been overlooked in China’s energy development agenda. Q: What are the reasons behind the huge waste in renewable energy? A: The problem lies primarily in the current electricity pricing policy. Currently, energy prices are not dictated by the market, but by the government. As a result, the price difference b e t w e e n o n - p e a k a n d o ff - p e a k p e r i o d s i s insigniicant, which gives enterprises no incentive to adjust their energy output during off-peak periods.

If off-peak electricity can be priced lower, enterprises – state owned and private – will shift their workforce from off-peak to on-peak periods. By doing so, they will produce less electricity during off-peak periods, as well as save unused electricity. The saved costs inherent in this practice can also be used to subsidize night-shift workers. This is the only way can we reduce the operating hours of our major power plants, which consume large quantities of coal. The lack of an adequate energy storage system to meet the peak-load regulation has also contributed to this situation. China also needs to shorten development periods for innovative technologies and practices. Although it is difficult to achieve this in the short term, China should do what it can to shorten these periods, while not cutting corners in checking and verifying new developments. Q: What technologies do you believe are needed to resolve the inefficient use of wind and solar energy? A: The problem of storing electricity on a large scale has been around since the irst power system was put into operation more than 100 years ago. I hope for a technology that will solve this problem, as it will resolve many problems related to the eficiency, stability, and quality of electric power. Q: Energy storage technologies include chemical energy storage, electrochemical energy storage and electromechanical energy storage. According to statistics released by the IEA in 2014, currently the most common type of energy storage is pumped hydroelectric storage and compressed air energy storage. Earlier this year, you led a research team to complete a pilot 500kW advance adiabatic compressed air energy storage and power generation system, believed to be the first of its kind. How does this technology function and what are its advantages? What is the technology’s development 37

Dialogue

Dialogue CEFC China Energy journal

status? A: Compressed air energy storage (CAES) technology turns excess and off-peak electrical energy into molecular potential energy. It achieves this through the use of multi-stage compressors and storage in high-pressure vessels. When greater power generation is needed, compressed air is released from the vessels and injected into turbines to generate electricity. Large-scale CAES facilities are crucial for collecting wasted renewable energy, as well as smoothing wind or solar power generation luctuations, responding to shifting peakloads, and increasing spinning and non-spinning reserves. At present, CAES technologies can be divided into two categories, normal CAES and advanced adiabatic CAES (AA-CAES). Normal CAES systems have already been used in many countries, such as Germany and the U.S. Unfortunately, this system requires burning natural gas to reheat the air, which is necessary to power turbines for electricity production. This is not useful for China, which is seeking to reduce its carbon emissions. In October of 2012, the AA-CAES research project was launched jointly by the State Grid, the Department of Electrical Engineering at Tsinghua University, the Institute of Physics and Chemistry, the Chinese Academy of Sciences, and the China Electric Power Research Institute. In April, 2015, the project reached a successful conclusion with the completion of a 500kW AA-CAES power generation system. Power generation capacity met 95% of the design value, and other indices reached their designed requirements too, such as achieving net zero emissions. Therefore, this system has been eligible for ive Chinese patents and one U.S. patent thus far. In addition to achieving net zero emissions, this system is also a combined cooling, heat, and 38

CEFC China Energy journal

power (CCHP) system that can produce electricity more efficiently than the Normal CAES system used in the United States and Europe. Furthermore, the system can provide a large storage capacity of around 100 million kilowatt-hours, and the investment per unit kilowatt is cheap. The system also provides a long life cycle – 40 years or more than that of other products – compared with products such as imported lithium iron phosphate batteries, our system is more cost eficient. However, at the moment, it is still difficult to put this system into daily use. Enterprises need to take into account the rate of return and the payback period if investing in such technology. Q: Energy storage technology still has some way to go to reach large scale commercialization. The production cost of CAES technology is still higher than that of pumped hydroelectric storage. Does the government need to do something to promote large-scale energy storage? A: Although CAES technology is ready to go market, we still urgently need government support. The government should establish more reasonable electricity pricing policies, so that surplus electricity, low-grade and high-grade electricity can be valued independently. A more reasonable pricing strategy will provide a steadier stream of capital inlow. The government should also acknowledge that CAES technology is a promising technology that can help China build microgrids and distributed energy systems. The government should support the experiments and demonstration projects of the technology until it is introduced to the market. Finally, the government should include CAES technology development in its renewable energy policies. Favorable policies, such as subsidies and tax beneits, should be offered to CAES technology.

Coal Liquefaction and the Future of China’s Energy An exclusive interview with Xie Kechang ( 謝克昌 ), Academician at the Chinese Academy of Engineering.

