CEFC China Energy Journal April 2015 Issue 12 by China Energy Fund Committee

CONTENTS

April 2016, Issue 12

54 1

2 4

Overcapacity Cut

Editorial 编者的话

Reform of Electricity Prices

Opinion 观点 China to Realize PV Power Supply to Grid System at Full Parity Price in 2025 -- Interview with Liang Zhipeng ( 梁志鹏 ), deputy director of New Energy and Renewable Energy Division, National Energy Administration 光伏平价上网有望 2025 年实现 ——访国家能局新能与可再生能司副司长梁志鹏 Demand should be cranked up to enable overcapacity cut 提高需求来配合去产能

Policy 政策 China’s NDRC: Pilot Reform of Electricity Prices Obtains Initial Success 发改委：输配电价改革试点初见成效

Figures 数字

Cover Story 封面文章 Emboldened with Solid Security, Chinese Nuclear Power Brand Brilliant in the World 中国核电安全有底气已成为中国品牌里耀眼名片

Nuclear Energy: A China Story 中国的核电故事

China Guangdong Nuclear Power Company (CGNPC) is Striving to Deliver the Technology of Hualong No. 1 and the Supporting System for Export to More and More Countries in Need of Nuclear Power 中广核希望出口“华龙 1 号”技术到多国家

Dialogue 对话 Highly Efficient Utilization of Resources Is Key to Deal with Low Oil Prices -- Interview with Cha Quanheng ( 查全衡 ), an expert with CNPC Consulting Center 应对低油价高效利用资是重要突破口——访中国石油咨询中心专家查全衡

Self-grown “grain”

Major Events 主要事件

Yalong River

Self-grown “Grain” Helping China Take the Lead in Fourth-generation Nuclear Power, with the First Production Line of Fuel Elements for High—temperature Gas—cooled Reactor Put into Operation 全球首条高温气冷堆燃料元件生产线投料生产自主“粮食”助中国四代核电领跑世界

China Releases Measures of Ensuring Fully Purchasing of Electricity Generated by Renewable Energy 《可再生能发电全额保障性收购管理法》出台

Business 商业 China Oil Giants Profits Plunge in 2015 “三桶油”2015 年业绩大幅下滑

Energy Security 能

安全

Planet 地球 A Yalong River Remade by Complementing Wind, Solar, and Hydro Energy -- Interview with Chen Yunhua ( 陈云华 ), President of Yalong River Hydropower Development Co., Ltd. 全流域风光水互补，再造一条雅砻江 ——访雅砻江流域水电开发有限公司董事长陈云华

China Maintains Growth in Proven Oil and Gas Reserves in 2015 2015 年中国石油天然气探明储量高位增长

Wang Binghua

Technology 科技

Foresight 前瞻 CAP1400 Is Expecting Two Big Overseas Orders Inked This Year -- Exclusive Interview with Wang Binghua ( 王炳华 ), President of State Power Investment Corporation CAP1400 今年有望签两大海外订单 ——专访国家电力投资集团公司董事长王炳华

Editorial

CEFC China Energy Journal

during operation. By eficiently providing baseload power, nuclear power can also help to balance the output from renewables, thereby aiding the decarbonization of the power supply. 2 China, in particular, has much to gain from nuclear power. China has committed to addressing environmental and human health issues, particularly those caused by coal power generation. Nuclear energy can help China meet its growing need for power while simultaneously improving the wellbeing of its people and fulfilling its commitment to reducing GHG emissions. Nuclear power can also help China address its energy imports, thereby bolstering the country’s energy security, ensuring a self-suficiency of at least 85%. 3

Nuclear Energy: A China Story Dr. Patrick C. P. HO

huge.1

We are at an energy crossroads. Climate change and other environmental concerns require energy sources to be clean, low emission, and with limited environmental impact. On the other hand, billions of people are still in need of economic development, which cannot be brought about without accessible and affordable electric power. Demand for energy is

We urgently need energy solutions that will light the decades ahead. Nuclear power is one such solution, which the world can no longer afford to ignore. Nuclear power offers attractive advantages given humanity’s current circumstances: it provides dependable baseload energy while producing effectively zero greenhouse gas (GHG) emissions

International Energy Agency, World Energy Outlook 2015 Factsheet: Global Energy Trends to 2040, http://www.worldenergyoutlook.org/media/weowebsite/2015/WEO2015_Factsheets. pdf. 2 International Atomic Energy Agency, Climate Change and Nuclear Power 2015. 3 Nuclear Energy Institute, Nuclear Energy in China, http://www. nei.org/CorporateSite/media/filefolder/Policy/Trade/China.pd4

f?ext=.pdf. 4 Cary Funk and Lee Rainie, Public and Scientists’ Views on Science and Society, http://www.pewinternet.org/2015/01/29/publicand-scientists-views-on-science-and-society/; David Robert Grimes, Why It’s Time to Dispel the Myths about Nuclear Power, https://www.theguardian.com/science/blog/2016/apr/11/time-dispel-myths-about-nuclear-power-chernobyl-fukushima

Accordingly, since the 1990’s, China has incrementally integrated nuclear power into its energy mix. In 2014, the country adopted an even more ambitious program with its New Action Energy Plan. Today, China has 33 nuclear reactors, amounting to a capacity of 28.8GW. Another 22, set to provide 22.1 GW of power, are under construction. Many more reactors are already in planning stages. Under the 13 th Five Year Plan, China is set to approve six to eight nuclear reactors each year.

power does have its drawbacks and risks. There is considerable debate today on what role nuclear power will play in our future energy mix, and on how severe or actual nuclear power’s drawbacks are.4 Generally speaking, nuclear power is seen as presenting three principal shortcomings: investment costs, waste, and safety. 5 These drawbacks and obstacles must be addressed to advance nuclear power, both in China and around the world. Fortunately, China is in a unique position to take on the challenges of improving nuclear power. It can bear the high capital costs of nuclear, having access to vast amounts of both physical, financial, and human resources. It also has the economic power – such as manufacturing scale – to bring down the cost of nuclear power. Finally, China also has the resources to invest in research and development, helping to realize innovative reactors that overcome nuclear power’s traditional shortcomings – particularly those of waste and safety. 6 In an effort to realize the benefits of nuclear power, while addressing its shortcomings, China is actively pursuing advancement in the entire chain of nuclear development. It has invested heavily in research, schools and training, as well as refined construction techniques.7

The road ahead, however, is not completely smooth. Like all other energy sources nuclear

Most notably, China has already developed its

https://www.theguardian.com/science/blog/2016/apr/11/timedispel-myths-about-nuclear-power-chernobyl-fukushima; Pushker Kharecha and James Hansen, Coal and Gas Are Far More Harmful Than Nuclear Power, http://climate.nasa.gov/news/903/. 5 International Energy Agency, Energy Technology Essentials: Nuclear Power, https://www.iea.org/publications/freepublications/ publication/essentials4.pdf. 6 Camila Ruz, Why Does the UK Need China to Build Its Nuclear Plants?, http://www.bbc.com/news/magazine-34329617. 7 World Nuclear Association, Nuclear Power in China. 8 Brian Spegele, China Inc.’s Nuclear-Power Push,

http://www.wsj.com/articles/china-inc-s-nuclear-power-push-1456251331#:WJtGIwmPb_48ZA; World Nuclear News, First HTR-PM Construction Progresses, http://www. world-nuclear-news.org/NN-First CAP1400-reactor-under-construction-0404144.html. 9 Steven Kotler, Meltdown or Mother Lode: The New Truth About Nuclear Power, http://ecohearth.com/eco-zine/green-issues/391meltdown-or-mother-lode-the-new-truth-about-nuclear-power. html; Stephen M. Goldberg and Robert Rosner, Nuclear Reactors: Generation to Generation, http://www.amacad.org/pdfs/ nuclearreactors.pdf. 5

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own reactor designs – CPR-1000, Hualong One (HPR-1000, an advanced generation III reactor), and ACP100 (a small, multipurpose, modular reactor) – all of which feature domestically developed intellectual property. 8 These newer reactors are more eficient (thereby reducing waste), advance operational nuclear safety, and standardize design (thereby reducing costs). Other advanced reactors currently being developed in China include the Shidao Bay HTGR (high temperature gas-cooled reactor) plant – the first modularized HTGR nuclear power plant in the world that is equipped with a highly advanced Generation IV nuclear power safety system. Construction of the plant started in 2012 and is scheduled to inish by 2017.9 China is also committed to achieving the world’s best nuclear safety standards and reviews. Since its irst nuclear power unit went into operation in 1994, China has maintained an admirable safety record, without incidents of grade 2 or higher, thus leading the world in all operational indicators. China has requested and hosted 12 Operational Safety Review Team missions from the International Atomic Energy Agency since 2011, and each of its nuclear plants receives one external and independent (non-domestic) safety review every year. China is also collaborating with the ASEAN+3 Forum on Nuclear Safety and the OECD’s Nuclear Energy Agency. 10 As a result of all these efforts by China, its enterprises have already begun exporting their work abroad. China National Nuclear Corporation (CNNC) has won bids to build two nuclear reactors in Argentina;11 China General Nuclear Power Group (CGN) will build the new reactors at Hinkley Point, in the United Kingdom.12 Other countries where China is exporting, or set to export, its nuclear technology include Pakistan, Romania, Iran, South Africa, Egypt, and Kazakhstan.13 Nuclear power and engineering design have become a trademark export of China, in line with the infrastructure objectives 6

of the One Belt, One Road Initiative.14 The export of China’s nuclear technology underscores how China’s pursuit of nuclear power is beneicial for the whole world. China is, in effect, unlocking nuclear power’s benefits, addressing its shortcomings, and transforming nuclear power into a global solution for sustainable energy development.

through investments and policy, China presents an unprecedented opportunity for nuclear professionals around the world to develop their careers and pursue their dreams. In time, by bringing together the best brains

China is making this future a reality, writing the next chapter of the nuclear power story. While much of the world has hesitated with nuclear power, China has become a bastion for its research and development. As the only country to embrace nuclear energy in a significant way

in the world and fostering a globally cooperative spirit, China will capitalize on its investment. In doing so, it will make nuclear power an affordable, safe, clean, and healthy option, for the beneit of all.

World Nuclear Association, Nuclear Power in China. World Nuclear News, Argentina and China Sign Two Reactor Construction Agreements, http://www.world-nuclear-news.org/ NN-Argentina-and-China-sign-two-reactor-construction-agreements-16111501.html. 12 Cecily Liu, EU Gives Regulatory Approval to CGN, EDF for Hinkley Point, http://www.chinadaily.com.cn/world/2016-03/11/ content_23819726.htm. 11

China has come of age, in the nuclear age.

World Nuclear Association, Nuclear Power in China; http:// www.world-nuclear.org/information-library/country-proiles/countries-a-f/china-nuclear-power.aspx. 14 Jeremy Kang Deng, How is China Planning to Execute One Belt One Road for Nuclear?, https://www.linkedin.com/pulse/ how-china-planning-execute-one-belt-road-nuclear-jeremy-kangdeng. 7

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CEFC China Energy Journal

Yao Jinnan

China to Realize PV Power Supply to Grid System at Full Parity Price in 2025 Interview with Liang Zhipeng (梁志鹏), deputy director of New Energy and Renewable Energy Division, National Energy Administration

With rapid development of PV industry in China, whether a full parity price could be realized for PV power’s supply to the country’s power grid system, and when will it come true, becomes a focus of the whole industry. Recently, Liang Zhipeng ( 梁志鹏 ), deputy director of New Energy and Renewable Energy Division, National Energy Administration (NEA), elaborated issues of on-grid price for PV power, “PV Pacemaker Project” and development of micro-power grid for new energies in an interview. Q: Some research institutions pointed out that PV power might be given parity price to connect with the country’s power grid system by 2025, what is your opinion on the perdition?

