Updates on the Chinese Energy Sector and the China LEAP Model:

Inputs to and Results of National and Regional Alternative Paths for China

Yanjia Wang, Alun Gu, Aling Zhang

EETC, Tsinghua University, China

3rd Asia Energy Security Workshop13-16 May 2005, Beijing, China

Part A: Background Information of Energy Situation in China

Yanjia Wang

3

Where Does China’s Energy Go?

• Basic facts in 2004– Primary energy production 1.846 billion tce– Total energy consumption 1.97 billion tce– Energy production and consumption both increased 1

5% than the year before– Coal consumption 1.87 billion ton, 14.4% higher– Crude oil consumption 2900 million ton, 16.8% higher

• More questions and worries internal, regional and worldwide– Energy security– International oil price– Emission from coal consumption

4

Poor on Domestic Conventional Energy Resources Source: Coal Economic Research 2005 Special Issue. Page 10

Remai ni ng recoverabl ereserves per capi ta(2003) - - Oi l ( ton)

05

1015202530

China

USA

Japan

World

Average

Remai ni ng recoverabl ereserves per capi ta(2003) - - NG ( cu. m)

0

5000

10000

15000

20000

25000

30000

Chi na USA J apan Worl d

Average

Remai ni ng recoverabl e reserves percapi ta (2003) - - Coal ( ton)

0

200

400

600

800

1000

Chi na USA J apan Worl dAverage

Remaining recoverable reserves per capita (2003)

China

USA JapanWorld Average

Coal (ton) 89 859 6 79

Oil (ton) 2.4814.4

30.06 24.85

NG (m3) 14081797

3312 27875

5

Low Consumption and Income Per Capita Source: Coal Economic Research 2005 Special Issue. Page 10

GDP per capi ta(US$)

1086

37457

33858

5709

0 10000 20000 30000 40000

Chi na

USA

J apan

Wor l dAverage

Energy consumpt i on percapi ta( kgce)

1299

11280

5678

2207

0 5000 10000 15000

Chi na

USA

J apan

Wor l dAverage

6

Primary Energy Consumption Source: China Energy Statistical Yearbook 2003

Coal Oil

7

Primary Energy Mix （％）Source: China Energy Research Society, Energy Policy Research, 2003.6

China World

Year 1980 1990 2000 2003 2003

Coal 72.2 76.2 66.1 67.1 26.5

Oil 20.7 16.6 24.6 22.7 37.3

NG 3.1 2.1 2.5 2.8 23.9

Elec. 4.0 5.1 6.8 7.4 12.3

8

Less Coal for Final UsersSource: China Energy Statistical Yearbook 2003

9

Heavily Relays on Small-scale Coal Mines Source: China Energy Research Society, Energy Policy Research, 2003.6

10

Death on Coal Mining Accidents (person/Mt)Source: China Energy Research Society, Energy Policy Research, 2003.6

Coal Economic Research 2005 Special Issue. Page 24* Calculated

Total Death*

(person)

China USA Russia

Average State-owned

Local TVE

1980 5066 8.17 7.11 10.50 9.03

1990 7300 6.76 4.53 10.19 16.88

2000 5800 5.80 0.97 3.46 10.99 0.039

2001 5951 5.13 1.88 4.23 15.44 0.041 0.490

2002 6997 5.07 1.25 3.83 12.12 0.027 0.335

2003 6951 4.17 1.08 3.13 9.62 0.031

11

China’s Petroleum Supply Course

Partial

dependence on oil im

port

Partial

dependence on oil im

port

Self-reliance

Self-reliance

Partial oil

exportP

artial oil export

Increasing oil import and

declining oil exportIncreasing oil im

port and declining oil export

Net oil im

porter with a grow

ing annual am

ountN

et oil importer w

ith a growing

annual amount

Net im

porter of oil productsN

et importer of oil

products

Net im

porter of crude oilN

et importer of crude

oil

1949 1966 1973 1991 1993 1996 Now

12

Higher and Higher Dependency on Import OilSource: China Energy Research Society, Energy Policy Research, 2003.6

Prod.