Yu Menglin Clean coal liquefaction technology (CTL) is crucial for China’s energy security. China is rich in coal, but risks facing oil shortages in the future. An indirect liquefaction (ICL) plant with a yearly output of over 8 million barrels was recently put into operation in Shaanxi Province. The plant

covers 303 hectares (749 acres) in the coal-rich city of Yulin, and produces 8.45 million barrels of oil from 5 million tonnes of coal. CEFC China Energy journal interviewed Xie Kechang during a break in the project’s opening ceremony. Mr.Xie is an Academician at the Chinese Academy of Engineering, and shared his views on the development of the coal liquefaction industry in China. 39

Dialogue

Dialogue CEFC China Energy journal

Q: What do you consider to be the practical signiicance of CTL projects in China? A: Until recently, coal has accounted for more than 70% of China’s primary energy consumption. Developing cleaner and more efficient coal utilization technology is necessary to achieve sustainable development for China’s economy and reduction of carbon missions. China’s industrialization and economic growth has required great increases in total energy supply. China has responded to this need in part by raising coal production, the most readily accessible form of primary energy in the country. China’s limited domestic oil reserves have made China dependent on foreign oil imports. This is regarded as a threat to national energy security. Given this situation, CTL projects can assist in addressing the needs of national security and national oil reserves, as well resolving tensions between energy eficiency and economic growth. Thanks to their efforts to develop cutting-edge technology, Chinese coal companies have been leading the CTL industry. The state-owned Yanzhou Coal Mining Company, for example, recently made a breakthrough in ICL technology, yielding petroleum products that can meet Euro 5 emission standards. CTL projects have beneficial consequences not just for commercial business, but society as a whole. Q: The transition towards clean and efficient coal utilization remains restricted to technological development. As a whole, the industry still embraces high consumption, high pollution, and low efficiency. What stands in the way of achieving higher efficiency and better economic return? 40

CEFC China Energy journal

A: The principal direction of the “coal revolution” is to move toward clean liquefaction technology. The efficiency of CTL projects will play a decisive role in determining the future of the technology and the economic return of the industry. In order to enhance such returns, enterprises should cooperate with national laboratories. This way, they can obtain the latest scientific achievements directly, and more rapidly improve their operations. Q: At present, global oil prices are at relatively low levels. Does this impact your optimism towards CTL’s future development? A: The future of CTL depends not only on markets, but also on technology. Generally speaking, CTL projects can still be profitable as long as oil prices remain above sixty dollars per barrel. However, since enterprises cannot control the market, they must continue to reduce costs. Therefore, the prospects for CTL depend on the extent to which enterprises can improve technology, lower costs, and enhance their core competitiveness. Q: What suggestions do you have for China’s CTL industry? A: As Mahatma Gandhi once said, the future depends on what you do today. Key economic and energy indicators predict that coal will dominate China’s national energy consumption for the next 30-50 years. Nevertheless, coals environmental drawbacks will need to be resolved. China will need to urgently promote and ield clean and eficient coal to address energy conservation and energy security challenges. CTL projects are essential in addressing these problems. I believe the future of CTL will also be very promising and we will see a greater technological upgrade of the coal industry, with wide adoption of CTL.

Coal Will Continue to Play an Important Role in China Wang Jing In this interview, Benjamin Sporton, acting Chief Executive of the World Coal Association, shares his predictions on the future of coal energy. Though declining in its percentage, Benjamin said that coal will continue to play an important role in

China’s energy mix, offering reliability and other economic advantages. Q: Unlike many developed countries, China has been receiving heavy criticism for its air pollution, both domestically and internationally. Some research agencies attribute excessively 41

Dialogue

CEFC China Energy journal

high proportion of coal consumption within China’s energy structure as the main cause of air pollution. With that in mind, what role do you see coal playing in China’s future? A: Although coal’s share of China’s energy mix is decreasing, I believe that coal will continue to play an important role in China’s foreseeable future. Coal offers reliability and other economic advantages, and will likely provide at least 45% of total energy consumption. China faces significant environmental challenges. China needs to ind a proper way to manage and balance the possible environmental consequences of a growing economy mainly fueled by coal. Fortunately, the Chinese government and Chinese companies have recognized this, and have started to promote clean coal technology. This will help to address environmental issues. Thanks to the encouragement of new technology and remedial

policies, China is a leader in the development of clean coal technology. Q: Although clean coal technology promises to revolutionize the coal industry, its fielding will also raise costs for coal-ired power plants. What suggestions do you have for balancing the relationship between rising costs and the implementation of new technology? A: Clean coal technology embraces high efficiency and low emissions. However, if you only consider costs, traditional coal-fired power plants do cost much less than other energy sources, including clean coal. There are, however, other factors to consider. C o n s i d e r, f o r e x a m p l e , t w o u l t r a supercritical coal-fired power plants located in Zhoushan and Ninghai, Zhejiang Province, owned by Shenhua Group. The emission standards these two plants have achieved – after unremitting efforts in emission reductions

for CO2, NOx, SOx – are better than those of Europe and the United States. China maintains an edge in clean coal technology. The significance of China’s ongoing endeavor in energy conservation and emissions reduction is not conined to the nation’s borders. Other countries-especially those still developing, such as India, Vietnam, and the Philippines – share concerns for energy as they urbanize and industrialize. China can serve as a valuable reference. Given coal’s cost advantages, developing countries prefer to build coal-ired power plants. However, since such plants might also pose environmental challenges such as low eficiency and high emissions, countries will eventually turn to China for technological and financial assistance. Q: Currently, the global and domestic coal market is in decline. Do you think this trend will

continue, or will coal rebound? A: If we look at coal markets from the long term, they are still following an upward trend. Although demand for coal has slowed in China, other Southeast Asian countries have maintained an annual demand growth rate of 4.8%. This trend is expected to last until 2035. Developing countries and emerging economies need affordable, reliable energy sources to support their economic development. Coal has always been the best choice. Between 1990 and 2040, coal-fired power plants are still predicted to trend upwards. Even though the growth of coal demand in China may be slowing down, other Asian countries, such as India, are still increasing coal use on account of their growing population, urbanization, and other social factors. Despite China’s reduction in coal use due to the promotion of renewable energy, in the foreseeable future, coal will still be a strong and competitive energy option.