▲ Liang Zhipeng 梁志鹏

A: I think it is absolutely possible. Technology advance, when enters into certain extend, might witness a constant acceleration. On the other hand, if external costs of fossil energy needs to be settled, especially negative costs within, it is necessary to reinforce investment. For instance, if you want

a coal-fueled thermal power station to achieve fairly low emission, you have to invest more on the emission control efforts. However, in fact, 100 percent control of pollutant emission is extremely difficult. So, in comparison, the price designated to renewable energy power generating might be a bit higher than the fossil energy-fueled power generating in the future. If energy tax and carbon tax is imposed to fully conclude environmental impacts caused by fossil fuel consumption, renewable energy may be more cheap compared with traditional fossil fuels. But such tax policy is unlikely to roll out for full consideration of environmental impacts now. We hope that by the year 2025, PV power generation will be able to compete with fossil fuel without any subsidies from the government, but only underpinned by technology advance to reduce costs, so as to realize fair on-grid price. Besides, renewable energy might mix together with other technologies, such as energy storage technology, which could contribute to cost reduction efforts of PV power generation. If the current cost of energy storage stood at 1 yuan/kWh, when more advanced technology is found in the future, the cost will likely fall to 0.3 yuan/kWh. By then, the PV power stations will be able to equipped with energy storage batteries and more PV chips, eventually reduce the total costs. Meanwhile, PV power combining with energy storage batteries could bring about better flexibility, enabling application of PV powering at the peak period of electricity consumption. At present, PV power supply can not cover a peak period power use during 20:0022:00 everyday. With the advance of energy storage technology, the PV power will likely get access to the peak period, in which the power consumption is usually priced at a higher level, and then the proit margin for PV power sales will see considerable improvement. In addition, we need to understand the PV power’s parity price supply to power grid system in

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CEFC China Energy Journal

two aspects, namely not only focus on integrated power generating, but also see the distributed power generating as well. By now, the supply side industrial electricity sales are usually priced at around 0.7-0.8 yuan/kWh, or higher, while the electricity consumer price for residential use is usually set at 0.5-0.6 yuan/kWh. Given current power price generated by fossil fuel, in term of integrated power plant, the power price by PV generating has to reach 0.5 yuan/kWh or even 0.45 yuan/kWh to meet the full requirement of parity price. But in term of distributed power generating, as supply side is near to the demand side, the PV power price could be set as high as 0.6 yuan/kWh. In this sense, a parity price between PV and fossil fuel power generating has been realized. We have ten years to achieve the goal. Now, the country provides subsidies to renewable energy power generating, especially PV power generating, which enjoys 0.4 yuan/kWh government subsidy for distributed way of generation and 0.6 yuan/ kWh for integrated PV stations. If such subsidizing regime remains unchanged, it is not good to simply encourage expansion of scales. Instead, we need to reinforce support to those adopt advanced technologies and see considerable reduction of costs, offering them with more preference policies. I believe the total costs to PV power generating could see apparent drop by 2020, and realize parity price for on-grid supply in 2025. Q: How is the “PV Pacemaker Project” going on? A: We launched “PV Pacemaker Project” last year, aiming to encourage technology innovation. Through the project, a special market is available for products from technology innovation manufacturers, allowing them to put more resources focus on research and development of the most sophisticated technologies, equipments and manufacture techniques, instead of putting cost-cutting efforts on common products as usual, 10

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hoping PV companies to concentrate their efforts on the most advanced production capacity. I believe that launch of the policy has been a positive boost on supporting PV companies’ technology and industry upgrading as it is quite hailed by many PV market players. The first demonstrative base of such project was launched in Datong of north China’s Shanxi province with a scale of one million kW. The base is now under intensive construction, and expected to meet the full completion by June 2016. After that, we unveiled plans to build similar projects in Baotou of Inner Mongolia, Jining of Shandong, Yangquan of Shanxi and Huainan of Anhui. It is expected that five or six bases for “PV Pacemaker Project” will be built in 2016, with total scale of about five gigawatts. PV manufacturers could see from such project that the country provides utmost efforts to support the most advanced technologies, receiving the message that if doing unwavering efforts on new technology research and new product development, a PV company could become a highly competent in the market. Q: Some NPC members asked that “PV Pacemaker Project” was made public last year, so would it encounter some different situation this year from that last year? Will the project be adjusted in accordance with new reality? A : We s t i p u l a t e t e c h n o l o g y i n d i c a t o r adjustment regime when formulating the project, not only adjustment of technology indicators for “PV Pacemaker Project” participants, but also adjustment of minimum indictors for the whole PV battery market entry. Through higher requirement for technology indicators, we urge PV companies to better plan their future. The adjustment of this year’s indicators has been published by now. Of course, we have to do the work well at current stage, then study the implementation of

higher indicators in the next stage. No other work should be interrupted for merely raising technology indicators. That will have nothing to do with solving problems. Q: Limitation of PV power generating is seen in many places of China. How the “PV Pacemaker Project” to deal with such situation? A: The demonstrative bases we selected have not encountered such limitation. But have to admit, in Inner Mongolia, if too much PV power plants are set up, there might be such policy risk of limitation. At present, no limitation is reported in Inner Mongolia. You know, Baotou and Wuhai are important industrial hubs of Inner Mongolia; they consume a lot of electricity. Of course, efficient management is necessary on overall layout of PV power generating to avoid blind and outlawed development. The demonstrative bases of the project are basically able to absorb all of their generated power in nearby consumers. And we noticed one difference that a competing power pricing regime is carried out this year, compared with a benchmark price set last year. Q: For the issue of competing power pricing, what is the particular term in the regulation? Will a range be set up? A: No specific regulation has been made on minimum power price. A comprehensive condition is attached to the competing pricing regime. Indicators, such as investment and operation achievements, technology and management competence, capital strength and financing capacity, as well as applying price, are all taken into consideration. The weight on apply price was only 20 percent of total assessment. So PV companies should think about their competence in comprehensive way, not only emphasizing on offering price.

Q: Could you please talk about the country’s plans and arrangements for development of PV industry? A: PV projects with a total of one-gigawatt capacity will soon be kicked off in Gansu, Qinghai, Xinjiang, Ningxia, Hebei and Inner Mongolia. All assessment and examination work has been completed by now. The formal implementation of such planned projects will likely arrive in early April. PV technology in China is still at the very beginning of its development, but many companies have spent a lot of time on technology preparation, enthusiastically. The complete industrial chain of PV industry has not yet been established by now. It needs three years to construct some projects, accumulating experiences and learning lessons from them. After three years of preparation, it is possible that PV power generating will see considerable expansion. Q: As for micro-power grid project for new energies, what do you think about its role in the future energy industry development? A: Micro-power grid project is a technology innovation, which meets requirement of larger scale of distributed energy development in the future. Micro-power grid could help realize multi-energy supplementary of distributed energy, combination of energy production and consumption, better connect distributed energy with larger power grid system. In the near term, the country plans to release 15-20 micro-power grid projects, based on local applications. Micro-power grid is not merely new technology. Its major target is to realize comprehensive, orderly use of renewable energy and traditional energy within its coverage, and maximize energy saving. 11

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Demand should be cranked up to enable overcapacity cut Lin Boqiang At present, overcapacity reduction has been set as the first priority of national economic tasks and the theme of governmental work in 2016. The energy sector has a high level of excessive capacity. In 2015, major industries including bulk commodities and electricity, coal, iron and steel, petrochemicals processing, cement, plate glass and anodized aluminum and others saw 25%-30% of excessive production capacity. Chinese demand for energy and bulk commodities peak around 2011, with many industries witnessing a growth rate of near 10%. In 2012, the demand was relatively lower than that in the previous year, while 2013 saw a slight rebound of demand. However, growth rate of demand plunged in 2014 and by 2015, many industries recorded negative growth.

▲ Lin Boqiang 林伯强 12

“

In the past three years, it has become a general consensus in coal industry that overcapacity should be reduced. However, Chinese coal production capacity could be even bigger than that in three years ago. Local protectionism and zombie enterprises are obviously two important factors behind this phenomenon.

continuous drop of prices in energy products has at least two aspects of direct inluence.

The logic behind overcapacity is relatively simple in a developing country with a booming economy. High economic growth rate around 2011 brought about predictions of high demand, which led to high investment and great expansion of manufacturing capacity. Once the demands slow down, overcapacity becomes inevitable. In fact, no one predicted that growth rate of coal demand would be negative 4% in 2015.

First, drastic fall in prices of these products, an important part national economy, has threatened to weak our economy. Producer price index (PPI) has been dropping for four consecutive years, while more than 70% of drop was contributed by five major energy-related industries including coal, petroleum, petrochemicals, iron and steel as well as iron ore.

The direct consequence of severe overcapacity is the sharp decline of prices. After a plunge in 2014, coal prices dropped by nearly 30% in 2015. Decreases of both quantity and prices have deteriorated bottom line of enterprises, and

Second, financial status with most of the energy-related enterprises deteriorated and most of these enterprises were running in red. In 2015, profits of enterprises above designated size in China dived dramatically from a year earlier, with

over 90% players in losses. In the downstream of energy industry, nearly 50%of large and mediumsized steel enterprises reported losses in their main businesses. China has already experienced difficulties in reducing overcapacities in previous years. Since the start of the 11th Five-Year Plan (2011-2015), although the government has repeatedly emphasized that overcapacity should be tackled in some industries, it seems that production capacity has grown bigger and bigger. The most recent example is the coal industry. In the past three years, it has become a general consensus in coal industry that overcapacity should be reduced. However, Chinese coal production capacity could be even bigger than that in three years ago. Local protectionism and zombie enterprises are obviously two important factors behind this phenomenon. There must be complicated background that zombie enterprises are allowed to exist, and the key to solving the problem of overcapacity just lies in this background. Firstly, China’s excess capacity concentrates mostly on capital-intensive and energy-intensive infrastructure related industries, which have an explicit stimulus effect on GDP growth. When these energy-intensive industries keep on the rise, local governments can attain higher GDP growth, more tax revenues and higher employment rate more easily by providing preferential policies that can appeal more investment. High demand in turn stimulates quick and high investment in these energy-intensive industries. Even when these industries come into downturn, local governments have to uphold the existing production capacity to stabilize growth and maintain tax revenues and employment rate. Secondly, for enterprises themselves, when demand and prices go down, keeping up production can provide them with necessary cash flows and help avoid bankruptcy and liquidation. In addition, 13

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such problems as replacement of staff, settlement of debt and bad loans caused by eliminating zombie enterprises are daunting to the local government and related financial institutions. Therefore, it is predictable that overcapacity reduction can be a very slow process even with the support of policies. The process of overcapacity reduction can be a very costly one, which requires a vast sum of money to distribute surplus staff and retrain them to be employed again, and other related expenses. An enterprise can only carry out overcapacity reduction smoothly when it has a relatively sound financial state, and only when the price is good, a sound inancial state can be attained. A good price can be sustained by reducing oversupply and easing expectations of supply exceeding demand. This can be achieved through raising demand, which is also a more practical choice to accelerate market clearing. Moreover, the problem of overcapacity has appeared many times during the course of China’s development, but now it is more striking. The difference lies in expectations of demand growth since relatively lower expectations will oppress prices. We should crank up demand to raise expectations. If energy demand continues to decline, the gap between supply and demand will stay unchanged in a long time, and prices will not be able to be sustained, which will further deteriorate the financial state of enterprises, making it more complicated and dificult to reduce excess capacity. Therefore, we should adopt a two-pronged approach to reduce overcapacity. On the one hand, we should, encourage merger and acquisition rather than bankruptcy liquidation in the supply side to save social resources and marketplace for goodperforming enterprises. On the other hand, as overcapacity is a relevant concept that is inluenced by demand, it is more effective to reduce excess capacity by increasing demand in the short term. To 14

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support infrastructure construction with policies, increase effective demand of upstream energy enterprises or at least contain further decline of demand, the government can focus on the following aspects. First, we can accelerate energy reform in the supply front, including reforms of energy systems and prices, and management of energy related stateowned enterprises. By truly separating government functions from enterprise management, we can reduce excess capacity of enterprises in a more market-oriented and lexible way.

In fact, China is still under the process of urbanization, and there is still huge room for infrastructure construction in small and mediumsized cities, towns and rural areas. Of course, infrastructure construction might aggravate the already severe financial pressures with local governments, but the point is that we can avert gloomy expectations, save time, avoid fast drop in demand side in the short term and prevent further deterioration of enterprises’ inancial state. In other

words, we should restore industrial prosperity, maintain relevant healthy inance with enterprises and prompt mergers and acquisitions as well as other reforms in the supply side with clear-cut targets and relatively high effectiveness. (The author is the director of the Collaborative Innovation Center for Energy Economics and Energy Policy in Xiamen University)

Second, we can increase opportunities for manufacturing capacity cooperation in the global market through prompting “One Belt, One Road” initiatives. By implementing this strategy, we can reduce excess capacity of those high energyconsuming sectors such as thermal power, iron and steel, petrochemicals, glass and electrolytic aluminum in the medium and long term. Although the strategy cannot take effect immediately, a rather active approach can increase positive expectations for these sectors. The “One Belt, One Road” initiatives involve underdeveloped countries located on the west and south border of China, and they are weak in infrastructure and investment. However, as a large scale of excess capacity currently exists in energy-intensive infrastructure sector, the government can support cooperation of relevant players with surplus capacity to help materialize the “One Belt, One Road” initiatives. Third, Chinese production capacity and consumption account for 50% of global total in sectors with excess capacity. Even if we proactively prompt “One Belt, One Road” initiatives, it’s difficult to eliminate such large amount of excess capacity. Therefore, in the short term, we still need to increase domestic energy demand to alleviate the imbalance of supply and demand.

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China’s NDRC: Pilot Reform of Electricity Prices Obtains Initial Success

growth as well, NDRC has approved the permitted revenues and the transmission and distribution electricity price level of grid enterprises in five provinces and regions in the irst supervision cycle (from 2016 to 2018). These will be made public by the local price authorities,” said Shi Zihai ( 施子海 ), spokesman of the NDRC. About 5.56 billion yuan of transmission and distribution electricity price was cut in the first batch of pilot areas, including provinces of Yunnan, Guizhou, Anhui and Hubei, and Ningxia Hui Autonomous Region. In 2014, icebreaking pilot reform of transmission and distribution electricity price was conducted in Shenzhen power grid. Up to now, the reform has been made in more pilot areas. Three prominent achievements have been made from the pilot reform, said Zhang Manying (张满英), inspector from the Department of Price of the NDRC. First, the supervision model has been transformed to a new one, which concuts direct supervision over all aspects of revenues, cost and price and transmission and distribution electricity on the basis of valid assets of grid enterprises. Meanwhile, lots of experiences have been accumulated on cost supervision and examination, certiication of valid assets and permitted revenues of grid enterprises.