13

Oil Import Dependency

6.5%

30.2% 28% 29.1%35.4%

46.49%

0

50

100

150

200

250

300

350

1993 2000 2001 2002 2003 2004

Cons

umpt

ion/

Net

impo

rtMt

)（

14

2nd Power Generation Industry in the WorldSource: Coal Economic Research 2005 Special Issue. Page 37

Year Capacity/GW Generation/TWh

Total Thermal Hydro Nuclear Total Thermal Hydro Nuclear

1980 65.9 45.6 20.3 -- 301 243 58 --

1985 87.0 60.6 26.4 -- 411 318 92 --

1990 137.89 101.84 36.05 -- 621.32 494.97 126.35 --

1995 217.22 162.94 52.18 2.10 1006.95 807.34 186.77 12.83

2000 319.32 237.54 79.25 2.10 1386.5 1107.9 243.1 16.7

2001 338.49 253.01 83.01 2.10 1483.86 1204.48 261.11 17.47

2002 356.57 265.54 86.07 4.47 1654.16 1352.20 274.57 26.49

2003 391.41 289.77 94.90 6.19 1905.21 1578.97 281.33 43.85

15

ENERGY EFFICIENCY IN CHINASource: Handbook of Energy & Economic Statistics in Japan, 2004

Coal Economic Research 2005 Special Issue. Page 10

GDP Energy I ntensi ty

2558

189316851229

939 891 827 839

0500

10001500200025003000

1980

1985

1990

1995

1999

2000

2001

2003

toe/

MUS$

16

…has gone a long way Source: “Energy Efficiency Programmes in Developing and Transitional APEC Economies”, ISBN 4-931482-25-2 2003

-6%

-4%

-2%

0%

2%

4%

6%

8%C

hil

e

Ch

ina

Ho

ng

Ko

ng

, C

hin

a

Ind

on

es

ia

Ma

lay

sia

Me

xic

o

Pe

ru

Ph

ilip

pin

es

Ru

ss

ia

Ch

ine

se

Ta

ipe

i

Th

ail

an

d

Vie

t N

am

Ave

rag

e A

nn

ual

Ch

ang

e 19

85-2

000

Energy Intensity Electric Intensity

17

…but much remains …Source: “Energy Efficiency Programmes in Developing and Transitional APEC Economies”, ISBN 4-931482-25-2 2003

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8C

hile

Ch

ina

Ch

ine

se

Ta

ipe

i

Ho

ng

Ko

ng

Ch

ina

Ind

on

esia

Ma

laysia

Me

xic

o

Pe

ru

Ph

ilip

pin

es

Ru

ssia

Th

aila

nd

Vie

tna

m

To

nn

es

Oil E

qu

iva

len

t p

er

To

ou

sa

nd

19

95

US

D

World Average

0.264

18

China is still Looking for the Way of Development

- 0. 2 0. 2 0. 6 1 1. 4 1. 8

El ast i ci t yof Energy

El ast i ci t yof Power

1981- 1985 1986- 1990 1991- 1995

2000 2002 2003

Composi t i on of GDP

30. 1 27. 1 20. 4 14. 6

48. 541. 6 49. 5

52. 2

21. 431. 3 30. 1 33. 2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1990 1996 2003

Pr i mary Secondary Tert i ary

19

Industry is the Main Energy Consumer Source: China Energy Statistical Yearbook 2003

0%

20%

40%

60%

80%

100%

1995 2002

居民服务业交通工业农业

Resident

Service

Trans.

Industry

Agri.

20

‘Three Shortages and One Hot Topic’

• Three shortages: electricity, coal & oil– Quick switch from surplus to shortage– Broad range– 24 out of 31 provinces– Shortage in coal

• One hot topic: energy development strategy– Sustainable development strategy for oil and gas – Energy science and technology development planning– Outline of medium-long term energy development

planning (2004-2020) (draft)

21

Outline of Medium-Long Term Energy Development Planning (2004-2020) (Draft)