Business

Business CEFC China Energy journal

CEFC China Energy journal

two new power sale and distribution companies. On August 3, Ningxia Power Sales and Distribution Co., Ltd was founded by CPI Ningxia Qingtongxia Energy and Aluminum Co., Ltd. On September 22, CPI Mengdong Energy Group Co., Ltd received its business license for Inner Mongolia Power Investment Huobai Power Sales and Distribution Co., Ltd, which will be operating in the Inner Mongolia Autonomous Region. Other corporations, such as Huaneng Group, Datang Group, Huadian Group, and China Guodian Corporation are also trying to enter the market. O n S e p t e m b e r 1 6 , t h e S t a t e C o u n c i l ’s Information Office held a press conference on the new power sector reform. Lian Weiliang ( 连维良 ), deputy director of the National Development and Reform Commission (NDRC), explained that the NDRC is currently drafting at least ten supporting documents in favor of the reform. Three have already been released.

China’s Power Sector Reform Creates More Business Opportunities

At the same time, China has been making preparations for the establishment of power trading institutions. The country is accelerating the reform of the power sector in favor of sales and distribution. This trend is bound to stimulate greater social capital and encourage the establishment of companies that will participate in the power sales and distribution business.

Kong Jueting

China’s reform of its power sector, a policy many years in development, has recently entered a new phase. With the primary reforms of the power generation industry completed, focus is now shifting to the market for selling generated power. Deepening Reform of the Power Sector, also known as Document #9, was unveiled in March 2015 under the joint authority of the State Council and Central Committee of the Communist 44

Party of China. According to Document #9, power generation companies are now allowed to participate in electricity sale and distribution. As a result, many Chinese power corporations have established subsidiary companies to begin their sales and distribution business.

Additionally, many international institutions are providing China with policy suggestions on power sector reform. On September 22, the Paulson Institute, a US-based NGO with extensive experience in China’s power sector research, released a paper on market-oriented reform, Deepening Reform to Reduce Emissions, Improve Air Quality and Promote Economic Growth.

For example, in the last two months, China Power Investment Corporation (CPI), one of the top ive power generating groups in China, established

Anders Hove, the Associate Director of Research at the Paulson Institute Beijing Representative Office, suggested that market and

incentive-based measures, which have been widely used in many countries, would help China address the major problems within its power sector. While there are no international models for power sector reform that perfectly fit China’s situation, there is nonetheless a wealth of cases that China can draw lessons from and adapt to its own unique conditions. Max Dupuy, Senior Associate at the Regulatory Assistance Project, shared his experiences of implementing successful power sector policies at the Power Sector Roundtable Inaugural Workshop, which was held on September 22in Beijing. Dupuy said that the experiences of other countries could be helpful for China’s power sector, particularly with regards to attracting investment, increasing energy efficiency, meeting environmental objectives, and minimizing costs. Many countries have, for example, implemented regulatory mechanisms that provide incentives for grid companies to better support the integration of electricity generated from renewable energy sources. Many experts believe that power sector reform in China will bring a bright future to power generation, distribution, sales, and consumption, as well as provide advantages to related business sectors. The backing of the government’s favorable policies and the extensive international experience that can be drawn on are both seen as ensuring successful reform. When the electricity retail market begins to see benefits from the reform, more and more energy companies will enter the market. Coal companies, for example, which are currently under great pressure due to structural transformation in the economy, hope to seize the opportunity presented by power sector reform to get their businesses back on track. 45

Technology

Technology CEFC China Energy journal

CEFC China Energy journal

CCS-EOR: A Driving Force behind the Low-Carbon Oil Revolution Tong Xiaobo

One of the less well-known forms of Carbon Capture and Storage (CCS) is CCS Enhanced Oil Recovery (CCS-EOR). By injecting CO2 into oil reservoirs, CCS-EOR stores carbon while also enhancing oil production. China is making significant advancements in the development of CCS-EOS technology. As the world’s largest carbon emitter, China is under great pressure to reduce its carbon emissions. Hoping to reduce the country’s emissions and develop a low-carbon industrial base, China’s oil industry is working hard to advance the development of CCS-EOR. 46

Technology

Technology CEFC China Energy journal

In june of 2015, the China Petroleum and Chemical Industry Federation (CPCIF) released a report on its CCS-EOR demonstration projects in the Shaanxi-Gansu-Ningxia Region. The report puts forward preliminary suggestions for the short term, middle term and long term development of CCSEOR demonstration projects throughout the country. The CPCIF’s projects aim to sequester nearly 100,000 tons of carbon equivalent within the next two to three years, and such have already obtained some encouraging results. Li Runsheng ( 李润生 ), Vice President of CPCIF, explained that since aglobal effort to reduce carbon emissions is inevitable, the potential market for CCS-EOR related technology and equipment is huge. China, as the world’s largest carbon emitter, is seizing its circumstances as an opportunity to lead CCS-EOR development. “Together with coal liquefaction, CCS-EOR demonstration projects are of great importance to China, a country lacking in oil but heavy in carbon emissions. The projects will focus on not only the strategic necessity of carbon emissions reduction, but also maintaining stable levels of oil production,” said Mr. Li. Improving Prospects for Increased Oil and Gas Production. CCS-EOR is a consolidation of two technologies. First, CO2 is isolated from other gases produced by factories or power plants. Then, it is delivered to suitable oil fields, where it is used to help extract oil while simultaneously being stored underground. This july, the Chuanqing Drilling Engineering Company of CNPC successfully carried out China’s largest-to-date carbon dioxide and sand “dry” fracturing operation. The procedure, which took place in Well #60 of the Shenmu gas field 48

