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Electric Power Industry in China Hui Ren University of Wisconsin-Madison North China Electric Power University PSERC Tele-Seminar, Feb. 6, 2007

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Page 1: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

Electric Power Industry in China

Hui RenUniversity of Wisconsin-Madison

North China Electric Power University

PSERC Tele-Seminar, Feb. 6, 2007

Page 2: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Contents

Power network in ChinaPower supply and demandCauses of 2002-2005 power shortageFuture power development plan and challengesPower industry reform

Page 3: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power network in China

500kV500kV

220kV220kV330kV330kV

Thermal Thermal PlantPlantHydroHydroPlantPlantNuclearNuclearPlantPlant

XinjiangXinjiang

TibetTibet

NortheastNortheast

NorthNorthNorthwestNorthwest

ChuanyuChuanyu CentralCentralEastEast

SouthSouth

Power network coverage 96.4% Hainan

Shandong

Fujian

Page 4: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Grid interconnection

Northeast

Tibet

North China

Northwest

South China

Central ChinaEast China

Taiwan

500KV AC(2)2001 / 051200 MW

±500KV DC(3)1989 / 2003/22077200 MW

500KV AC(1)2003 / 09800 MW

120KV DC(1)2005 / 06360 MW

±500KV DC(1)2004 / 023000 MW

500KV AC(3)20011900 MW

500KV AC(2)2006 / 061200 MW

State Grid Corporation

Page 5: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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North corridor

Central Corridor

South Corridor

The capacity of each corridor will reach about 20GW in 2020.

Power transmission from The West to the East: Three transmission corridors

Page 6: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

Growth of GDP, energy and electricity use

Page 7: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

China’s installed capacity and power generation output are second largest in the world’s electricity industry following the United States

Source: China Electricity Council (http://www.cec.org.cn/cec-en/index.htm

Page 8: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

(100%)(24.7%)(10.6%)(% of world total)

2,57813,1201,288Power generation per capita (KWh/person)

15,614.13,858.51,654.2Power generation (TWh)

(100%)(26.4%)(9.6%)(% of world total)

3,372.8979.6356.6Installed capacity (GW)

World totalU.S.China

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

American w orld total china

Electricity intensity per capita is 1/10 that of U.S. and less than half of the world’s average.

2002 Per Capita Generation in

KWh per person

2002 Data

Page 9: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

Coal is the major generation supply fuel.2.3% 0.06%

15%

82.64%

Nuclear

ThermalHydro

Others

Power generation in 2004 Installed capacity in 2004

73.72%

24.57%

0.16%1.55%

(1,807 TWh)

(328 TWh)

(50 TWh)

Page 10: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

41%

15%17%

8%5%

5% 5% 4%≥300MW

200-300MW

100-200MW

50-100MW

25-50MW

12-25MW

6-12MW

6MW

Coal-fueled installed capacity mix in 2003 by unit size. The total installed capacity is

289,770MW

Page 11: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

69.8

1.07

2.2

3.47

5.04

13.22 5.2

Source: China Statistical Annual and China Energy Resource Statistical Annual, and China Electric Power Information Center. 2002 data.

Industry

Agriculture, forestry,ranching and fishery

Residential

Other

Commercial

Transportation and communication

Construction

Preliminary industry

Secondary industry

Tertiary industry 10.71%

70.87%

5.2%

13.22%

69.8

13.2

17

28

36.5

35.5

47.7

31.3

21

49.3

15.2

35.5

0%10%20%30%40%50%60%70%80%90%

100%

china U.S. Japan Korea

other

Resid

Indus

Industry electricity use dominates other sectors

Share of total 2002 electricity use by sector in 4 countries

China’s 2002 elec. use

Page 12: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

13%18%20%-2%18%‘02-’05 annual growth

11.5%10.65%74.85%3%

11.24%10.7%74.9%3.16%

10.2%13%73.8%3%

24.4%1,900.82,422.213751.255918,6332003

10.4%1,9801,60010,61978014,9792002

2005

2004

Year

2,840

2,444

13.22%

Residential

13.5%2,63018,48074024,690

16.3%2,329.516,301687.521,762

5.2%

Agriculture, forestry,

ranching and fishery

70.87%

Industry and construction

10.71%

Rate of increase

relative to the previous year

Transportation, communication,

commercial and others

Total

Electricity consumption (2002-2005)

Business consumption growth dominates total growth

Page 13: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

Power shortages were being caused by need for more generation capacity (Trillion Yuan = $130B)

Page 14: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power supply and demand

Demand exceeded supply

Balance

Supply exceeded demand

Demand and supply condition by region (2005)

Power shortages occurred in three major regions.