Source: Shanghai Security Nwespaper July 1st 2004 http://finance.sina.com.cn

1. Top priority given to energy conservation and efficiency improvement

2. To make adjustments on energy profile– coal dominant, power oriented, as well as oil, natural gas and new energy

3. Better distribution of energy facilities– east and west, urban and rural, transportation capacity

4. Full utilization of domestic and overseas resources and markets– self sufficient and international cooperation

22

Outline of Medium-Long Term Energy Development Planning (2004-2020) (Draft)

5. Rely on technology innovations

6. Make great efforts on minimizing environmental impacts by energy production and consumption

7. Full attention given to energy security– diversification, stockpiles

8. Improvement of energy policy-making

23

Main Areas of Energy Technology Develop

ment Source: Tsinghua, China Energy Outlook 2004

1. Energy efficiency technologies2. Higher efficient and cleaner utilization of coal3. Technical system to support oil security4. Advanced nuclear power technologies5. Large-scale hydropower generation

technologies6. Increasing reliability of power grids7. Renewable energy8. Hydrogen and fuel cell

24

China Medium and Long Term Energy Conservation Plan

1. Taking energy conservation as an important component of changing the economic growth pattern (saving energy through changing the economic growth pattern)

2. Integrating energy conservation with economic structural adjustment, technology innovation and management enhancement

3. Integrating the function of market mechanism with government macro-regulating

4. Integrating lawful management and policy incentives5. Three key sectors (industry, transportation, building)6. Public participation (governmental agencies’ role)

25

Measures for Energy Security

• Oil conservation

• Domestic resource exploration

• Overseas resource development

• Shipping security

• Fuel substitution (coal liquefaction, Ethanol, bio-diesel)

• Stockpile

26

Actions in 2005

• Electricity pricing

• Law for Promoting the Development and Application of Renewable Energies

• Set up State Energy Committee/Office

• Oil industry reform

27

Electricity Pricing Associated with Coal Price

• Market coal vs planning electricity• 440 power plants among 1140 plants lost 7.8 billi

on yuan RMB in 2004 because of higher coal price.

• First quarter of 2005, price of coal for power plants raised 10-15%

• New pricing mechanism effected in May 2005. If coal price changes 5% or above within more than 6 months, power price will change.

• Power for industrial consumers will increase 0.0213 yuan/kWh in May.

28

Law for Promoting the Development and Application of Renewable Energies• Finished legal procedure on Feb. 28th, 2005 and will effe

ct on Jan. 1st, 2006.• Encourages all entities to participate in and protects legal

rights and interests of the developers and users. • Sets middle and long-term target of the total volume at th

e national level.• Encourages and supports various types of grid-connecte

d renewable power generation.• Government budget establishes renewable energy

development fund to support research, standard establishment, pilot project, project construction, resource surveys and assessments, and localized production of the equipment.

29

Top Authority of Energy

• No integrated authority to deal with energy issues since 1992.

• Set up Energy Bureau under NDRC in April 2004 with 30 staff.

• China will set up the State Energy Committee/Office. Mr. Ma Kai, the Minister of NDRC will be the head of the office.

30

Monopoly in Petroleum Industry will be Broken

• Dec. 11st 2004 is the first day that China opens its oil product retail market based on the commitments for joining the WTO.

• Dec. 11st 2004, Petroleum Chamber of Commerce under ACFIC (All-China Federation of Industry & Commerce) was set up. More than 100 non-state-owned enterprises joint it.

31

PART BPART B China LEAP Model: Inputs to and China LEAP Model: Inputs to and Results of National and Regional Results of National and Regional

Alternative Paths for China Alternative Paths for China

Aling ZHANG, Yanjia WANG, Alun GUTsinghua University

May 13-16Beijing

32

OutlineOutline

• Background of this study• Basic assumptions• Business as usual Path• National Alternative Path & Regional

Alternative Path• Cost comparison and emission

comparison

33

Background of this studyBackground of this study

• Funded by Nautilus Institute, LEAP modeling and dataset in China started from 2001 as a part of the larger EAEF/AES regional project

• Prof. Yanjia Wang, Prof. Aling Zhang, Dr. David Von Hippel and Ms Lea Prince have been of great help to the completion of the dataset and the paper summary