CEFC China Energy journal

in Shaanxi province, provides a new technique for future multi layer and large-scale waterless fracturing operations in China. The “dry” fracturing process utilizes liquefied carbon dioxide with the sand typically used in hydraulic fracturing. This mixture replaces conventional hydraulic fracturing fluid, which damages oil and gas beds via water intrusion. By adopting this technology, China would be able to signiicantly increase oil extraction, conserve water resources, and simultaneously avoid groundwater contamination. Zhang Guobao ( 张国宝 ), Director of the Committee of Experts, National Energy Commission, believes that waterless fracturing will be key to increase shale gas exploration in China. Shen Pingping ( 沈平平 ), a former president of the Research Institute of Petroleum Exploration & Development, and a specialist of CCS-EOR technology for over ten years, is overseeing the nationwide evaluation of carbon emissions sources, distribution systems, and potential geological storage areas. “A U.S. research report placed current CO2based EOR technology as enhancing oil recovery by around 10-15%. Newer technology is expected to enhance oil recovery by over 30%. CCS-EOR has achieved technology maturity and has established a foothold in the market. It has a huge potential for further huge gains,” said Mr. Shen. Experiments made at CNPC’s jilin oilfield showed that carbon dioxide, which had been extracted and isolated from natural gas fields and reused for EOR, helped increase oil production by over 10%. CCS-EOR Will Lead the Way towards a Low-carbon Oil Industry Alongside China’s growing dependence on

foreign oil is the difficulty of raising domestic oil production. There has been insufficient discovery of new reserves, and an inability to extract more oil from existing oilields, such as in Daqing. Shen Pingping pointed out that, on average, China recovers only 32.2% of oil from its oilfields.There is massive room for improvement. At the same time, low permeability reserves account for only 70% of the total proven reserves discovered in China within the past two decades. Although CNPC has over 58 billion barrels’ worth of proven low permeability reserves, it is only able to extract half of that amount from such reserves. Therefore, to achieve the sustainable development of China’s oil industry, the key issue remains enhancing extraction from ultra-low permeability reserves. As Li Runsheng pointed out, China’s foreign oil dependency will correspond its increases. According to Mr. Li, more strategic attention should be dedicated to iguring out how China can realize a stable level of domestic oil production (around 1.47 billion barrels annually). According to scientific assessments, hydrocarbon reservoirs, underground brine aquifers and coal seams are the optimal geographic features for CO2 storage. Current estimates place the total carbon storage potential of China’s reservoirs at around 13-15 billion tons. Mr. Li believes that coal will not lose its dominant position in China’s energy structure any time soon, despite the continual development of clean energy. Similarly, he sees CCS-EOR technology playing a significant role in increasing oil production and encouraging progress in oil exploration technology. Finally, he expects that the technology will offer new opportunities for related industries, and will help China round the corner towards a low-carbon economy.

Indeed, the CCS-EOR research and experiments carried out by CNPC’s jilin oilfield are realizing zero carbon emissions. At present, the Jilin oilield has built 69 sets of gas-injection wells. These are storing more than 500 thousand tons of CO 2 and producing over 1.47 million barrels of oil per year. Similarly, CO2 produced as a byproduct by the Acetic Acid Plant of Yulin Coal Chemical Co., Ltd, Shaanxi Yanchang Petroleum Group, has been reused for CCS-EOR experimentation in the jingbian Oil Production Plant. Thus far, this plant has built 26 sets of wells, which it plans to expand to 51 sets of wells by the end of 2015. “The current CCS-EOR projects have verified the technological maturity of each part of the CCSEOR industrial chain, and have resulted in the accumulation of enough engineering experience to allow for building larger scale cross-industry CCSEOR projects in the future,” said Mr. Li. A coal-based power generation enterprise emits 2-5 million tons of CO2 per year. A calcium carbide enterprise, chemical enterprise, or reinery each produce roughly 5 million tons of CO2 per year. A coal-to-chemical, iron and steel, or cement plant produce anywhere from 1 to 30 million tons of CO2 per year. The coal-to-chemical enterprises, represented by coal gasification, coal liquefaction, and coal-to-alkene, recently witnessed especially high growth rates of carbon emissions, 60% of which contained over 85% CO2. The low costs of carbon capture present the best choice for reducing CO2 emissions from these sources. Mr. Li posited that the regions currently prepared for CCS-EOR implementation include Daqing, jilin, Changqin, and Xinjiang, among others. Yet the most suitable region, with its expansive oilields and high concentrations of CO2, is the Ordos Basin located in the Shaanxi-GansuNingxia region. As has been divulged thus far, CCS49