Yao Jinnan

also been carried out orderly.

Initial success on the pilot reform of transmission and distribution electricity price has been obtained, said the National Development and Reform Commission (NDRC) at a press conference on March 29 regarding the progress on this pilot reform. And reform in newly-added pilot areas has

5.56 bln yuan transmission and distribution electricity price cut in irst pilot areas

“In the light of cost supervision and examination results, and investment and electric generation

Second, the reform “constrained the cost of grid enterprise”. Through cross supervision and examination, about 1.6 billion yuan of assets unrelated with transmission and distribution electricity and unreasonable cost is eliminated or reduced. Third, the reform verified the transmission and distribution electricity price. All of the price reduction of 5.56 billion yuan was used to reduce electricity price for terminal users and saved enterprise’s electricity cost. With the verification of the transmission and distribution electricity

price, power grid enterprises can open their grid facilities to the third party without any barriers and with a fair access. This benefits the construction and operation of electricity markets and electricity trading and creates better conditions for the forming of market-oriented electricity prices. Besides, it also facilitates the balance and structural optimization between power supply and demand. As for the progress and experience in pilot reform in Yunnan, Guo Jixian ( 郭继先 ), director of the price authority of Yunnan province, said that the transmission and distribution electricity price in Yunnan has been approved by the NDRC and been carried out since March 15. Guo said that in the process of pilot reform of the transmission and distribution electricity price, China initiated remote supervision and examination for the irst time. A group in Guangdong in charge of cost supervision and examination conducted the cost supervision over Yunnan province. “This method can both guarantee the comparability of supervision and examination for different areas and ensure the objectivity and impartiality of supervision from the third party,” he added. Guo said that while making electricity price reform, Yunnan also tried to advance power trading through the market. The electricity volume via market transaction accounted for over 45% of Yunnan’s industrial power consumption. Through transaction, on average 0.108 yuan was reduced per kWh, which helped enterprises being involved in trading save 3.5 billion yuan. This was an apparent effect brought by the market trading. Strive to conduct a nationwide reform in 2017 Currently, the NDRC issued a notice on expanding pilot reform of transmission and distribution electricity price. This year, 12 provincial 17

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power grid enterprises of Beijing, Tianjin, south Hebei, north Hebei, Shanxi, Shaanxi, Jiangxi, Hunan, Sichuan, Chongqing, Guangdong and Guangxi are involved, and some other provincial grid enterprises under state comprehensive pilot reform of power system and the North China regional power grid were enlisted as well. “On the basis of previous experiences, we will further expand the scale of pilot reform of transmission and distribution electricity price,” said Zhang. According to the schedule and objectives of the reform, we strive to conduct a nationwide reform in 2017. In addition, further studies on big issues will be carried out, including the relation between investment and cost of power grid, the transmission and distribution electricity price level in remote areas, information asymmetry existed in the management of transmission and distribution electricity price and cross subsidies.

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“

More market-oriented electricity price will be form through market transaction. Where there builds electricity trading market, there will see the forming of market-oriented electricity price.”

Pilot reform in newly-added areas done orderly “We are going to spend about three months in the supervision and examination of the transmission and distribution electricity price,” said Pang Jinlong (庞金龙), deputy director of the price bureau of Shanxi province. As a newly-added pilot province, relative work involving the pilot reform has been ongoing in Shanxi. Currently, Shanxi has issued methods of distributing major tasks of power system reform in Shanxi province and clearly defined the timetable and road-map. According to the methods, firstly Shanxi will estimate the transmission and distribution electricity price and make a

full investigation of the assets and costs of the transmission and distribution electricity and operating conditions of grid enterprises. Combining with practical situation, Shanxi will analyze conflicts in the management of the transmission and distribution electricity price, so as to grasp key points in the reform. At the same time, Shanxi plans to finish cost supervision within three months and strives to accomplish electricity price reform on time as required by the state. Besides, the province plans to deliver its transmission and distribution electricity price after reasonable calculation and veriication to the NDRC in October. At last, Shanxi will properly deal with cross-subsidies. Insisting on the principle of guaranteeing fair compensation and burden sharing, Shanxi will resolve cross-subsidy problems for different kinds of electricity prices.

Zhang also mentioned more efforts should be made to improve the transmission and distribution electricity pricing rules, though the implementation guidelines of the transmission and distribution electricity price reform and the supervision methods over the transmission and distribution electricity cost have been made. “Supervision can be more standard, efficient and scientific only with rules. This task is ongoing and collecting suggestions from all the parties.” “We must strengthen the building of electricity market after pilot reform of the transmission and distribution electricity price, advance electricity transaction through the market and perfect trading rules,” Zhang said. “More market-oriented electricity price will be form through market transaction. Where there builds electricity trading market, there will see the forming of marketoriented electricity price.” 18

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China’s PV Installed Capacity to Hit 160mln kW in 2020

New Energy Vehicles Sales up 100pct y-o-y in Q1 China will add some 15mln-20mln kW PV power generating capacity annually during the 13th Five-Year Plan (2016-2020) period, remaining the world’s fastest growing PV power generating market, Nur Bekri, head of National Energy Administration (NEA), said recently. NEA’s PV ambition is an obvious assurance to improve the industry’s confidence on its future development. If the target is well fulfilled during 2016-2020, industrial scale of solar power generating is expected to see signiicant expansion. According to a market scale target set by NEA, the installed solar power generation capacity is to reach 160mln kW by the end of 2020, with an annual power output of 170bln kWh during the period. In which, PV power generation installation will reach 150mln kW, while solar thermal power generation installation will be 10mln kW, and total solar 20

thermal absorbing area will be added up to 800mln square meters by then. Besides scale, much attention is also given to structure of solar power generation. According to the NEA plan, solar power installation is to represent 7 percent of total power generation, and about 15 percent among all newly added power generating installation. And its shares in the national total electricity production will be 2.5 percent by the end of 2020. It is worth noticing that the country also set specific targets for solar power generation technology innovation. For instance, the plan sets more than 23 percent, more than 20 percent and about 20 percent industrialization rate respectively on technologies of mono crystal silicon battery, polycrystalline silicon battery, solar PV ilm battery.

China’s new energy vehicles (NEV) output and sales stood at 62,663 and 58,125 units in the first quarter of 2016, up 110 percent and 100 percent year on year respectively, according to statistics from China Association of Automobile Manufacturers (CAAM). In a breakdown, output and sales of pure electricity vehicles reached 46,348 and 42,131 units in Q1, both witnessing year-on-year growth of 140 percent, while hybrid energy vehicles saw 46 percent and 43 percent growth over the same period of last year to 16,315 and 15,994 units respectively. It is noticeable that since the beginning of 2016, favorable policies, like warm spring breeze, have been granted to support the development of NEV

industry. In February, the Standing Committee Meeting of the State Council announced five measures to lend further support to the development of NEV; during the “Two Sessions” held in March, Miao Wei, Minister of the Ministry of Industry and Information Technology (MIIT), said China’s NEV had entered a fast track of its development, and the growth might double over that in last year. Meanwhile, local governments soon followed suit to roll out corresponding subsidy policies. By now, 14 provinces or cities, such as Beijing, Shenzhen, Hebei and others, have publicized their subsidy policies to NEVs for 2016, most of them offering 1:1 subsidies. According to CAAM statistics, China’s NEV market remains highly proitable by now. 21

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CNOOC Liwan-3-1 Gas Output Exceeds 5bln cum

CNNP’s Nuclear Power Output up 5.57pct Y-o-Y in Q1

China National Offshore Oil Corporation (CNOOC) recently announced that the natural gas output of its deepwater Liwan 3-1 gasield exceeded 5 billion cubic meters since its operation.

China National Nuclear Power Co., Ltd. (CNNP, 601985.SH) said in an announcement on April 12 that it generated a total of 18.957 billion kWh of electricity in the irst quarter of 2016.

According to the announcement, since the operation of Liwan 3-1, the company has achieved breakthrough on remote control technology over Tyhoon-Proof Operation Model of deepwater gas well pit production, and for the first time realized such production via remote control operation. Equipped with this technology, the company is able to maintain its deepwater gas production without any output interruption and losses by typhoons and other critical weather conditions.

CNNP announcement showed that dwindling electricity output from Qinshan Phase-II Nuclear Power Station was mostly due to major maintenance in Q1, while major reason for the increasing output from Fuqing Nuclear Power Station was additional output from new generating unit, namely the No. 2 Unit that entered operation in October 2015. According to the announcement, power output of Qinshan Nuclear Station stood at 11.468 billion kWh in Q1, Tianwan Station at 3.657 billion kWh, while Fuqing Station and Hainan Station saw their electricity output at 3.022 billion kWh and 810 22

million kWh in Q1, respectively. In CNNP’s social responsibility report issued on April 7, the company’s total asset value reached 250 billion yuan by the end of 2015, operating 14 nuclear power generating units with a combined installed capacity of 11.512 million kW, ranking the country’s No. 1 nuclear power station operator. Meanwhile, 11 units are under construction with a total installed capacity of 12.098 million kW. The report also showed that CNNP’s accumulative power output amounted to 529.8 billion kWh, equivalent to an effect of reducing 170 million tonnes of standard coal consumption, which could be translated into reducing carbon dioxide emission of 560 million tonnes, sulfur dioxide emission of 4.14 million tonnes and oxynitride emission of 2.76 million tonnes.

Thanks to the technology breakthrough, CNOOC Liwan 3-1 deepwater natural gas supply could play an increasingly important role on improving energy structure of Pearl River Delta and better ensuring China’s national energy security. As China’s first deepwater natural gas

processing platform, Liwan 3-1 has solved a series of technology problems that usually lead to shutdown of offshore oil and gas exploration and production platforms, guaranteeing the production continuity and facility reliability of the Asia’s largest jacket platform. If a platform has to ensure its output targets, its production continuity should be secured against the biggest challenge of typhoons that are often seen in eastern part of South China Sea during the summer. The remote control technology’s Typhoon-Proof Operation Model becomes a critical step to solve the challenge. By now, deepwater natural gas produced in South China Sea is carried to gas-fueled power plants and industrial users via natural gas pipelines built by CNOOC, fulilling electricity demand from China Southern Power Grid to soothe strain supply during the consumption peak season. On the basis of current gas consumption level, the Liwan3-1’s gas output could fulill a 1-million-population city’s 50 years’ demand for household gas use, providing a reliable energy source to fuel the economic powerhouse of the Pearl River Delta. 23

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Emboldened with Solid Security, Chinese Nuclear Power Brand Brilliant in the World

power technology now is among the world’s most advanced squad. Nuclear power industry’s start-up 00:14, Dec. 15, 1991, in a 300,000-square meter-large workplace in Haiyan of east China’s Zhejiang province, everyone grasped the breath, to witness the moment that the operator turned on the switch, when nuclear fission generated strong electric current and was injected into the East China power grid. This was the exciting moment the Qinshan Nuclear Power Station successfully started its operation and connected with the power grid system. A whole generation of nuclear power talents and workers spent about 20 years, from the very beginning of blueprint and successful operation, to witness the moment. Success of Qinshan Nuclear Power Station put an end to the situation that no nuclear power station was operated in China. But the signiicance of Qinshan’s success is not only limited to fill the blank.