The number of provincial grids with curtailments in the peak period:12 (2002)22 (2003)24 (2004) 26 (2005)

Page 15: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Causes of power shortages

Climatic variability (droughts and heat waves)Economy, and therefore energy use, is growing faster than electric generation capacity can be built.

6.4%

9.6%

9.2%7.5%

12.8%

6.6%

9.8%

8.0%

5.0%6.0%7.0%8.0%9.0%

10.0%11.0%12.0%13.0%14.0%

1980-1987 1988-1995 1996-2000 2001-2005

Growth rate of power consumption

Growth rate of installed capacity

Page 16: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Causes of power shortagesCoal supply shortages and transport bottle-necksEscalating coal prices and decreased energy content of coal. Differences in price trends of “regulated power prices” and “unregulated coal prices”.

Blue indicates supply sources and red indicates major load centers

Page 17: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Addressing power supply shortages

Generation sectorDeveloping coal-fired generation – high boiler pressure, high capacity, and environmentally friendly – is the direction.Accelerating development of hydropower, nuclear power, and gas-fired power generation.Introducing renewable energy (solar, wind,…)

Network sectorStrengthening the grid.

Intensifying energy conservation efforts and improving energy efficiency.

Page 18: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Environmental challenges

Source: International Energy Association 2004

China’s carbon dioxide emissions from consumption of fossil fuels are expected to increase from 3,000 million tons in 2000 to 5,700 million tons in 2020.

0.001,000.002,000.003,000.004,000.005,000.006,000.007,000.00

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

United States China

Page 19: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Environmental challenges

97.5%120.8Mt3.13MtSmoke dust

10.8%0.97Mt8.01MtSO2

efficiencyremovalemission

China is experiencing rising SO2 and NOX.

Efficiency of SO2 and smoke dust emission

reduction systems(2003)Emission trends

Page 20: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Improving generation and delivery efficiency

3206.25.12020

3747.185.822005

Coal consumption (g/kWh)

Power transmission losses %

Internal use of electricity %

Greater generation and delivery efficiency is reducing rates of internal use of electricity, transmission losses, and coal consumption.

0123456789

10

1980 1990 1995 2000 2001 2002 2003320330340350360370380390400410420

Internal use of electri. (%)power transmission losses (%)coal consumption (g/kWh)

Page 21: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Strategies for overcoming coal supply and delivery challenges

Alliances between coal mining companies and power generation companiesMine-mouth power plants substituting electric transmission for coal transportation

Shenhua model: simultaneous stock holding and building of power stations

Shanxi coking coal co. model: building of power station by coal mines

Luneng model: building of coal mines by power enterprises

Huainan model: joint venture to establish the new coal mines and power stations

Page 22: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Hydro-power development

HydroResources: 500GW

By the year 2005:Installed capacity120GW (including 34.1GW from small hydro plants).395TWH, 15% of the total annual generation.

Page 23: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Min,zheMin,zhe, , gangan14161416

XiangxiXiangxi791791

NanpanjiangNanpanjiangHongshui riverHongshui river

13121312WujiangWujiang

867867

Northern Main Northern Main Stream of Stream of Yellow riverYellow river

609609

DaduDadu riverriver18051805

YalongYalongriverriver19401940

JinshajiangJinshajiang47894789 Upper reachesUpper reaches

of of ChangjiangChangjiang28312831

LancangjiangLancangjiang21372137

黄 河

黑?

? 江

绿

江辽

第二

? 松花

河黄

洪泽湖

长富春江

闽江

鄱阳湖

清 江

洞庭湖

资水

沅水

澧水

长江

河雅

砻江

黄河

大通

青海湖洛

渭河

南? 江盘

水 河

雅 鲁藏

布 江

天河

塔里木河

车尔臣河

孔雀

葛洲坝271。5

隔河岩120

三峡1768

天生桥120

天生桥132

岩 滩120

漫 湾125

二 滩330

龙羊峡128

李家峡200

刘家峡116

白 山150

12 Major12 MajorHydropowerHydropowerLocationsLocations(unit: 10(unit: 1044KW)KW)

NortheastNortheast11311131

Upper reaches Upper reaches of Yellow riverof Yellow river

14151415

Page 24: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Nuclear power

KEYNPP in operationNPP under constructionNPP being proposed

Page 25: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Potential wind power resource > 3000 GW

green=great, pink=good, blue=ok, yellow=poor(offshore & coastal potential not shown)

Page 26: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Wind power

By the year 2005:59 wind power plants, with total installed capacity of 1266MW.200,000 small wind units, located in rural areas, with total installed capacity of 30MW.Mass production of 750KW (and below) units; units at MW level is still in the trial phase.Key technology dependent on imports. However, design expertise growing in China.