Technology

Technology CEFC China Energy journal

EOR projects have been included alongside major national oil and gas projects in the 13th Five-Year Plan. The projects will be initiated in the Xinjiang and Shaanxi-Gansu-Ningxia regions. Large reserves of light crude oil are also predicted in the Shaanxi-Gansu-Ningxia region. These are expected to be suitable for facilitating future increase in carbon storage. The coal-tochemical industrial base in the Ordos Basin, adjacent to the relevant oilfields, is also expected to enjoy the geographical advantages of carbon capture, delivery and oilield utilization. At present, the total annual CO2 emissions for coal-to-chemical projects in the Shaanxi-GansuNingxia region that are operational or under construction exceed 100 million tons. Among them is China’s first CCS demonstration project, which was built in 2010 by the Ordos Coal-to-Liquid Company, Shenhua Group. The project was built with a storage capacity of 100,000 tons of CO2 per year. Thus far, it has accumulated over 300,000 tons of stored carbon. There are other benefits to CCS-EOR development in the Ordos Basin. For example, the Changqing oilfield, which is considered an ultra-low permeable oilield, has only been able to produce 20% of its total reserves using traditional means. However, experts say that by utilizing CCSEOR the Changqing oilfield could be expected to recover 30% of its total oil reserves. Strategic guidance from the government is essential The recent report by the CPCIF, CNPC, and Shenhua Group proposes short term, middle term, and long term goals for CCS-EOR. In the near term of 2-3 years, China hopes to implement 100,000 tons’ worth of CCS-EOR pilot projects. Within 5-7 years, the goal is to construct one million tons’ worth of 50

CEFC China Energy journal

CCS-EOR demonstration projects. In the long term of 10-15 years, the goal is to complete a large-scale national CCS-EOR demonstration region. Nevertheless, according to Mr. Shen, current conditions make it difficult to meet these targets. Present CO2 prices and carbon capture costs are among the main constraints prohibiting wide application of CCS-EOR technology around the country. If the cost of capturing carbon can be reduced to 20 U.S. dollars per ton, CCS-EOR will be able to develop smoothly in China. In the U.S. market, however, customers can only bear the cost if it is below 20 U.S. dollars per ton.

significant improvements as well. Presently, there is no precedent on which such integration can be based on. Excluding issues regarding money and technology, insufficient regulations and a lack of effective cross-industry cooperation mechanisms also negatively affect enthusiasm for participating in CCS-EOR projects. Li Runsheng noted that, “generally, there are two reasons behind the rapid development of the CCS-EOR industry in the U.S. On the one hand, the

increasingly high profits of the oil industry attract more and more private capital. On the other hand, the U.S. government also provides strong support to the industry.” In line with this kind of government support, experts agree that China’s government should also offer strategic guidance and support to CCS-EOR projects, which will be of great significance to China’s sustainable development. With appropriate supporting policies, China will be capable of developing CCS-EOR technology in its own way.

At the moment, the production cost in China for CO2 recovery equipment is roughly 100-300 Chinese yuan per ton. Most carbon dioxide emissions are emitted by the petrochemicals industry, power plants, and iron factories, though some stem from associated gases released from natural gas fields. For power plants, the cost of carbon capture is around 50-60 U.S. dollars per ton, while the market price (including transportation costs) for CO2 is roughly 40-60 U.S. dollars per ton. It should be noted that for coal-to-chemical plants that emit dense concentrations of carbon dioxide, the cost of CCS storage is comparably low. Furthermore, there have already been some successful cases of CCS-EOR implementation, such as those conducted by Yanchang Petroleum Group. Here, the cost of carbon capture has been controlled to below 100 Chinese yuan per ton, which makes it ready for further expansion within China. The report also reveals that lack of funding is still the primary impediment facing CCSEOR expansion. In the current stage of research and demonstration, CCS-EOR projects will not bring about any commercial returns to investors before 2020. Furthermore, the technological integration of the whole industrial chain requires 51

Energy Security

CEFC China Energy journal

production volume surged to 3.87 billion tons in 2014, from about 1 billion tons in 2002. In light of this, the Chinese government has pledged to enact stricter safety regulations on coal mining. Some positive results have already been obtained. In recent years, the SAWS and the State Administration of Coal Mine Safety have outlined a series of new measures for improving coal mine work safety. Through their continuous efforts, the situation has been greatly improved. Both the total number of coal mine accidents and the death toll have been experiencing steady decrease. Huang Yi, spokesman for the SAWS at a recent press conference, vowed that authorities would continue to promote safety precautions and carry out inspections in collieries to make sure there are no violations. Mr. Huang also explained that, although workplace safety is improving, coal mines remain dangerous and need to be more strictly supervised. Of the 32 provincial-level regions surveyed by the SAWS, 27 saw declines in both accidents and deaths, and 15 had no accidents with more than 30 deaths in the irst eight months. Chinaâ&#x20AC;&#x2122;s State Council has demanded that the country shut down 1,052 small coal mines with production capacities lower than 10,000 tons in 2015. It has also requested that the number of coal mines nationwide should be under 10,000 by the end of this year. This decision relects the fact that China has been steadily reducing its reliance on coal, and cutting the percentage of coal in its energy mix. Low coal prices and demand have also had the effect of reducing the labor force, thereby making accidents less likely.