Lu Zehua At a sunny day morning with fresh air in Prague after a rain, on March 30, Chinese President Xi Jinping and his Czech counterpart Milos Zeman co-chaired the Sino-Czech Economic and Trade Cooperation Round Table Meeting in the Vltava riverside. The two countries signed several agreements, including a memorandum of understanding (MOU) for cooperation on building 24

nuclear power stations and jointly develop nuclear power markets in the third country, which means a step forward for China’s nuclear power industry’s overseas market exploration, after the similar deals with the UK and Argentina. In recent years, nuclear power industry becomes a brilliant Chinese brand in the world market. Thanks to independent innovation and full industrial chain development, China’s nuclear

In the early planning stage of Qinshan Nuclear Power Station, Chinese Premier Zhou Enlai set a target of “mastering the technology, accumulating the experience, training talents to lay foundation for China’s nuclear power development”. But China’s nuclear power followed a zigzag way of advances, just like “feeling underwater stones to march across an unknown river”. At that time, academic and industrial disagreements have long dominated and stalled the country’s nuclear power efforts on a string of issues of technology, security and policies. For instance, on the choice of nuclear reactor type, about ten years have been spent on merely debates. What is worse, the serious accidents happened to nuclear stations in Three Mile Island and Chernobyl in 1979 and 1986, caused much passive impacts on

China’s nuclear power development, and voice of terminating construction of nuclear power stations in China became even more often heard across the country. But in spite of the pressure, our leadership still determined to carry on the Qinshan nuclear power project. Eventually, Qinshan Nuclear Station, as expected by many of its fans, successfully entered formal operation and link with the national power grid system. Upon operation, its power generator units have kept in good condition and passed national examination and test in July 1995, registering a record of 331-days full scale operation. Then such record was soon refreshed by itself, with new 443 days and 448 days. This record is also rarely found in the world as a prototype reactor. Following the first phase project, China soon started building the second phase and third phase facilities in Qinshan and the first phase project of Ling’ao Nuclear Power Station. Based on technology of Qinshan Station, China’s nuclear power industry witnessed a development from a start-up to independent research and development, then now catch up with international advanced technology standards, realizing an overall enhancement and innovative development on nuclear power design and construction, equipment building, nuclear fuel production, testing and security management. To China’s nuclear power industry, the zigzag history of Qinshan Nuclear Station is a cherished memory, and also a preparatory period for the future success. Homegrown technology builds real competence of nuclear power The office building in the old base of China Nuclear Power Research and Design Institute could often witness furious discussion among a couple of 25

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research fellows in 1997. They carried out a concept of “177 reactor core”, and conducted argumentation on major indicators for the solution of a million-kW nuclear power station. Reactor core serves as heart of a nuclear power station. If a reactor’s reactor core capacity had been changed, it meant that China wanted to independently develop a type of reactor core. This is now widely regarded as one of the major sources of the much-promoted homemade nuclear power brand of “Hualong-One”. In fact, China’s nuclear power industry has long been in trouble of low rate of homemade equipment and lack of core technologies. As core technologies are owned by foreign countries, China has to import nuclear power equipment from overseas owners with high prices. In recent years, the country imported the third-generation nuclear power technologies from U.S. And French companies. Even so, the importing of such technologies was not easy, as many equipment imports required government-to-government trade talks. From time to time, the equipment you need would run out of order, or sometimes you need to pay extra money for particular equipment. Meanwhile, some foreign sellers might stipulate strict conditions in the contracts, such as terms of excluding competition by Chinese nuclear reactor builders in overseas markets. All of these unfairness upset Chinese nuclear power workers. To shrug off the others’ control, China geared up research and development of homegrown nuclear power technology. Hualong-One, which was born under the background, is an integrated solution of the third generation nuclear power technology independently invented by joint efforts of China National Nuclear Corporation (CNNC) and China Guangdong Nuclear Power Group (CGN). According to Xing Ji, chief designer of Hualong-One with CNNC, Hualong-One is totally invented at home with full intellectual rights for designing technology, special design software, 26

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nuclear fuel technology, operation and maintenance. In 2014, Hualong-One passed the International Atomic Energy Agency (IAEA)’s general design review of its nuclear reactors. It is estimated that the domestically-made parts of Hualong-One exceeds 85 percent, most of which, especially core devices, could be totally manufactured inside the country. “We did go abroad to learn in western countries in earlier years, but now thing is different, some western companies saw our advances (in nuclear power technology), and showed their willingness to jointly do the research and development with us, that becomes a symbol of China’s increasing national competing power,” said Luo Qi, director of Nuclear Power Institute of China (NPIC). China’s nuclear power emboldened with solid security

year. That is much less work load for feedstock transportation. However, the security issue on nuclear power often challenges the public’s sensitive nerves, which poses another big hurdle, in addition to political and economic barriers, to stall nuclear power’s going overseas. Then, is China’s nuclear power station safe? Hualong-One, as China’s first independently developed third generation nuclear technology of pressurized water reactor, has its buildings strong enough to stand the impact of commercial passenger airplane, and also could survive the hit of earthquake like the damage power equal to that happened to Fukushima Nuclear Power Station, said Qian Zhimin, general manager of CNNC.

According to Qian, Hualong-One adopts “a security design philosophy of positive plus nonpositive combination”, which uses non-positive approaching as supplementary to positive security design”n, enhance the overall security strength. Socalled non-positive security approaches require no external electricity power, but make use of natural power such as gravity, difference of temperatures and evaporation, to take away heats from reactor core’s operation and in the protective crust outside the reactor core. On much worried problem of accidental nuclear blasts, Xing Ji said it was impossible to see any nuclear explosion, because nuclear fuel sticks used in power stations contain less than 5 percent of element Uranium-235 or plutonium-239 in the total quality, compared with more than 90 percent purity

After the accident happened to Fukushima Nuclear Power Station in Japan in 2011, an overeighty-year-old man, who is Ouyang Yu, the founder of China’s nuclear power technology research, became extremely busy. Riding in his armchair, he gave a science popularity lecture to the public at China Science and Technology Museum, answering various questions on nuclear power security issues. Ouyang Yu told his audience that nuclear power should be pressed ahead only given that the nuclear security could be attached with the top priority of consideration. As one of the largest energy consuming countries in the world, development of nuclear power is the choice that China has to take if it wants to reduce dependence on fossil energy. Nuclear power is highly efficient in electricity generating. To run a 1-million-kW installed power generating facility, coal-fueled power plant requires coal as many as a 40-carriage train’s full loan everyday, while for a nuclear power plant, its feedstock could be carried in by only one heavy truck once for a 27

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in atom bombs. In the Third Nuclear Security Summit held in Hague in 2014, Chinese President Xi Jinping formally illustrated China’s nuclear security policy of “rational, coordinating and advance together”. During March 31 to April 1, 2016, President Xi again attended the Fourth Nuclear Security Summit in Washington, fully indicating China’s emphasis on nuclear security issues. Time is right to go overseas International nuclear power market has long been dominated by furiously competing companies from U.S., France, Russia and Japan. In recent years, boosted by “One Belt, One Road” initiatives, China’s influence in the world’s nuclear power industry becomes increasingly clear and noticeable, and overseas market promoting efforts are intensiied. “One Belt, One Road” initiatives provide an important opportunity for Chinese nuclear power’s going overseas. “Nuclear energy is not merely a kind of energy source, but also represents a comprehensive national power. So, many countries along “One Belt, One Road” expect to develop their nuclear power projects,” said Qian Zhimin, adding that such expectation could bring about enormous industry value from nuclear power exports. According to Qian, every one unit of nuclear power generator could directly yield as much as 30 billion yuan of industry value, equivalent to exports of 300,000 cars. In recent years, China’s nuclear power has become a knock-out product just like the highspeed railway. By now, nuclear power cooperation agreements and MOUs have been signed between China and Argentina, UK, Romania, Kenya and Czech. According to Qian Zhimin, CNNC has exported six sets of nuclear power generating 28

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units, ive small-sized nuclear reactors, two nuclear research facilities and one research reactor to seven countries across the world. Nuclear power and nuclear industry chain cooperation talks are now held with about 20 countries, such as UK, France and Egypt. Sun Qin, chairman of CNNC, said it was a good time for China’s nuclear power to go overseas. “About 70 countries have been taking actions or shown their interests in developing nuclear energy, including 40 of them are along “One Belt, One Road” he said, adding that some 100 nuclear power generating units could be sold along “One Belt, One Road” by 2030, in which, Hualong-One could represent 20 percent to 30 percent market shares. Sun Qin also pointed out that great challenges, including furious competition from domestic players, non-establishment of Chinese independent nuclear power brands in international market, lack of experience on overseas market promotion and no organization to coordinate overseas market development, were lying ahead over there to undermine the future development of China’s nuclear power industry.

Shifting from the Biggest Constructor for Nuclear Power Globally and the Biggest Operator for Nuclear Power in China to the Nuclear Power Solution Provider Worldwide

China Guangdong Nuclear Power

Company (CGNPC) is Striving to Deliver the Technology of Hualong No. 1 and the Supporting System for Export to More and More Countries in Need of Nuclear Power

Zhu Xuerui Under current circumstance, time is right for China’s nuclear power industry to go overseas, given that a response is necessary to adjust its overseas pace in accordance with the change of market. On March 17, 2016, Hualong International Nuclear Power Technology Co., Ltd., a joint venture set up by CNNC and CGN, was launched to form synergy over Hualong-One’s overseas promotion and development. In the long term, China has planned to build a science and technology research and development system and facilitating industrial system that relects the world’s nuclear development direction by 2030, fully realizing the target of building the country into a strong nuclear power player.

On 23 February 2016, CGNPC hosted the International Summit for Hualong No. 1 at Daya Bay Nuclear Power Base, with the focus on targeting countries and partners to promote the technology of Hualong No. 1 and its supporting system for export. The representatives from more than ten countries, including United Kingdom, Thailand, Kenya, etc., not only attended the information sessions, but also had ield trips to visit Daya Bay Nuclear Power Base, CGNPC Designing Institute, CGNPC Research Institute and Dongfang Electric Nanshan Production Base, as well as the construction site of Fangcheng Port Phase II Project. They also had the chance to witness the

industrial capability of nuclear power in China from various aspects of Hualong No. 1, such as research and development, equipment manufacturing, production and operation, project construction and experimental veriication. He Yu 贺禹 , Director of the Board of CGNPC, indicated that the internationalization process for Hualong No.1 had started, with Thailand becoming a shareholder of Fangcheng Port Phase II Project and signing with EDF an agreement related to British Bradwell B project based on Hualong No.1 project. “Based on the start of Fangcheng Port Phase II pilot nuclear power plant and British Bradwell B 29

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东山 , Deputy General Manager of CGNPC, suggested that besides the competency of security, reliability and efficiency in the third generation nuclear technology of Hualong No. 1, CGNPC also plans to make more plentiful “menu” for Hualong No. 1 to cater for differentiated needs to various countries and expedite the process of going out. “With accumulated competitive advantage, capability of integrated industrial chain, capital advantage, government support and abundant experience of the over 30 years, CGNPC is capable of providing speciic and comprehensive solutions for targeted countries in areas of the construction and operation of nuclear power stations, as well as training for nuclear capacity building and management,” said Zheng Dongshan, “CGNPC is able to provide a package of services for international clients, including fostering talents, consulting, site selection, construction, operation, supply of nuclear fuel, investment and financing, technology transfer, etc.” Project, we intend to promote Hualong No.1 in the global market, by incorporating the need of market development for international nuclear power. This helps to demonstrate the comprehensive capacity of Chinese nuclear enterprises in nuclear research and development, design, construction, operation and industrial chain. It has signiicance in deepening the level and scope of Hualong No. 1’s ‘Going Out’”, said He Yu. In the past several years, there has been a steady increase of emerging nuclear countries, bringing the sentiment of nuclear renaissance to its peak. The huge market potentials have attracted fierce competition from magnates of different countries. Nuclear export, with the core on technology, is seen as the coexistence of competition and cooperation. As a new member in the irst phalanx in global nuclear power, China has successfully transferred its role from borrowing a boat to 30

sharing a boat, and ultimately to making a boat. In view of the complicated global market, Chinese nuclear enterprises still need to improve its core competency continuously. He Yu expressed that as the main creator of Hualong No.1’s technology, CGNPC has become a nuclear developer in a decisive position worldwide after more than thirty years of development, starting from the construction of Daya Bay Nuclear Power Plant. It has also achieved good results internationally in nuclear industry. “Based on the technology of Hualong No. 1 and accumulated experience n design, construction and operation for more than 30 years, CGNPC is confident to deliver better, safer and more economical nuclear solutions and services for international partners”, said He Yu. During the interview, Zheng Dongshan

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Insiders revealed that matching plans for export can be understood as the “combo set” in a “menu”, which will greatly extend the selection base for clients. In addition, this type of “one-stop” service has obvious comparative advantage in efficiency and cost effectiveness. It is known that in the aspect of nuclear construction, CGNPC will provide diversified nuclear solutions for international clients based on the technology of Hualong No. 1, such as Engineering-Procurement-Construct (EPC) model, Build-Own-Operate (BOO) model and BuildOperate-Transfer (BOT) model, etc. In the aspect of industrial solution, CGNPC will offer customized planning for nuclear power based on the production capacities, construction capacities and needs of targeted countries. CGNPC can also help to improve project quality and reduce the cost based on mass production of Hualong No. 1.