By the year 2020 – 40GW

Wind farm under-construction

Dan Nan wind farm in Nan’ao

Page 27: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Solar power resource

Theoretically 1.7 trillion ton coal equivalent/year2/3 of the land with daylight hours surpassing 2,200 hours/year, equaling 5,000mega joule/m2

Most abundant in western regions

Page 28: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Solar power

PVInstalled capacity: 70 MW, mainly in the rural areas. (including “sending electricity to townships” project: 17MW).On-grid ceiling PV: Shenzhen 1MW project.Industrial capacity: 300MW units/year, but silicon materials depend on import.

Solar water heaters

Page 29: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Renewable energy policy

Renewable Energy Law of China -- effective from January 2006.

Establishing national targetsGrid connection prioritiesClassifying tariffs for RE electricitySharing cost at national levelSpecial fund for renewable energyFavorable credit and favorable tax treatment

Page 30: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Long-term target generation mix

65%

22%

7% 3% 3%

coal hydro gas nuclear new

325

560

108

246

644040

0.7

0

100

200

300

400

500

600

700

800

900

1000

2004 2020

Target generation mix in 2020

Installed capacity (GW)

Page 31: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power industry reform objectivesTo establish a power market system that will introduce competitive incentives, improve efficiency, lower cost, improve power pricing, optimize resource allocation, promote electric power development, and advance nationwide grid construction. This market system should encompass fair competition, orderly transition, and efficient development using separation of government functions from enterprise functions.

Page 32: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Reform goals

Goals of “Article Five” during the “10th Five-year Plan”

A: Separation of generation from grid (completed)B: Corporate separation of non-core functions (such as planning, designing, construction, etc.)C: Direct access to market by large usersD: Formulation of competitive regional power marketE: Bidding for access to gridsF: Make retail tariffs more market-driven

Page 33: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power industry reform history

20041997 1998 2002 2002 2002 2004

State Power Corp. (SPC)

established

Dissolved Ministry

of Electricity

East China starts pilot

regional power market

operation.

Power Regime Reform formally approved

by the State

Council

State Elec. Regul.

Commission (SERC) created

(October 2002)

SPC restruc-

tured Separation of gen. assets from

transmis-sion assets

Page 34: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power industry reform

generation assets

gridassets

China Huaneng Group

China Datang Group

China Guodian Group

China Huadian Group

China Power Investment Corporation

State Grid Corporation of China

China Southern Power Grid Corporation

Former SPC

To “ introduce competition and break the market monopoly introduce competition and break the market monopoly ”generation and grid sectors were separated.

Restructuring of the State Power

Corporation of China December 2002

Page 35: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power industry reform

36%

46%

1%

2%

5% 9% 1%

Comparison of the installed capacity of different types of players (2004)

Big 5 Generation GroupsState-owned enterprises other than Big 5 groupsLocal, government-owned enterprisesGeneration owned by Grid GroupState-owned Nuclear GroupPrivate generators from ChinaInternational private generators

Page 36: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Power industry reform – grid sector

State Grid CorporationTibet Autonomous RegionChina Southern Power Grid

Page 37: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Restructuring pilot program

East China: the most developed area; electricity consumption ranks first; installed capacity ≥100,000MW in 2005.One of two pilot regional power markets in China.May 18, 2004: East China’s first simulated bidding process for the next month.October 2005: simulated operation of China’s first day-ahead power market.April 2006: trial operation of day-ahead power market. East China

Power Grid

North East Power Network

Page 38: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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Restructuring pilot program

Generation units in East China:Category A: coal-fired units with capacity over 100MW (216 units registered by the end of 2005, generation capacity ≥58,818MW = 56.7% of total generation capacity in East China area). Participation Required.

Category B: gas-fuel units, oil-fuel units, hydro units, nuclear power units, etc. Participation Not Required

Market Participants

Grid Companies

Generation Companies

Neighboring buying/selling

entity

East China Grid Company

East China Power Dispatching & Trading

Center

Province (Municipality) Power Company

Province (municipality) Power Dispatching, Trading

& Settlement Center

Trading modes:Bilateral Transactions (between neighboring provinces and municipality)

Yearly Generation ContractMonthly Contract BiddingDay-ahead Market Real-time Balance Market

Page 39: Electric Power Industry in China...Industry Agriculture, forestry, ranching and fishery Residential Other Commercial Transportation and communication Construction Preliminary industry

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