Chinaâ&#x20AC;&#x2122;s Coal Mine Accidents Decline Wu Xiaojuan

China had 39% fewer deaths resulting from coal mine accidents in the irst nine months of 2015 than it did in the same period last year. The number of coal mine accidents also dropped 33.2% in the same time frame. There were no accidents with more than 30 deaths for 29 months in a row, the longest streak in history, according to recent statistics released by 52

the State Administration of Work Safety (SAWS). However, coal mining remains a dangerous job in China. There are hundreds of thousands of mine workers going underground everyday, and hundreds of them die every year. In 2014, coal mine accidents claimed 931 lives. 2014 was also the irst

time the yearly death toll dropped below 1,000, again suggesting that working conditions, while still dangerous, are improving. The reason for the high death toll is attributable to the fact that China is the largest coal producer and consumer in the world. Chinaâ&#x20AC;&#x2122;s annual coal

Nevertheless, statistics also show that the fourth quarter of each year tends to generate a high number of accidents. In the fourth quarter, a surge in coal demand for heating, transportation, and energy usually causes collieries to work overtime, thereby neglecting or overlooking key safety issues. 53

Planet

Planet CEFC China Energy journal

CEFC China Energy journal

Beijing Conserved More Water in 2014 Wang Haixia

Beijing faces one of the most serious water stress and scarcity situations in the world. In 2014, however, after implementing stricter water conservation measures, the city successfully conserved approximately 120 million cubic meters of water. This is equivalent to 60 times the storage capacity of Kunming Lake, the largest lake of the Summer Palace in Beijing. In response to severe water scarcity, the Beijing government has made water conservation and treatment top priorities. It has tightened restrictions on water usage for water-intensive industries such as golf courses and ski resorts. In the meantime, reducing groundwater extractions has also become an important means of water conservation. Last year, Beijing’s groundwater usage was reduced to about 1.95 billion cubic meters, a 480 thousand cubic meter reduction from 2013. Rainwater is also being utilized. The Chinese government has set a timetable for its “Sponge City” program, which plans to construct a highlevel urban sewer system during renovation work and construction of new roads, residences, industrial parks and public green areas. The new sewer system will drain rain water quickly and guide it to collection facilities for recycling. Last year, Beijing utilized around 110 million cubic meters of collected rainwater, which also helped to ease drainage pressure in some areas. 54

to Beijing. The project’s cost is about 500 billion yuan. Today, one third of Beijing’s water supply is provided by this project, which went into partial operation last December. The project has also supplied more than 1.7 billion cubic meters of water to 34 million people living in Beijing, Tianjin, and the provinces of Hebei and Henan.

Beijing is just one example of Chinese cities suffering from water scarcity. In 2014, the total water usage of the whole country reached 609.5 billion cubic meters. This almost reached the 2015 “red line” limit of 635 billion cubic meters set up by the government. Above this limit, water consumption levels are unsustainable.

Beijing launched its water conservation campaign in 2005. It has already required 10 public service industries, including schools, restaurants, hospitals, office buildings, car-washes, hotel and catering industries, to abide by water consumption quotas. Meanwhile, authorities have also promoted water-saving practices among major commercial consumers. Car washes, bath houses and golf courses are all required to use recycled water. For example, newly installed water recycling facilities at car washes must limit the amount of water used to clean a sedan car to only 10 liters, down from at least 70 liters in the past. Thanks to better sewage treatment, the amount of recycled water in 2014 reached 860 million cubic meters, accounting for more than 22% of Beijing’s total water consumption. Currently, Beijing’s per capita water volume is only around 150 cubic meters. Lin Keqing ( 林克庆 ), the vice mayor of Beijing, explained that due to climate change, urbanization, and population increase, among other reasons, these 150 cubic meters is only one twentieth of the national average, and one eightieth of the world average. Water scarcity has become a major bottleneck for Beijing’s sustainable development, but Beijing is working hard to overcome it. In order to surmount this dificulty, a South-toNorth Water Diversion Project (the country’s largest water transfer project) is being built to supply water 55

Foresight

Foresight CEFC China Energy journal

CEFC China Energy journal

China 2030: ight Insights on China’s Energy Transition

0.2

1000

0.1

500

0 2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

CPS E erg De a d Elasi it

Figure 1: Energy Consumption vs. Economic Growth 12000

50%

10000

45%

8000 40% 6000 35% 4000 30%

2000

25%

EES Power Ge eraio

CPS Power Ge eraio

EES Power i Fi al E erg Use

CPS Power i Fi al E erg Use

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

0 TWh

2016

Under the CPS, the share of coal in the total energy consumption mix will decline, year on year, standing below 60% in 2020 and nearly 50% in 2030. By contrast, the share of coal consumption could drop to below 44% in 2030 under the EES. Since a slow down for coal use in China is currently envisioned, we expect there to be more room for an increase in clean and eficient use of other types of energy sources.

2017

Coal is also crucial to China’s energy transition. Under the CPS scenario, coal consumption will plateau in 2025 at about 3.1 billion tons of coal equivalent (tce). Under EES, the coal consumption will peak at 2.9 billion tce, before declining thereafter.

CPS Energy Demand

EES E erg De a d Elasi it

2015

3. Clean and Efficient Coal Use Will Contribute To Energy Saving and Emissions Reductions.

EES Energy Demand

2014

Under the EES, high eficiency means that the amount of generated electricity that is consumed will be high. This will achieve a cleaner, more environmentally-friendly, and more sustainable energy end-use, helping to realize President Xi jingping’s( 习近平 )goal of building a “Beautiful China”.