Regarding funding, CGNPC will provide optimal financing option by leveraging on its financing capability and government support. Regarding talent training, CGNPC will provide offline and online training, as well as information sharing. CGNPC welcomes partners to engage in domestic nuclear projects by means of investment, project construction, production and operation, etc. Information revealed that CGNPC had paved its way for international market development. In June 2015, CGNPC signed an agreement with ASEAN Energy Centre, which was intended to provide capacity building of nuclear power for ASEAN countries. The aim was to promote the establishment of China-ASEAN Clean Energy Capacity Building Centre. In September 2015, CGNPC signed an MOU with Kenya Nuclear Electricity Board (KNEB). Both parties will develop comprehensive cooperation in nuclear power development and capacity building, based on the technology of Hualong No. 1 and improved technologies. On 23 December 2015, Thailand’s Ratchaburi Electricity Generating Holing Public Company Limited (RATCH) signed an agreement with CGNPC to hold shares of Fangcheng Port Phrase II Nuclear Power Project, which makes use of the technology of Hualong No. 1. RATCH will jointly develop, construct and operate this project with CGNPC. During the Hualong International Summit, CGNPC also discussed details on cooperation of fostering specialists in nuclear power sector. It is learned that CGNPC currently employs about 35,000 staff globally, including 6,000 welltrained professional engineers. Based on CGNPC’s successful construction of Daya Bay Nuclear Power Station, CGNPC has built up a professional system for nuclear power generation, project construction, technology innovation and nuclear fuel security , which also complies with international standards. At present, CGNPC is capable of concurrently building 15 to 20 nuclear power units. 31

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Highly Eficient Utilization of Resources Is Key to Deal with Low Oil Prices Interview with Cha Quanheng ( 查全衡 ), an expert with CNPC Consulting Center

Wu Li A “chilly winter” of low crude oil prices, from which the petroleum industry now is suffering, will have profound and lasting inluence on the industry, because no signs of quick rebound have been seen in the short term. The petroleum issues, which are closely related to the normal operation of a nation, deserve enough emphasis for the signiicance. How China’s petroleum industry to deal with the impact of low oil prices? What is the basis for the whole solution of the problem? Cha Quanheng 32

查全衡 , as a veteran expert

with CNPC Consulting Center known for his 60 years of experience in the oil industry, shares his valuable insights on the country’s oil industry at an interview granted to us. Low prices provide favorable time to adjust China’s energy structure Q: Could you please talk about future trend of international petroleum industry? A: First of all, supply and demand is still the basic pair to decide the development of petroleum industry. Currently, the world’s oil supply is higher

than the global demand, and it is quite sure that such trend will not change in the short term. Oil producers in the Middle East, instead of adopting their former approach of output reduction to maintain oil prices, now keep high gear of their oil production facilities to ensure respective market shares, eying a play of “one stone kills two birds” market strategy, that on the one hand to knock down unconventional oil and gas exploration and development (E&D) in North America, and the other to cripple the high profile process of nonfossil fuel development in Europe. If taking into account of signiicant output capacity of Iran, Iraq and Libya, which is now unable to turn into real crude oil output for some reason, the crude oil prices might not likely to witness drastic rebound, let alone new highs. In this sense, the petroleum industry needs to get prepared for a test of long time of inferno. Q: What do you think about current situation that China’s petroleum industry is now facing? A: Current losses might be embedded with future gains, and vice versa. A dialectical point view is necessary to cope with the issue of low oil prices, as transformation is possible from the negative to positive over its effects. The low oil prices have fully exposed the problems caused by the impropriate works in the past. Solving these problems is believed to be a strong motivation for people to rely more on advance of science and technology, as well as scientific management, following a philosophy of “higher quality and better eficiency”, so as to considerably enhance management standards and capacity of entrepreneurship, laying solid foundation for better development in the future. For China, an era of low oil prices is the favorable time to press ahead restructuring the energy mix, among oil, gas and other energy resources. In the history, we lost several times of

such opportunity to advance reform, such as the period after 1993, in which the international oil prices saw several low ebbs, especially in 2008, when the world was suffering from global inancial crisis. Those were good chances, but not as good as this time, because the oil price drop was not as low as this time. Q: What are the favorable conditions that China’s petroleum industry has to tackle low oil prices? A: China’s petroleum industry has a brilliant tradition to overcome difficulty unwaveringly, for instance, the discovery of Yumen Oilfield, Daqing Oilield and Renqiu Oilield, they were all discovered during the very dificulty time in China. With such superb encouragement, in addition to great potential of resources at home and abroad, the country’s petroleum industry has much room to ind out an optimistic way to survive the current dificult time. Meanwhile, there is also enormous space for China’s petroleum industry to enhance product quality and production and utilization efficiency. During the periods of 10th Five-Year Plan (20012005) and 11th Five-Year Plan (2006-2010), the country’s proven oil and gas reserves doubled that of the previous decade of 1991-2000, but labor expense also doubled, indicating that yield of single oil well saw not much improvement. In other word, the oil and gas reserves were proven recoverable, because more investment was put on E&D, not because of improvement of productivity, so we still have room to enhance quality and eficiency. Reinforce national planning on petroleum industry Q: How could the oil industry to deal with this problem? 33

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A: The upstream sector of oil industry is suffering the most, other ields and sectors are also in trouble. A uniform effort by the nation, the oil companies and relevant departments is necessary to bring about comprehensive approach against the impact of low oil prices. However, China lacks such coordinating mechanism and arrangement at present, leaving the upstream sector now a big headache of oil companies. Q: What role the government could play against low oil prices? A: First, the nation needs to take advantage of socialist system, trying to do well in the following four aspects:

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adopted. Considering China’s speciic situation, we need to adopt various kinds of stockpiling to find out a balance between accessibility and economic feasibility, namely avoiding over-stockpiling in terms of cost reduction and under-stockpiling against shortage. Total crude oil output stands at about 200 billion metric tons in China. This could be eyed as a reliable oil reserve, but current oil industry management system and evaluation regime failed to let crude oil output fully and briskly adept to demand changes. Theoretically, we could import more oil to fully meet domestic demand, but this has never happened. And domestic oilfields need more lexibility to decide whether their production should be shut down or maintained at certain level, through assessing of their respective situation.

2015), Chinese oil companies put much emphasis on overseas operation in North America, conducted acquisitions in Canada and the United States. Actually, more practical and feasible areas for overseas acquisitions are in the Middle East and Central Asia, which are less developed on the infrastructure of oil service and oil equipment industries. Chinese oil firms, who have superb technology and experience on oil service and equipment making, could ind more opportunities in these regions. Second, the nation should fully implement the principle of “base on domestic, supplement in overseas” on oil industry development. 1) China’s oil and gas dependency on imports

1) Buy more overseas oil and gas and build more storage for stockpiles at overseas Try several ways of storage. Capacity of the irst phase strategic petroleum reserve (SPR), which has completed its construction, is too small to have enough inluence on the market, so it is suggested that the country also needs to try more ways of storage, for instance, to preserve some production capacity to meet unpredictable emergency, or to utilize aging oil wells’ empty caves as storages, which could be a good choice for their safety, environmental friendly and ample holding capacity. A medium-sized such oil well cave has a capacity to hold oil as equivalent to the first phase SPR. By now, construction of underground gas storage facilities has been pushed forward in many places of China. Likewise, technology and research efforts should be made for underground oil storage. Many aging or abandoned oil wells in eastern part of China could be fully studied to ind suitable places for storage facilities. Ensure appropriate amount of oil stockpiles. It is not necessarily meant that we need to meet the standard like the developed countries have 34

now reached as high as 60 percent and 30 percent respectively. But it is still necessary to stick to principle of “base on domestic, supplement in overseas”, because domestic oil and gas resource provides basis for national energy security, while integrated and well developed petroleum industry lays foundation for positive and efficient use of overseas resources. China’s oil and gas resources are rich in quantity, but poor in term of per capita calculation, and complicated in geographic situation of oil and gas reserves. Even after sixty years of fast development, the country’s proven rate is still as low as less than 40 percent and 20 percent for oil and gas respectively. Abundant unconventional oil and gas resources are also found in China, though at the very beginning stage. It is obvious that much room remains available for the country’s petroleum

2) Acquisition of some overseas oil firms and oil service companies, employ some international talents, to foster more stamina and competitiveness for future development. 3) Optimize structure of overseas oil and gas assets; enhance shares of higher yielding rate assets. During the 12th Five-Year Plan Period (20112015), Chinese oil companies, delighted by ample money over higher crude oil prices, acquired many overseas oil and gas assets. But some of these overseas acquisitions seem not proitable deals now, especially overgrowth of unconventional oil and gas assets, becoming trouble-making white elephants that hammer Chinese buyers’ proits when oil prices suffer nosedive fall in recent two years. However, the difficulty is fair to the sellers. Some small oil firms might vend some high quality assets. Under this circumstance, the nation is advised to lend financial support to Chinese oil firms to seize the opportunities and buy quality assets with cheaper price. 4) Implement action plan of “One Belt, One Road” initiatives, optimize arrangement of “going global” strategy. In the last ive-year period (201135

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industry to enter further development. Due to unpredictable geopolitical factors and oil upstream sector’s feature of “high risk, long investment cycle”, we need to take active efforts to press ahead domestic oil and gas exploration and development, as long as large scale of overseas operation, building more production capacity that could be frozen unless emergency. In this sense, the US experience could be an example for us. The United States adopted a strategic target of realizing “energy independence”. To achieve the target, the

CEFC China Energy Journal

US government sticks to develop low grade oil and gas resources at home, including unconventional oil and gas, despite any luctuation of international oil prices. Among the total 500,000 oil wells inside US, about 400,000 of them have an average output of two barrels per day. Even so, the US petroleum industry has never interrupted its E&D, research and innovation, eventually, breakthrough was made on shale oil and gas production, making a significant change of the world’s oil and gas picture and leading to an oil upstream industrial revolution.

2) Establish “upstream petroleum industry development fund” to protect upstream sector when the oil price is low. The government could inance the fund with surplus oil purchasing money saved at an era of low oil prices, plus “special windfall tax” collected during the high-oil-price period. 3) Highly efficient utilization of resources, foster new economic growth points. Since 1949, China has organized several times of oil exploration campaigns, successfully boosting

the oil and gas sector’s capacity building and output expansion, while standards of theoretical thinking, technology and management had also been improved significantly. The oil exploration campaigns could be regarded as intensive oil exploration operations, or actually a case of matrix management, reflecting advantage of socialist system that is able to motivate major power to focus on particular project, also providing a favorable platform for innovation. Such oil exploration campaign is still adoptable nowadays, with different stresses on innovation and with

Dialogue

Dialogue CEFC China Energy Journal

different expectation on achievements, for instance, oil campaign on “Stabilizing the East” and “Revitalizing the Northeast”, campaign on “Low Grade High Efficiency” exploration of Song-Liao Basin, ect. 4) Organize joint efforts to tackle major science and technology problems, foster momentum for sustainable development, including commercial development of unconventional oil and gas technologies or development technology to utilize buried mountains for oil stockpiling. 5) Coordinate utilization of resources at home and abroad, make good use of China’s enormous oil and gas imports, stocks and production capacity by controlling stock positions, adjusting amount of output, so as to acquire more bargaining power to suit China’s economic status, better protect the country’s energy security. Q: Oil companies, as production operators, what is your suggestion for them? A: As oil and gas production operators, oil companies should look proits as its utmost priority. In the era of low oil prices, oil firms need to put more emphasis on enhancing their enterprise competence. Resource, market and enterprise compete are usually regarded as key factors for resource operation and management in the oil cycle of developed countries. In particular, the deinition of enterprise competence means the capability to turn resource into net present value. Due to difference of competence, different enterprises might achieve varied economic beneits in the same market with the same resource conditions. This is the basis provided for the existence of competition, as well as the fundamental reason that the market is able to optimize the resources. Therefore, oil companies should follow the regular patterns, rely on advance of science and technology, adopt scientific management, make efforts to enhance 38

CEFC China Energy Journal

their competence. Wake up low grade underground oil and gas resource Q: Upstream sector suffers the most from low oil prices, how to minimize its impacts on the sector? A: China’s economy is now undertaking a transformation of development pattern. Under this circumstance, develop underground oil and gas resources with high eficiency could be an important point to deal with the challenges brought by the low oil prices. The upstream sector of the petroleum industry is an enormous systems engineering, whose biggest enemy is mistake decision-making. So three principles should be kept in mind: 1) Objective resource assessment serves as an antecedent for correct decision-making. This principle could be proven by the long history of China’s petroleum industry development. No more than 30 years, basic tone of oil and gas assessment for Tarim Basin has been shifted from “over-heated” to “over-sluggish”; while that for aging oil producing fields in the eastern part of China has been shifted from “over-sluggish” to “partially over-heated”. Such a wavering assessment not only misled the decision-making, but also resulted in serious economic losses. 2) Enterprises’ competence determines economic value of resources. By the end of 2014, proven but untapped geographic reserves of oil stood at 8.36 billion metric tons, and that of natural gas at 3 trillion cubic meters, representing 23.4 percent and 40.5 percent of accumulative proven reserves respectively. Given that the recovery cost is set at 2 U.S dollars per barrel in oil equivalent, about one trillion U.S

dollars of oil money has been buried underground for years. About 80 percent of these untapped reserves could be speciied as “low grade” reserves, meaning they are usually more difficult, less economic beneit compared with resources with normal grade. Such speciication misleads decision makers of oil industry into a mindset that these reserves of low grade could yield less benefit, so not necessary to put much emphasis on these reserves. As a matter of fact, if well managed, even these reserves of low grade could also create considerable good beneits, like many successful examples in Changqing Oilfield, Yangchang Oilfield and Daqing Oilfield have shown. What is more, the much-touted shale gas and shale oil could also be seen as low grade resources of unconventional energy, with even higher geographic risks and more difficult to explore and develop, now has been put much more favor and investment than the traditional low grade reserves. That is really an unwise move. Low grade resources are naturally much more than that of so-called high grade. As a natural law, it will become even increasingly more when more exploration and development work has been done. If enterprises’ competence is enhanced to get more access to the low grade resources and pump it economically feasible, upstream of oil industry could realize sustainable development; if not, upstream sector is expected to see increasingly shrinks. 3) Know yourself, know the enemy, enhance advantage and avoid disadvantage, to acquire real discursive power. In the drive of “following international practice”, China’s mineral resource management and administration work sustained three times of impacts. In the first time, mineral resources were classiied through three criteria in the end of