34

• Approach: Use LEAP to study the energy futures scenarios for China

• Task: Describe the possible results of energy consumption, GHG emission and costs comparison (demand cost, transformation cost or import cost and so on)

Background of this studyBackground of this study

35

Basic assumptionsBasic assumptions

• There are three Scenarios in this LEAP model: BAU, NAP and RAP

• The data are from China statistical yearbooks of various years, energy reports and energy articles

• Some O&M cost data is estimated according to the current average level in China

36

Business as usual Path 2000 2010 2020 2030

population（100 million） 12.66 13.77 14.72 15.25

urbanization（% ） 36.2 47.18 54.58 61.7 GDP growth rate（% ） 7.0 7.0 5.5 5.5

Saturation of gas use in

household % )

78.13 90.68 100

Saturation of NG use (% ) 15

Saturation of solar heater use

(% )

5 Urban

computers usage per

household (fraction)

0.06 0.11 0.20 0.33

Living space per household

(m2)

51.25 78.5 94.2 109.9

Saturation of solar heater use

(% )

50

refrigerator usage per

household (fraction)

0.11 0.15 0.20 0.25 Rural

Living space per household

(m2)

85.38 127.5 148.75 165.75

37

• There is no dramatic breakthrough has taken place in the regional political relations and economic cooperation

• Natural gas is widely used for electricity generation

• The urbanization process continues to speed up, bringing high pressure in terms of both energy consumption and environmental problems in most cities

Business as usual Path AssumptionsAssumptions

38

Net final fuel demand of BAU

0

500

1000

1500

2000

2500

3000

3500

2000 2010 2020 2030

year

mil

lion

tce

Biomass

Coal, Coke and Peat

Crude Oil

Electricity

Heat

Natural Gas

Oil Products

Other fuels

Renewables

• Energy demand growth rate: 3%/yr• The renewable energy will not strongly promoted by the reason of national energy policy

39

Business as usual PathComparison of the Energy Demand Structure (by sector)

year 2000

I ndustry53%

Agriculture1%

Commerce5%

Transport10%

Households31%

year 2030

Households17%

I ndustry44%

Commerce12%

Transport26%

Agriculture1%

• transportation sector is projected to be the fastest growing sector, with its share of total national energy use increasing from 10% in 2000 to 26% in 2030• industry sector share of energy use decreases, it remains the largest energy consumption sector, accounting for 44% of total energy consumption in 2030

40

National Alternative PathNational Alternative Path AssumptionsAssumptions

• This path describes the development of nuclear power and renewable energy in China

• the program of renewable energy utilization as a part of the National Alternative Path for China

• Nuclear power is widely used in electricity generation

• Coal will still play an important role in the all demand sectors

41

Net final fuel demand of NAP

0

500

1000

1500

2000

2500

3000

2000 2010 2020 2030

year

mill

ion

tce

Biomass

Coal, Coke and Peat

Crude Oil

Electricity

Heat

Natural Gas

Oil Products

Other fuels

Renewables

• Energy demand: 3%/yr• The renewable energy will account for a little share by the reason of national energy policy

42

• The nuclear power generation will account for about 11% of the total electricity generation in 2030• More natural gas will be applied in the power generation

Output: Electricity Generation of NAPOutput: Electricity Generation of NAP

0

500

1000

1500

2000

2500

3000

3500

4000

2000 2010 2020 2030

year

tho

usa

nd

gig

aw

att

-ho

ur New import from RFE to Shenyang

New import from RFE to Beij ingNew GT NGasNew Landfill GasNew BiomassNew WindCCGT base loadAdvanced Large Coal fireGeothermalSolar pvSmall hydroCHPOil combustionGas fireLow&mid Scale Coal fireWindpowerNuclearLarge&mid HydroExisting Lar Scale Coal Fire

43

National Alternative PathNational Alternative PathGHG emissionsGHG emissions

• GHG emissions are mainly dominated by the Industry and transport sectors

• Due to the usage of natural gas and nuclear in electricity generation in China, GHG emissions from the electricity sector are projected to decrease

• As a result of the rapid development of the transport sector, emissions from the transport sector are projected to increase to account for 21% of total GHG emissions by 2030