Motoe

2016

Under the CPS scenario, both total electricity generation and the total amount of electricity generated are slightly higher than the level project under the EES. More surprisingly, the amount of generated electricity that is consumed under the CPS will be a bit lower than that under the EES.

-0.1 2015

The set and implications of policies enacted during our research time frame. 2 Million tons of oil equivalent.

0.3

1500

2013

0.4

2000

2014

We have developed eight insights on energy trends to aid China in its transition from the CPS to the EES. These insights demonstrate that our recommended policies are not only achievable, but also realizable before 2030.

0.5

2500

2012

Our EES scenario recommends that China pursue a new economic development paradigm, prioritizing a dynamic of high quality growth, optimized energy systems, high eficiency, and lowcarbon development.

From the perspective of energy demand elasticity, the positive correlation between the growth of energy demand and economic growth could be gradually decoupled after 2025. We expect that in an era of slowing economic growth targets for energy saving and efficiency, as well as structural reform, will be easier to pursue. Eventually, the decoupling between energy demand

0.6

3000

2013

In the report, my team carefully considered the future implications of the Current Policies Scenario1 (CPS). It used the CPS to make recommendations for a future Eco-Friendly Energy Strategy (EES). Finally, the team compared the CPS and EES scenarios.

0.7

3500

2011

In early September of 2015, my research team concluded its interim report for the Chinese Academy of Social Sciences’ (CASS) World Energy China Outlook. The report explores China’s energy outlook from the point of view of existing and alternative policy options.

Our research team found that energy demand in China will continue to grow at a rate of around 2% from 2015 to 2030 (30.21 to 40.46 mtoe2) under the CPS. However, under the EES scenario, energy demand will reach its plateau in 2020 (33.80 mtoe). Structural change and improvements in energy eficiency will thereafter ensure that energy demand remains steady (by 2030, 33.94 mtoe). The total primary energy demands in 2030 under the EES – our recommended scenario – would be 6.43 mtoe lower than the level projected under the CPS.

0.8

4000

2012

Chief Fellow, World Energy, Chinese Academy of Social Sciences

1. Energy Demand Will Plateau in 2020 and Thereafter Begin to Decouple from Economic Growth.

2. Electricity Generation Will Decrease, While Electricity Consumption Will Increase.

4500

2011

Xu Xiaojie( 徐小杰 )

and economic growth will be visible from 2030 onwards.

Figure 2: Electricity Generation vs. Electriication

Notably, there is a negative correlation between coal used for power generation and coal used in final consumption (especially in residential and industrial ields). In other words, when coal used for power generation increases, coals used in the inal consumption shrinks. This prediction also highlights that, under the EES scenario, both changes in coal used for power generation and in inal consumption may enjoy a faster pace of decrease than that of coal use under the CPS. In either case, cleaner and more eficient use of coal will make great contributions to energy conservation. 57

Foresight

Foresight CEFC China Energy journal

CEFC China Energy journal

4000

60%

3500

50%

3000

40%

2500

30%

2000

20%

1500 10%

1000

500

-10%

CPS Coal Demand

EES Coal i Fi al E erg De a d

EES Coal used for Power

CPS Coal i Fi al E erg De a d

CPS Coal used for Power

2030

EES Coal Demand

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

Motoe

way in which oil consumption is used in the energy optimization process under the EES scenario, which is not expected in the CPS. By taking the energy optimization process into consideration, the impact of energy-saving measures under the EES become apparent. It is estimated that scale of substitution fuels under the EES could be more than 50 million tons or higher by 2020, thus providing a noticeable oil imports decrease. This phenomenon is also applicable to natural gas imports. Based on our latest review of natural gas, the anticipated growth of gas demand could be lower than the forecasted double-digit rate. Gas imports could be seeing a possible surplus until 2030.

Figure 3: Coal Outlook under the Two Scenarios 70% 60% 50%

5. The Targeted Share of Non-Fossil Fuels in Primary Energy Consumption Might Come Earlier.

40% 30% 20%

Figure 5: Differing Non-Fossil Fuels Outlook

CPS Nu lear I stalled Capa it

EES Nu lear i E erg Mi

CPS PNu lear i E erg Mi

Figure 6: Nuclear Energy Outlook 45000 40000 35000 30000 25000 20000 15000

EES GDP per E erg Co su pio

Through the aforementioned energy system optimization and transformation, carbon intensity tends to decline under both scenarios, which may help China meet its climate change

2030

CPS No -fossil Fuels i Power Ge

EES Nu lear I stalled Capa it

2029

CPS No -fossil Fuels i E erg Mi

2029

2028

EES No -fossil Fuels i Power Ge

2027

EES No -fossil Fuels i E erg Mi

2029

2025

2026

2027

2023

2025

2021

2024

2023

2019

2023

2021

2017

2022

2019

2015

2021

2017

2013

2020

2015

0 GW 2011

2019

2013

2018

Energy eficiency is crucial to achieving national energy-savings, transformation and development. As such, this factor is highly positioned in our recommended scenario, quite above that visible in the CPS. Through energy system optimization, the total industrial output per energy unit cost under the CPS will stand at 37306 RMB by 2030 (using 2011 constant prices calculation). Under the EES, output could also reach 41626 RMB, nearly 10% higher. 8. Carbon Emission Could Peak in 2020.