1990s, the second time of impact took place at the beginning of 21st Century when the three state oil companies launched their IPOs in overseas stock markets. At that time, a view became popular that oil and gas resource management and administration should follow the standard set by Securities And Exchange Commission (SEC) of US. The third impact came from the ongoing chase of shale gas starting from the beginning of this decade. As proven by the history, these situations failed to suit the trend and reality of China and the world’s petroleum industry. The “fever” of shale gas, to some extent, crippled the development of China’s petroleum industry. The demonstration of shale gas biding and exploration could not be seen as successful, because such public biding had put some non-oil firms and private firms under a troubled situation, without yielding positive results, undermining future reforms. During 2011-2015, unconventional oil and gas resources, such as shale oil and shale gas, saw drastic growth of shares in Chinese oil companies’ overseas assets, which now become heavy burden for them when the oil prices tumbled. China is currently facing critical period to restructure its economy. The situation of wow oil prices troubles the country’s decision makers. Under this circumstance, the petroleum industry should be highly aware of difference on national situation and development stage, to carefully learn from but not merely duplicate foreign experience. For instance, the United States, who has seen its traditional oil and gas output surpass peak, has to give full play to unconventional resources by now. However, China’s situation is totally different, as its oil and gas exploration is still at the stage of midterm and beginning of the whole cycle, featured with enormous potential. Therefore, positively explore high grade resources, putting much efforts on exploration of low grade reserves could be a principle that really suits China’s national conditions. 39

Major Events

Major Events CEFC China Energy Journal

CEFC China Energy Journal

China Releases Measures of Ensuring Fully Purchasing of Electricity Generated by Renewable Energy

guaranteeing the full purchase of electricity generated by renewable energy, ensuring to realize the proportion goal of non-fossil fuel energy in the country’s energy consumption mix, and promote energy production and consumption revolution.

hours under guaranteed purchasing, while on the basis of the market competition mechanism, the requirements of giving priority to renewable energy power generation and the power supply safety as well.

The Measures made a clear definition of renewable energy, referring to non-hydro renewable energy used for wind power generation, solar power generation, biomass power generation, geothermal power generation and ocean power generation. And hydropower generation shall take the Measures for reference.

“Under the existing system, thermal power plants take the de facto priority of power generation because the government grants annual power generation plan for them. This occupies the available development space of the renewable energy. In this sense, how to solve the problem of abandoning wind and solar power serves as an important part of power reform and whether the problem could be solved smoothly is also a symbol of success or failure of the reform of energy revolution,” said Qin Haiyan (秦海岩), secretary general of the Wind Energy Select Committee of the Chinese Renewable Energy Society.

Though some experts said that the publication of the Measures was a compromising result among government, renewable energy enterprises and power grid, the Measures have still a substantial and positive influence on resolving the problem of abandoning wind power, solar power and hydropower. “I think the measures are a much-needed boost to the development of the new energy industries,” said Cao Renxian (曹仁贤), CEO of Hefei Sungrow Power Co., Ltd. It has been ten years since the Chinese Renewable Energy Law proposed the purchase of electricity generated from renewable energy in full amount, the publication of the Measures means that the guarantee of full purchase is inally going to be implemented, said Cao. Ways to address abandoning of power generated from renewable energy Zhong Yinyan

public.

Ten years after the implementation of the Renewable Energy Law, the system of ensuring fully purchasing of electricity generated by renewable energy, which is viewed as the most difficult part of policies in pushing forward the development of renewable energy, was inally made

On March 28, the National Development and Reform Commission (NDRC) issued the Administration Measures of Ensuring Fully Purchasing of Electricity Generated by Renewable Energy (hereinafter referred to as the Measures), in order to strengthen the administration of

Guaranteeing the purchase of electricity generated from renewable energy in full amount means that power grid enterprises (including power dispatching institutes) should purchase on-grid electricity generated by renewable energy power generating projects within the scope of planning in full amount according to the state-set ongrid benchmark electricity prices and utilization

Under the situation with frequent precipitation during flood seasons, deficiency of power transmission channels, decline of power demand of and the limited capacity of peak shaving of heating units, the abandon of water, wind and solar power have always been the chronic headache impairing the development of the renewable energy industry of the country. Industrial experts estimated that more than 40 billion kWh of water power was likely abandoned in 2015. According to the statistical data from the National Energy Administration, the total amount of wind power abandoned in 2015 reached 33.9 billion kWh, up by 21.3 billion kWh a year earlier and with an average 15% of wind power abandon rate. The solar power abandon is quite serious in Northwest China, of which in Gansu as much as 31% of solar power generated was abandoned and 26% in Xinjiang. The Measures could provide a good solution to the above mentioned problem. According to the Measures, power generated by renewable energy projects joining power grids is divided into two 41

Major Events

Major Events CEFC China Energy Journal

parts, one under guaranteed purchasing and the other for market transaction. As for the first part with guaranteed purchasing, the electricity will be purchased in full amount according to the ongrid benchmark price by being given priority in the yearly power generation schedule and in the signing of power generating contract with grid enterprises (contract for materials or contract for difference). As for the second part, renewable energy enterprises should win power generation contract through market competition and power grid enterprises should carry out the contracts by giving priority to power generated from renewable energy. Qin Haiyan indicated that the real reasons for the abandon of wind power do not come from technical factors and other practical restrictions, but from the obstacles existing in the electricity market and the obstruction generated from the conflict between the new technology and the old thinking patterns as well. In this context, after three days of the publication of the Measures, the Wind Energy Association announced to safeguard the legitimate rights and interests of renewable energy enterprises according to law by applying for information disclosure, reporting to the related national authorities, administrative reconsideration and legal action and so on. According to Qin, so far the Wind Energy association has applied for information disclosure regarding to the alleged lawbreaking of purchasing wind and solar power in Gansu, Xinjiang and Yunnan to the NDRC, Commission of Economy and Information Technology and electricity enterprises, and noted that “further actions will be taken depending on the development of the situation”. Minimum utilization hours uniformly determined by the State I t ’s w o r t h n o t i n g t h a t t h e m e t h o d s o f 42

CEFC China Energy Journal

guaranteeing the purchase of power generated from renewable energy and market transaction only apply to the areas where the purchase of power from renewable energy is strictly restricted. The power purchase should be guaranteed to be full amount in central and east China where the purchase of power from renewable energy is strictly restricted and it is not allowed for grid enterprises to take the opportunity to lower electricity prices. The Measures made clear that the minimum utilization hours under guarantee should not be set and implemented by provincial governments or power grid enterprises, but determined by the state uniformly. The annual utilization hours of the on-grid renewable energy power projects with guaranteed power purchase are checked and ratified, and supervised for implementation jointly by the National Energy Administration (NEA), along with the Bureau of Economic Operations of the NDRC. The basic principle of the guaranteed power purchasing is to ensure reasonable benefits of renewable energy power projects. “The prices of electricity generated by renewable energy by category are set according to the level of resources, investment cost and 8% yield rate of internal capital,” said Yi Yuechun ( 易跃春 ), vice president of the China Renewable Energy Engineering Institute, “The guaranteed power purchase should be determined in this way.” For example, the on-grid benchmark price of wind power in Class-I wind resource zone of China is 0.49 yuan per kWh, which has started performing since January 1, 2015. The basic evaluation indicators for the price are the 8% yield rate of internal capital, 4.9% long-term loan interest rate, 8100 yuan per kWh of the construction cost in Class-I wind resource zone, depreciation of equipments, etc. Thus, it is estimated that the annual

utilization hours of a wind power project should have at least 2,180 hours to ensure basic yield of 8%. If the hours are less than 2,180, the yield rate will be less than 8% and the basic yield of the project cannot be guaranteed. Thus, the guaranteed hours should be set as 2,180 hours and the guaranteed purchasing power could be got by multiplying this number by the installed capacity of the project. “If a project has the capacity to reach 2300

40 billion kWh of water power was likely abandoned in 2015

33.9 billion kWh of wind power was abandoned in 2015

hours of annual utilization, then the exceeded 120 hours could be used to win power sales contract and taking part in market transaction with lower prices, even zero or negative prices when necessary, so that the priority access of the grid for the power through market transactions could be achieved by means of marketization. And the power generated from renewable energy for market transactions could be entitled to subsidies according to the local subsidy standard,” said Qin. According to the Measures, in order to guarantee the purchasing of electricity generated by renewable energy, priority power generation contract will be transferred to the units with less power generation priority if a non-renewable energy power project limits the power generation of on-grid renewable energy power projects due to its action of occupying the power consumption and transmission channels of the latter. The non-renewable energy power project should make compensation for the loss for the on-grid renewable energy power projects according to the impacts. Yi Yuechun said that in other words, renewable energy power projects should take the loss of power abandoned and limited resulted by themselves, power grids and other reasons. The Measures also explicitly proposed that self-supply power plants should also be responsible for compensation, take the same social responsibility as conventional energy power units and enjoy no privilege. It is worth noting that the action that power grid enterprises are forbidden to demand renewable energy power projects to get preferential power generation through paying money to power plants with lower power generation priority, according to the Measures. “That is to say, the action of demanding renewable energy power companies to get preferential power generation will be forbidden. The action of replacing power generation priority between thermal power with water and wind power which happened in Yunnan province last year is illegal,” said Qin. 43

Business

Business CEFC China Energy Journal

CEFC China Energy Journal

China Oil Giants

Proits Plunge in 2015 Qu Peiran

Chinese three gigantic oil companies, PetroChina, Sinopec Corp. and CNOOC Ltd., experienced a profit plunge in 2015 due to slump of international oil prices. According to International Financial Reporting Standards, in 2015 PetroChina got net profits of 35.5 billion yuan, a decline of 66.9% compared with last year. Sinopec Corp. achieved 32.4 billion yuan of proits, 30% lower than last year. CNOOC Ltd. obtained 20.25 billion yuan, with a 66.4% of year-on-year drop. Among these companies, upstream-oriented PetroChina suffered the heaviest losses. International oil prices had dramatically plunged since 2014 due to crude oil supply surpluses and other factors. After a bounce in the second quarter of 2015, prices fell to a twelve-year low, breaking the lowest level in the inancial crisis of 2008. It means that proits of oil exploiting and sales decreased and losses from chemical products extended. Amid low oil prices, major oil companies around the world also suffered losses. The profits of Exxon Mobil dropped by 58% in the last quarter of 2015 compared with the same period of 2014. BP lost as much as 6.5 billion US dollars in 2015, as the largest loss during the recent 20 years. Shellâ&#x20AC;&#x2122;s proits plunged 80% in 2015. 44

Business

Business CEFC China Energy Journal

As a consequence, upstream operations in petroleum industry came into a crisis. Proits with PetroChina’s exploration and development sector were 33.9961 billion yuan in 2015, down 81.8% year-on-year. Upstream operations with Sinopec Corp. lost 17.4 billion yuan in 2015. Qiu Xiaofeng(裘孝锋), a senior analyst with research department of China Galaxy Securities, said plunge in upstream sector resulted in PetroChina’s proit plunge. Upstream sector served as the mainstay of PetroChina and contributed over 80% proits of the company in past years, he added. Continuous fall of international oil prices also dragged down performance of Sinopec Corp. in the upstream. Low oil prices, as a double-edged sword, also forced oil enterprises to reduce losses. Cut of costs as well as improvement of quality and efficiency have become key words for PetroChina, Sinopec Corp. and CNOOC Ltd. PetroChina lowered its costs and energy consumption, taped potentials and promoted efficiency constantly through innovation and fine management. According to PetroChina’s annual report, its capital expenditure in 2015 was about 202.2 billion yuan, down 30.7% from a year earlier. The downward trend continues and capital expenditure of PetroChina will further decline to 192 billion yuan in 2016. Sinopec Corp. brought its advantage of integration into full play, through increasing income, reducing expenditure, improving eficiency, advancing constantly structural reform as well as scientific and technological innovations. In 2015, capital expenditure with Sinopec Corp. reached about 112.2 billion yuan, falling 27.4% compared with the figure of the previous year. In 2016, Sinopec Corp. will witness another 10.6% decrease in capital expenditure. 46

CEFC China Energy Journal

Annual capital expenditure of CNOOC Ltd. in 2015 was 66.5 billion yuan, diving 37.9% yearon-year. In particular, expenditure on exploration reduced by 37.9% from a year earlier. Costs of each barrel of crude oil dropped 5.9% to 39.82 US dollars from the previous year, experiencing decreases for two consecutive years. Meanwhile, CNOOC Ltd. lowered its goal of net production for the irst time in the past 16 years to 470-485 million barrels oil equivalent.

and gas pipeline network conforms to the general direction of the oil and gas system reform, and constitutes an important part of the reform. The reform will take into consideration the actual conditions of domestic oil and gas pipeline network, and will be implemented step by step to realize the overall goal of integrating pipeline and network resources and achieving independent and market-

oriented operation of oil gas pipeline network. Recovery of the world economy will still be weak, global oil supply will in general exceed demand, and international oil prices will stay low, according to industry insiders.. With the reform of oil industry initiated, PetroChina, Sinopec Corp. and CNOOC Ltd. will face new challenges.