Million tons 2000 2010 2020 2030

CO2 Equiv. amount share amount share amount share amount share

Electricity

Generation 993 31.7% 1033 23.1% 1151 20.7% 1459 20.7%

Other

Transformation 393 12.5% 614 13.7% 684 12.3% 769 10.9%

Transport 258 8.2% 504 11.3% 933 16.8% 1476 21.0%

Industry 1216 38.8% 1805 40.4% 2013 36.3% 2236 31.8%

Households 153 4.9% 260 5.8% 366 6.6% 479 6.8%

Commerce 106 3.4% 225 5.0% 358 6.4% 554 7.9%

Agriculture 17 0.5% 26 0.6% 42 0.8% 66 0.9%

Total 3134 100% 4466 100.0% 5547 100.0% 7039 100.0%

44

Regional Alternative PathRegional Alternative Path AssumptionsAssumptions

• Under the Regional Alternative Path (RAP) for China, the fast-growing economy in the middle and western parts of China leads to increasing demand for electricity and for cleaner energy (including the current Northeast revival)

• Allowing the expansion of international power networks and construction of international pipelines, regional cooperation brings new opportunities to all countries concerned

• An energy charter is drafted to promote further cooperation in the region, including the free transfer of new energy technologies and a common set of benchmarks concerning energy efficiency to guide design of energy-using products in the region

• More natural gas is used in China’s economy as a whole, relative to the BAU and NAP cases

45

Net final fuel demand of RAPNet final fuel demand of RAP

0

500

1000

1500

2000

2500

3000

2000 2010 2020 2030

year

mil

lio

n t

ce

Biomass

Coal, Coke and Peat

Crude Oil

Electricity

Heat

Natural Gas

Oil Products

Other fuels

Renewables

• The shares of electricity and natural gas in energy demand are projected to increase through 2030 • The coal share of total energy demand is projected to decrease by 2030

46

Output: Electricity Generation of RAPOutput: Electricity Generation of RAP

0

500

1000

1500

2000

2500

3000

3500

4000

2000 2010 2020 2030

year

tho

usa

nd

gig

aw

att

-ho

ur

N ew import from RFE to S henyang

N ew import from RFE to Beijing

N ew GT N Gas

N ew Landfill Gas

N ew Biomas s

N ew Wind

C C GT bas e load

A dvanced Large C oal fire

Geothermal

S olar pv

S mall hydro

C H P

O il combus tion

Gas fire

Low&mid S cale C oal fire

Windpower

N uc lear

Large&mid H ydro

E xis ting Lar S cale C oal Fire

• For the regional cooperation, natural gas will play very important roles in the electricity generation in 2030

47

•In the BAU and NAP scenarios, the energy demand fuel mix is almost the same, but for the RAP scenario, the natural gas share of total energy demand is projected to increase quickly• Coal energy demand is projected to decrease in all three scenarios, but the decrease in the level of coal demand differs between the scenarios• The increase in demand for oil in the future in China is expected to be unchanged, the driving force behind the increase being the rapid growth in China’s transport sector

China AES: comparison of scenarios

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

2000 2010 2020 2030

year

mill

ion

tce

RAP NAP BAU

48

Cost comparison

•This section is not completed, but the trend is not unchanged• The cost of RAP scenario is projected to be much larger than the NAP scenario for the import cost.

49

Emission comparisonEmission comparison

•The emissions of RAP scenario is projected to be less than the NAP scenario

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

million ton

2000 2010 2020 2030

emissions comparison

RAP NAP BAU

50

ConclusionsConclusions• From 2001 to 2030, all three scenarios

describe future “clean energy” paths• The era of cheap oil had already gone,

rapidly growing energy demand will generate a need for increased energy supplies and energy security for China (natural gas and nuclear energy)

• Regional cooperation will promote increased energy output and cut down the total GHG emissions

51

Next StepNext Step

Continuous modification LEAP TED substantial Hydrogen economy CDM Project and energy

structure in China District heating added in

the China LEAP model

52

Thank you !

gal@tsinghua.edu.cn010-6279 4098(O)