2011

7. Energy Eficiency Is Vital.

15.00%

5.00%

2017

25.00%

As a result, China would become the lead world nuclear power operator in terms of installed capacity, surpassing japan, France and the United States before 2030. However, while construction will commence in 2015 and continue through to 2020 (8 to 10 units to be put into construction annually), building up one to two world-class facilities is still subject to the enhancement of nuclear power ’s comprehensive strength and competitiveness.

2016

35.00%

Nuclear power is indispensable and should continue to be pursued at a steady pace. Nuclear power plays an important role in achieving the government’s target on non-fossil fuels by 2030. We have calculated that the scale of nuclear power could reach over 170 GW, accounting for about 6% of power generation by 2030 under the CPS, which is slightly lower than what is achievable under the EES.

100

2015

Notably, under the EES scenario, dependence on foreign oil will reach only 62.4% by 2020 and then fall to 59% by 2030. The difference lies in the

45.00%

10%

120

2014

We project that oil price will hover around 45-65 dollars per barrel by 2020. In this context, China’s dependence on foreign oil and gas will rise from 60.67% in 2015 to 63% or above by 2020. This prediction does take into account the potential substitution of oil fuels by coal liquefaction, electric vehicles and LNG transportation under the CPS scenario.

12%

140

2013

4. Dependence on Foreign Oil and Gas Can Be Lowered Through Systematic Optimization.

14%

160

2012

Figure 4: Comparative Dependency on Foreign Oil and Gas

The share of non-fossil fuels in primary energy consumption and the proportion of non-fossil fuels in power generation capacity increases every year in both scenarios. Under the CPS, non-fossil fuels account for a lower share, with a slower increase, but nonetheless meet the government’s objective, which is around 20% by 2030. Comparatively, the share of non-fossil fuels increase more sharply under the EES scenario, reaching 24% by 2030. This means that the 20% objective put forward by the government can be achieved four years ahead of time.

180

2011

CPS Gas Foreig Depe de

2030

CPS Oil Foreig Depe de

2029

EES Gas Foreig Depe de

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

EES Oil Foreig Depe de

6. Nuclear Power Should Continue to Be Pursued at a Steady Pace.

CPS GDP per E erg Co su pio

Figure 7: Energy Eficiency

12000

0% -10%

10000

-20% 8000

-30% -40%

6000

-50%

4000

-60% 2000

-70% -80%

0 2011

2013

2015

2017

2019

2021

2023

2025

2027

EES CO2 E issio

CPS CO2 E issio

EES Car o I te sit

CPS Car o I te sit

2029

Figure 8: Carbon Emission Outlook Under the Two Scenarios

Foresight CEFC China Energy journal

commitments and obligations. Notably, under the CPS scenario, CO 2 emissions from fossil fuels could reach a plateau in 2025, at 11 billion tons, and stagnant before 2030. However, under the EES scenario, CO 2 emissions could peak at 10 billion tons in 2020 and decline sharply by 2030. Note: the illustrated carbon intensity trend refers to the declining rate for that year against 2005. Conclusions and Policy Recommendations. 1. Economic Growth: Policy makers are advised not only to review economic growth in terms of GDP size, but also consider the quality and eficiency featured in their economic development plans. We suggest that the GDP growth rate should be maintained at around 6.6% between 2016 and 2018. With further expansion of the scale of the economy, the GDP growth rate might possibly slow down to around 4.5% beginning in 2019, and return to a 5% growth rate by 2030. The reason for Chinaâ&#x20AC;&#x2122;s economic slowdown is to shift our policy focus onto a better quality of growth and to search for a new economic development model. This provides room for energy transition implementation. 2. Final Consumption Orientation: We should promote electriication and drive inal consumption towards a clean, low-carbon and sustainable end. Database optimization may also help to realize electriication while using less electricity. 3. Coal Industry: We should pare down out final coal use for both residential and industrial ends nationwide, especially in the eastern part of the country. Moreover, we should increase the proportion of efficient coal-fired generation and promote low-emission, high-performance, and high60

eficiency energy use. A large-scale transformation within the coal industry will be unavoidable in the coming 10 to 15 years. 4. The Oil and Gas Industry: Oil and gas supply and demand should be estimated in a more systematic manner. Moreover, policy makers are advised to find a better substitute for fossil fuels. 5. Non-Fossil Fuel Energy Sources: Alternative energy sources such as hydropower, wind, solar, and thermal should continue to be promoted. In the meantime, to further facilitate alternative energy development, power grids that deliver carbon-free electricity from remote areas to highly populated cities should also be enhanced in terms of the capacity, eficiency and stability. 6. Energy Saving and Emission Reductions: Energy saving results in emission reductions. Methods such as industrial structure optimization, technology innovation and Carbon Capture, Use and Storage (CCUS) play important part in achieving emission reductions. 7. Conclusion: We believe that current energy policies issued by the government are in the right direction, and that the country can meet its intended targets. However, there are still uncertainties associated with structural reform, energy eficiency enhancement and energy saving. This indicates that the expected trajectory of energy transition and its effectiveness is not guaranteed. Therefore, we suggest that the energy transition should be more aggressively pursued, particularly in times of economic slowdown. This way, the government can find new directions for the coal, oil and gas industries, as well as clean off bottlenecks in the development of non-fossil energy sources. Only in this way can the country achieve its targets ahead of schedule and gain better outcomes for its energy transition.