Benefiting from shift of profits from upstream to downstream of petroleum industry chain, performance of oil refining sector improved in general. In 2015, the refining and petrochemical sector of PetroChina ceased to lose money and began to turn out profits for the first time since 2011, with operating profits of 4.883 billion yuan and an increase of 28.443 billion yuan in reversing losses from the previous year. The operating proits from PetroChina’s oil refining sector were 4.69 billion yuan in 2015 with improvement of 11.845 billion yuan from that in 2014. Operating income of petroleum processing sector with Sinopec stood at 21 billion yuan in 2015, which increased by 22.9 billion yuan from a year earlier and became the main source of proits. According to Qiu Xiaofeng, the situation of supply exceeding demand will be improved but mainly in the second half of 2016. Oil prices may not rise until the latter half of the year, and there will still be great pressures for upstream operations in the irst half of 2016. It is predicted that more integration programs on oil and gas pipeline network will be launched, and the reform of oil and gas system especially the separation of pipeline network from oil giants will enter a deep water zone. PetroChina, the largest petroleum and natural gas enterprise in China, undertakes the important task of state-owned enterprises reform and the reform of oil and gas system. Separation of oil 47

Energy Security

CEFC China Energy Journal

China Maintains Growth in Proven Oil and Gas Reserves in 2015

215 million tonnes, 1.9% higher than that in the previous year. During the 12th Five-Year Plan (2011-2015), Chinese newly-added proven geological reserves of crude oil have topped 1 billion tonnes for five consecutive years. China posted 6.127 billion tonnes of accumulated new proven geological reserves of crude oil in 2011-2015, which was 375 million tonnes or 6.5% higher than that in 20062010. Ten oil fields had more than 100 million tonnes of newly-added proven geological reserves of crude oil. Chinese total crude oil production was 1.047 billion tonnes during the 12th Five-Year Plan period, 94 million tonnes or 9.9% higher than that in the 11th Five-Year Plan period.

Yu Huan

the MLR.

China’s proven reserves of crude oil and natural gas witnessed growth in 2015 in addition of steady output increase in particular with shale gas production, said Yu Haifeng (于海峰), director of department of mineral reserves with the Ministry of Land and Resources (MLR) at a press conference by the MLR in early April.

Chinese newly added proven geological reserves of crude oil stood at 1.118 billion tonnes in 2015, marking the 13th year and the 9th consecutive year with over 1 billion tonnes of new discoveries. The newly added proven technically recoverable reserves of crude oil totaled 217 million tonnes. Two oil fields reported over 100 million tonnes of newly added proven geological reserves, respectively. Up till the end of 2015, the remaining technically recoverable reserves of crude oil stood at 3.496 billion tonnes.

China records 1.118 billion tonnes of newlyadded proven geological crude oil reserves and 1,110.6 billion cubic meters of newly-added proven geological gas reserves in 2015, increasing 5.37% and 0.58% year on year, respectively, according to 48

In 2015, national crude oil output totaled

In 2015, China maintained growth in proven geological reserves of natural gas since 2011. China’s newly-added proven geological reserves of natural gas stayed at 677.22 billion cubic meters while the newly-added proven technically recoverable reserves of natural gas totaled 375.435 billion cubic meters. Two natural gas fields had over 100 billion cubic meters of proven geological reserves. The remaining technically recoverable reserves of natural gas read at 5193.945 billion cubic meters by the end of 2015. In 2015, China produced 124.357 billion cubic meters of natural gas (shale gas, coal bed methane, carbon dioxide gas excluded), 0.4% lower than that in 2014. During the 12th Five-Year Plan period, Chinese annual newly-added proven geological reserves of natural gas exceeded 500 billion cubic meters for ive consecutive years. Accumulative newly-added proven geological reserves of natural gas totaled 3.92 trillion cubic meters in 2011-2015, 819.339 billion cubic meters or 27.7% higher than that in

2006-2010. Chinese total natural gas production reached 601.317 billion cubic meters during the 12th FiveYear Plan, 223,008 billion cubic meters or 54.8% higher than that in the 11th Five-Year Plan period. China’s newly-added proven geological reserves of shale gas jumped to 437.379 billion cubic meters in 2015. The country added 109.345 billion cubic meters of technically recoverable proven shale has reserves. By the end of 2015, the remaining technically recoverable reserves of shale gas were 130.338 billion cubic meters. China generated 4.471 billion cubic meters of shale gas in 2015, 258.5% higher than that in last year. I n 2 0 11 - 2 0 1 5 , C h i n a m a d e s i g n i f i c a n t breakthroughs in the exploration of shale gas. China has realized accumulatively 544.129 billion cubic meters of newly-added proven geological reserves. Since commercial development of shale gas in 2014, Chinese total production of shale gas has reached 5.718 billion cubic meters. Still, China only registered 2.634 billion cubic meters of newly-added proven geological reserves of coalbed methane (CBM) in 2015 in comparison of 60.2 billion cubic meters in 2014. Plus, China added 1.317 billion cubic meters of technically recoverable CBM reserves in 2015. Up till the end of 2015, remaining technically recoverable CBM reserves stayed at 306.341 billion cubic meters in China. In 2015, China produced 4.425 billion cubic meters of CBM, up 24.75% year on year. During 2011-2015, Chinese newly-added proven geological reserves of CBM totaled 350.489 billion cubic meters accumulatively, 184.48 billion cubic meters or 111.1% higher than that in the previous ive-year period. 49

Technology

Technology CEFC China Energy Journal

CEFC China Energy Journal

Zhu Xuerui

Self-grown “Grain” Helping China Take

the Lead in Fourth-generation Nuclear Power, with the First Production Line of Fuel Elements for High—temperature Gas—cooled Reactor Put into Operation

Rongcheng and Baotou, two cities in China hundreds of miles apart, one in Shandong province and the other in Inner Mongolia, are closely bound up by the first nuclear power plant with hightemperature gas-cooled reactors (HTGR) in the world. When fuel elements – the “grain” of nuclear plants – are shipped from Baotou to Rongcheng and turned into clean electric energy through the operations of reactors, the industrialization of advanced fourth-generation nuclear power technology will start up in China. The first tank of triuranium octoxide powder was slowly poured into the dissolution tank on March 27 in the workshop of China North Nuclear Fuel Co., Ltd (CNNFC), marking the successful completion of all construction and formal entry into production of the fuel line for the HTGR power plant, a major national science and technology project and also a demonstration project under construction for three years. The chief designer of the project, Professor Zhang Zuoyi from Tsinghua University pointed out that the completion of the irst industrial-scale HTGR fuel line in Baotou indicated China has led the world in developing and applying fourth-generation nuclear power technology. In the 1970s, Tsinghua University started the research and development of HTGR and its fuel elements, completed a trial production line for spherical fuel elements and produced cuttingedge coated-particle fuel elements, thus providing advanced fuel elements for the 10MW trial HTGR, signaling the birth of manufacturing technology of HTGR fuel elements for which we possessed our own intellectual property rights. After the trial reactor’s entry into operation in 2000, with the accelerated development of nuclear power in China, HTGR came into the stage of commercial development, with great importance

having been attached to it by the industry and the from the state level as well. In December 2004, the Investment Agreement on Jointly Constructing High-Temperature Gascooled Reactor Demonstration Project was signed between China Huaneng Group, China Nuclear E&C Group and Tsinghua University. According to the agreement, the three parties would form a joint venture, responsible for the construction and operation of the 200MW HTGR commercial demonstration nuclear plant. In 2006, the State Council released the Outline of the National Program for Long- and Medium-Term Scientific and Technological Development (2006-2020), listing “advanced large-scale pressurized water reactor and HTGR” among the 16 national technology and science major projects. It also explicitly set up the aim as building a 200MW HTGR demonstration nuclear power plant, on the basis of which research and development should be conducted to construct related industrial auxiliary projects and to maintain China’s international leading position in this area. As a support project for the national technology and science major project, the importance of the production line for HTGR fuel elements by CNNFC is self-evident. It is understood that the production line will have an annual capacity of 300,000 spherical fuel elements and is based on Tsinghua University’s manufacturing technology of spherical fuel elements. It will be a comprehensive production line consisting of multiple processes such as uranium chemical conversion, nuclear core manufacturing, coated particles manufacturing, spherical fuel elements manufacturing, base graphite powder manufacturing, and liquid waste processing and solid waste recycle. “This is the irst industrial scale fuel elements 51

Technology

Technology CEFC China Energy Journal

production line with the characteristic of fourthgeneration nuclear technology in the world, and for which we possess complete intellectual property rights,” said Mr. Niu Xiaoping (牛小平), manager of the HTGR fuel elements plant of CNNFC From the lab of Tsinghua University to CNNFC workshop, it took more than 40 years of scientific research, equipment development and engineer design to increase the capacity for HTGR fuel elements from 100,000 to 300,000. It also took ten years to have the production line approved, constructed and put into operation. In February 2013, the environment impact assessment and preliminary security analysis report on the project was approved by the Ministry of Environmental Protection, and the National Nuclear Security Administration issued a permit for its construction. On March 16 of the same year, construction formally started. In April 2015, the production line entered into impoverished fuel feeding and trial production stage, and the quality appraisal for related equipment and processes was completed successively, with the whole production line becoming operational and qualiied simulation spherical fuel elements being produced. In March this year, the operating license for the production line was approved by the National Nuclear Security Administration. Since Shidaowan demonstration HTGR plant is scheduled to start commercial operation in 2017, fuel elements for the irst reactor must be delivered on site by then. Analysts pointed out that as the first HTGR spherical fuel elements production line in the world, it ensures the supply of fuel elements to our 200MW HTGR demonstration nuclear power plant, and at the same time creates favourable conditions for the research and development of HTGR fuel elements manufacturing technology, as well as accumulating technology experience for the production of fuel elements for future HTGR plants. 52

CEFC China Energy Journal

Among the six fourth-generation reactor types selected by “Generation IV International Forum”, HTGR is widely recognized as the fourthgeneration nuclear system that could enter into commercial operation irst, boasting the advantages and features such as being secure, multiple utility and modulated construction. In 2004, the result of inherent security verification test conducted at the 10MW high temperature reactor showed, in the scenario of severe incident, including the loss of all cooling capability, the reactor could remain under safe conditions and release remaining heat without any human or machine intervention. It was learned from industry experts that the design of high temperature-resistant and multilayer coated spherical fuel elements was of vital importance with respect to ensuring the inherent security of HTGR. As the “grain” of nuclear power plants, fuel elements are not only source of energy, but also the irst protective screen of nuclear security. They are core of the kernel. To provide “grain” to the first HTGR demonstration project in the world, CNNFC has gone through numerous tests, and is facing opportunities right now. Niu Xiaoping said: “CNNFC is the only enterprise in China which has the most comprehensive types of nuclear plant fuel elements production lines. We possess abundant reserve of technology and talents, as well as advanced equipment. Estimated on the basis of 300,000 fuel pellets per year, the annual output of this line is not very high, but what we value is its demonstration implication and prospects.” With the development of nuclear power towards scale, the industry has been actively pushing forward the industrialization of HTGR in recent years, hoping the advanced fourthgeneration nuclear power technology which we

own independent intellectual property rights would accelerate the “corner overtaking” by China’s nuclear power. It is learnt that China Nuclear E&C Group (CNECC), the shareholder and participant of the HTGR demonstration project, has successively started preliminary work of HTR projects in Jiangxi, Hunan, Guangdong, Fujian, Shandong, Hubei and Zhejiang provinces, and is now set about constructing the first 600MW HTR commercial project in Ruijin, Jiangxi province. In addition, CNECC has promoted HTR technology to key countries and areas such as the United Arab Emirates, Saudi Arabia and South Africa. T h e s e l f - s u ff i c i e n c y o f f u e l elements solved the “cut-throat” problem the export of nuclear power technology faced before. On the other hand, the industrialization and “going overseas” of HTGR has direct impact on CNNFC’s layout and development in the ield of fuel elements. As far as a new field that no one has touched before is concerned, the accumulation of experience and increase of capability is more than precious. Industry experts indicated, the formal operation of the irst production line in the world is a key step forward to ensure the demonstration plant’s first and follow-up reactors’ fuel supply and to push forward the commercialization of HTGR technology, as well as accelerating the “going overseas” pace of China’s nuclear power. 53

Planet

Planet CEFC China Energy Journal

A Yalong River Remade by Complementing Wind, Solar, and Hydro Energy Interview with Chen Yunhua ( 陈云华 ), President of Yalong River Hydropower Development Co., Ltd.

CEFC China Energy Journal

Zhu Xuerui On March 27th, the last unit of Tongzilin Hydropower Station, the concluding project of the second phase of hydropower development in the Yalong River Hydropower Development Co., Ltd., was officially put into operation, which signified the wrapping-up of hydropower development for the downstream area of the river and boosted total operating installed capacity of the Yalong River hydropower base to 14.7 GW, thus making it a key power supply point in China’s West-East Power Transmission Project. Yalong River Hydropower Development Co., Ltd. announced on the same day that it would shape a world-class demonstration base of clean energy with an installed capacity of over 10 GW while moving steadily ahead with hydropower development across the Yalong drainage basin, helped by the prominent advantage of being the only one developer of the river. Why building such an energy base? What about its scale and advantages? How significant is clean energy development in the Yalong drainage basin to the local area and to the restructuring of China’s energy mix? Chen Yunhua, President of Yalong Drainage Basin Hydropower Development Co., Ltd. (Hereinafter referred to as the Company) replied to the above-mentioned questions. The best model for energy development China Energy News (Q): The Company is mainly dedicated to hydropower development.

What are the considerations behind a clean energy base that combines the distinctive advantages of wind, solar and hydro power? Chen Yunhua (A): Currently, non-fossil energy only account for 8% of China’s primary energy consumption. To reduce CO2 emission intensity by 40-50% by 2020 compared with the 2005 level and increase the share of non-fossil energy including renewable energy and nuclear energy to 15% in primary energy consumption, we need to rely heavily on the development of renewable energy including hydropower. It was observed at the 3rd meeting of the 12th National People’s Congress that wind and hydro power must be vigorously tapped into. Meanwhile, with increasing demand for renewable energy and deepening reform of the electricity system, the country is likely to come up with a quota system for renewable energy to ensure its development and optimize the energy mix. With the latest round of electric power system reform came the removal of price controls over on-grid tariff as well as power generation and consumption planning, which enables marketoriented pricing and greater competitiveness for hydropower developers who are good at replenishment and regulating due to cascaded hydropower stations and are expected to be more profitable with quality power. Wind and hydro power, as clean energy prioritized for connection to the grid by the central government, are processed and distributed by the Company’s watershed centralized control center, ensuring safe and stable supply of clean energy in quantity by the grid. With gradually market-oriented power distribution and sales, the Company could have instant access to the power sales market based on its innate advantages, get a head start by grabbing medium and large industrial clients, and extend the industrial chain to nurture new areas of growth. Besides, Sichuan province is abundant both

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in hydropower and new energy. The Yalong River watershed in west Sichuan province is rich in wind and solar energy and well poised for the development of wind and solar power. In order to make full use of its resources, Sichuan province formulated the clean energy development strategy of prioritizing hydropower development and accelerating power generation from new energy, and focused on the Yalong River Hydropower Base and Clean Energy Demonstration Base for Complementing Wind, Solar and Hydro Energy in its endeavors to shape a Demonstration Province for Clean Energy. Q: Is there any calculation of the exploitable wind and solar resources in the Yalong River watershed? How abundant they are in comparison with the installed capacity of hydropower across the Yalong River watershed? A: Ganzi Tibetan Autonomous Prefecture, L i a n g s h a n Yi A u t o n o m o u s P r e f e c t u r e a n d Panzhihua City in west Sichuan province where the Yalong River runs across are abundant in wind and solar energy. According to initial calculation, the exploitable wind and solar resources across the Yalong River watershed exceed more than 30GW and are accessible for development, with the potential capacity equivalent to all the hydropower stations combined on the Yalong River. According to preliminary planning, about 80 wind farms with an estimated installed capacity of 12.61GW and about 25 solar farms with an estimated installed capacity of 18.16 GW will be built in the Yalong River drainage basin. With a total capacity of 30.77 GW and annual generation of about 51.9 billion kWhs, total investment will approximate 307.7 billion yuan. The planned 22 cascaded hydropower stations on the Yalong River main stream have a combined capacity of nearly 30 GW. That means 60 GW of total installed capacity for the Yalong River Clean Energy Demonstration 56

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Base for Complementary Wind, Solar and Hydro Energy, which is likely to become the largest of its kind in the world. Q: In recent years, we have witnessed some attempts at the output of energy combinations, for example, hydro plus solar power as well as wind plus coal-generated power. What is unparalleled about the Yalong River Clean Energy Demonstration Base for Complementary Wind, Solar and Hydro Energy? A: The Yalong River is an exemplar of one developer for one river, which makes smooth coordination possible. Comprehensive development of wind, solar and hydropower enables us to make full use of the regulating capacity of multiple hydropower stations in the Yalong River watershed, thus counteracting the impact of unstable wind and solar power generation and connection to the grid and leaving room for peak seasons when wind and solar power are connected to the grid in quantity. In this way, random, volatile and intermittent nature of wind and solar power is no longer a problem and optimized utilization of resources is made possible. Three major reservoirs, namely, Ertan, Jinping and Lianghekou, quite effective in terms of regulating, serve as an enormous energy storage system, where hydropower development is suspended during the dry season and makes way for wind and solar power while the other way around during the rainy season when wind and solar output wanes but hydropower development is running at adequate or even full capacity. These three types of electricity is transmitted out in combinations following preparations by the smart operation scheduling system, turning volatile generation into stable output and enabling safe and stable grid performance so that quality clean energy could reach the general public. Besides, our company, good at river basin

development and management, suficient in capital, well-positioned in human resources and sound in public partnerships, coupled with the premium West-East Power Transmission routes completed or under planning, makes sure that the Yalong River clean energy base could be developed in the most optimal mode. Clean energy: wise investment Q: According to the latest description of your company on strategies for the Third Phase, four to ive cascaded power stations including Lianghekou in the middle reaches of the Yalong River will be completed before 2025, which will create 8 GW of newly installed capacity. That is five years late compared with the original plan. Do you think it has something to do with the electricity overcapacity at the moment? A: Given sluggish global economic recovery and Chinese economic â&#x20AC;&#x153;new normalâ&#x20AC;?, power generation restructuring will be long in duration with repeated wrestling, and overcapacity will stick around for a relatively long time to come. At the same time, as China is cracking hard nuts in law-based governance, hydropower development in Tibetan-inhabited regions is complicated by political, economic and cultural environment and easily exposed to huge legal risks. Therefore, we postponed our goals for the river basin development on our own accord to increase strategic resilience and elbow room, so that we can proceed with land requisition and resettlement in accordance with laws and regulations, and manage carefully factors including safety, quality and investment control. In this way, our company will maintain sound and stable growth, constantly moving towards science-based river basin development and management and keeping our project progress in pace with socioeconomic development.

Q: Due to electricity overcapacity at the moment, curtailment of power is ubiquitous across the country, including Sichuan province. Have you taken into account of the risks related to continued development of wind and solar energy? A: On second thoughts, electricity overcapacity in China is more of a structural sense, mainly due to an unbalanced energy mix that is insufficient and inadequate in the development of clean energy such as wind, solar and hydro power, which is out of step with the pressing need to control air pollution and alleviate stress on both resources and environment. It was therefore proposed at the countryâ&#x20AC;&#x2122;s work conference on energy that we have to increase the share of non-fossil energy to about 15% in aggregate primary energy consumption by 2020. It was also made clear at the year-end economic work conference of Sichuan province in 2015 that we need to develop vigorously clean energy, such as hydro, wind, solar and shale gas, so as to materialize the vision of a demonstration province for clean energy. All these have shown that the development of clean energy mainly comprising hydropower is hugely promising and our company is in a period of strategic opportunity for expedited development. Moreover, the supply-side reform proposed by the central government is adapting to changes on the demand side and rejecting the mentality featuring blind launch of new projects and obsession with the size the economy, so as to restructure power generation against the background of changing demand side, new changes in the electricity landscape and new trends in global energy development. We are convinced that clean energy, including wind and PV, will remain nascent industries for a long time to come. Though there are difficulties concerning digestion and transmission of new energy, they are temporary in nature. It is wise to invest in new energy from a long term perspective. 57

Foresight

Foresight CEFC China Energy Journal

CEFC China Energy Journal

CAP1400 Is Expecting Two Big Overseas Orders Inked This Year Exclusive Interview with Wang Binghua (王炳华), President of State Power Investment Corporation

Zhao Wei

expansion of CAP1400 lately?

As State Power Investment Corporation (SPIC) was formed after merging State Nuclear Power Technology Corporation (SNPTC) and China Power Investment Corporation (CPIC), the newly-formed SPIC is ready to flourish at the outset of the 13th Five-Year Plan.

A: Currently we are emphasizing on promoting the projects in South Africa and Turkey. And we will soon send out bid invitations for the nuclear power project in South Africa and announce the pre-winning bidder in August after a month-long review in July. China has cooperated with South Africa twice in technical training, and CAP1400, as China’s lagship brand in nuclear power “going overseas”, has always been the featured unit in South Africa.

What actions will SPIC take to expand its selfdeveloped third-generation nuclear technology CAP1400? And how does it solve the problem that electricity generated is hard to go outwards in northeast China? Wang Binghua (王炳华), president of SPIC gives concrete answers to these questions in the following interview. Q: Would you please tell us about the overseas 58

We are also conident in the project in Turkey. Turkey’s third nuclear power plant is located in Igneada. Turkish government is attaching great importance to it and trying to put them into operation by 2023, which means that Turkey

will put an end over the history without nuclear power. Launching a joint bid with America’s Westinghouse, China is more competitive compared to other bidders. The to-be completed AP1000 nuclear power plant and the completed CAP1400 technological research and development are proofs that we are capable of building nuclear power plants in Turkey.

should be proactively implemented.” So what we need to do now is to be well prepared.

Q: Does SPIC have any plans during the 13th Five-Year Plan period?

Q: With the operation of new nuclear units in Hongyanhe nuclear power plant and the construction of new nuclear power plants in recent years, the absorption problem of nuclear power in northeast China is becoming increasingly severe, which has impacted the safety, stability and development of nuclear power in this area. So what will SPIC do to tackle this problem?

A: It is explicitly written on the state 13th FiveYear Plan that China will build AP1000 projects in Sanmen and Haiyang; to build HPR1000 demonstration projects in Fuqing (Fujian province) and Fangchenggang (Guangxi Zhuang Autonomous Region); to start the construction of CAP1000 demonstration project in Rongcheng (Shandong province) and several new nuclear power projects in coastal areas as well as to speed up the construction of the phase III of Tianwan nuclear power plant.

A: The situation in northeast China is kind of special. First of all, the economic condition in three northeastern provinces is not stable. And second, in winter northeast China heavily depends on integrated heating and power and ensuring household heating is put irst place. So the peak load shaving capacity is limited in winter. The utilization hours of clean energies including wind power, solar power and nuclear power in the northeast China are all in decline.

The year of 2016 will be “the year of SPIC”, with AP1000 beginning to generate electricity and CAP1400 starting construction. Haiyang nuclear power plant phase II and Zhanjiang nuclear power plant in Guangdong province will be ratified after the “two sessions” and are now in good progress. Bailong nuclear power plant in Guangxi is going to start construction during the 13th Five-Year Plan period. Besides, SPIC will be responsible for the research and development of heavy-duty gas turbine, which is one of China’s state key scientiic research programs.

As the first nuclear power plant in northeast China, Hongyanhe faces a huge inluence. Currently, there are three gigawatt-level pressurized water reactors (PWR) in commission of the plant. Units of No. 4, No.5 and No. 6 are under construction and No. 4 will be put into commercial operation in June. So we operate only two units in winter and only one unit during Spring Festival when the load sees further decline.

Q: What do you think of inland nuclear power projects? A: There is no doubt that we will develop inland nuclear power projects. It’s just a matter of time. It is also written in the state 13th Five-Year Plan that “preliminary work on inland nuclear power projects

It needs to be noted that nuclear power plant is operated in accordance with its base-load which means it is impossible for nuclear power plants to be involved in peak shaving. If so, they will be posed a strong impact on their safety, reliability and economical efficiency. The reason why the utilization hours of the American nuclear power plants exceed 8,000 hours is mainly because the storage power stations are involved in peak shaving. 59

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Q: In your opinion, how do we completely resolve this problem? A: I think China needs a compensation mechanism for peak shaving power plants so as to stimulate enthusiasm in investing storage power stations. Besides, we also need to build a group of storage power stations especially for the peak shaving of nuclear power plants. However, China lacks clear operation and pricing mechanism for storage power stations. And we are considering making possible breakthrough in the construction of offshore storage power plants. Q: Not only nuclear power industry, the whole clean energy industry is facing the absorption dificulty. What’s your opinion about it? A: Many industries in our country always encounter a common problem in their development process. They are growing at such a fast speed that the related planning cannot even keep pace with it. China’s clean energy industry has seen large scale development in just two to three years, but neither

the research technology and storage capacity nor the manufacturing and investment are developing at an coordinated pace. In the past, each industry is developing without a comprehensive planning. For example, power plants just focus on their own business of power generation and the same for grid enterprises and manufacturers. Thus, in order to solve the absorption difficulty, we need to seek a new mechanism and system. Q: How do you see the supply-front reform in energy industry? A: Supply-front reform is crucial to nuclear power enterprises. As China’s economy enters the “new normal”, decline will be seen in the growth of power demand as well as the utilization hours of generating equipment. And even some generating equipments are leaving unused. However, this is a very good opportunity for energy industry to adjust itself, and what we need to do is to improve the quality and eficiency of the industry.