I came across this description of the state and development of the Chinese power sector. It is written by Weimin Xi who kindly agreed for me to post it here. I am sure you will find it to be very interesting as I did.

Capacity in China, how many installed and how many to be installed?

Since I came here I have heard too much comment on the energy consumption of China. Hardly could you miss it in any lectures on general energy issues or in the general part of them. Although most lecturers are fairly objective in quoting figures (I especially appreciate Paul, who emphasized that the oil consumption increase can not simply be attributed to China and India in our course of International Oil and Gas Market), some of them made quite mistaken statements, and sometime the style of the expression is rather misleading. Also, there are some circumstances when the figure seems rather abnormal, while the lecturer fails to give further explanation. It is especially the case when it comes to power sector during the first decade of this century. For instance, China is building 2 coal-fired power stations a week, as demonstrated by Ed Miliband in some lecture. Ed is undoubtedly an interesting guy however, as a minister, it is not the right way to cheer people up like that.

So I will show some facts here.

1. How many generators were built in China

I have a table here, source mostly from CEC(Chinese Electricity Council), listing the total and annual incremental capacities and thermal capacities in China from 1997 to 2008 (unit: GW).

It can be seen the annual increased capacity of China peaked in 2006, which was 105GW, including 93GW thermal power plants (the coal-fired station should be less, for there were quite a few gas-fired CCGTs). Last year, the annual increase of thermal power station has dropped to 47GW. And it’s almost certain this figure will continue dropping this year and on.

Let us verify what Ed Miliband said. It is really some tricky words from politician, instead of engineer. For 2 coal-fired power stations, you don’t know what the unit capacity is(2*6MW CHP, or 2*1000MW ultra supercritical coal fired station?), and you don’t know the time scale it is applying to(one month, one year, or a decade?). That means it is always right. We can easily infer the probability of 2 coal fired power stations commisioned in one week is high using whatever probability distribution, when there are in total 47GW commissioned. We all know he is just implicating that China is building too many coal-fired power plants, however, this kind of expression is really misleading. People who are not familiar with actual situation will naturally apply 2 of 2*600MW coal fired power plants every week for a year, which means 120GW installed per annum, almost 2 times of UK current total demand.

So, it is necessary to point out something on the unusual increase of capacity from 2005 and 2008, which have been abused by many lecturers in similar way of expression like ED.

It can be traced back to the end of last century, as the financial crisis swept Southeast Asia in 1998. Almost all countries influenced adjusted their demand forecast down to low level, some of which even made negative increase forecasts. China also made very conservative load forecast for 2005 and 2010. As the consequence, coal-fired power plants were rarely approved afterwards, considering the hydro projects(e.g. Three Gorges) and natural gas generators to be built. Take my province of Jiangsu as example, we had 4 gas projects and 1 pumped storage project approved since 1999 to 2003, without even one large coal-fired project(obviously, small CHPs still can be built).

However, the power demand keeps increasing despite of the adversities of economy, and began to soar since around 2003 with a speed far exceeding what estimated. This is complex to explain, but the main drivers include the WTO entry of China in 2001, the huge investment on infrastructure, the heavy and chemistry industry dominated industrial structure, the competitive advantage of low energy and labor cost in China, and don’t forget the high borrowing of US. The power shortage from 2002 lasting until 2006 all over the country severely influced the industries and residentials. Government and investors hurried to build generators, however, power plant has considerably long lead time before operation. That is basically why most of the generators were commissioned from 2005 to 2008, as clearly seen in the figures. Unfortunately, these power plants are mostly thermal, where coal-fired dominated. The reason, as you can imagine, is that nuclear and hydro take too long construction time to meet the demand, while gas is very limited for generation. So, for the generators commissioned in 2005-2008, at least some of them should have been built before 2006 to avoid the power shortage. If we even out the incremental capacity during 2002(when power shortage appeared) and 2008, the annual increase of thermal units was 50GW. And one thing should be pointed out is in 2008, there had already been a very obvious signal of capacity surplus.

This also explains why the supercritical units orders of China skyrocketed after 2000. Compared with the continuous increase of US and Japan, there was actually an sudden abruption of large coal-fired power station construction for several years before 2002 in China.

After this summit of generators commissioning, actually since the end of 2006, the main theme of power sector in China has been tuned to closing down small low efficiency generators. Coal-fired power stations can only be built with precondition that proportional capacity of small generators be closed down first. New generators approval was strictly controlled. My province of Jiangsu, the third largest province in terms of economic scale in China, haven’t had even one big coal-fired generator begin to construct during Dec. 2005 and Oct. 2007, when a project of 2*600MW coal-fired projects begun construction after closing down 2*300MW old oil-fired units. Even now, there are few more coal-fired projects finally approved.

At the same time, more focuses are put on other clean generations. Wind power increased a lot during this period of time. In my province, there have already been more than 1000MW commissioned or in construction in less than 3 years. Following this years global credit crunch, the demand also dropped significantly. Although the coal-fired powe station capacity will still continue to increase, but the stunning figure of 2006 and 2007 would hardly appear again.

Above is roughly the depiction of what happened in Chinese power sector in those years. And it is also a mirror of the whole energy sector of China in that period.

2. How many generators will be built in China

This is something too complex to answer. Maybe someone can give us an answer using Mixed Integer Non-Linear Programming with millions of binary variables. Let’s use a simple model of elasticity, which is frequently used in long term power sector planning for verification. Simply set the elastic coefficiency(annual electricity demand growth ratio/annual GDP growth ratio) to be 0.6 in the long term. The officially expected GDP growth rate is 8%, then the demand growth rate should be 5.4%, plus a reserve margin would be roughly 6%. Based on current 780GW of capacity,  that is to say, to sustain the electric demand in CURRENT WAY(which is not possible to sustain), the annual net increase of capacity should be 47GW.

It’s obvious this number couldn’t last long. So, another simple and practical model can be used to estimate the ultimate capacity (maybe it can be called carrying capacity, according to Tuesday’s lecture), which is per capita method. Assuming China will ultimately have a per capita capacity of 1kW(a rather low level), the saturate capacity should be 1300GW, 500GW more than current level.

Even if we complete this task in 50 years, there would be 10GW built per year, which is a huge number for most countries. However, people should notice the fact below if he thinks the growth of China’s capacity too fast:

Firstly, even with 1kW per captia of capacity in China, it is still very low, compared with 3.6kW per capita of US(in 2006). China may never reach the level of US, but the current level of per capita capacity(much less than 1kW) is obviously too low still.

Secondly, as China is currently a net export country(in fact, a highly export-dependent country), significant portion of its energy consumption is actually exported. That means, this portion of energy will just be consumed, no matter where the factory is located. So it is not some isolated issue on China’s energy consumption, nor are any other countries.

There are still to come more and more lectures in which China will be again and again mentioned as example to illustrate how world energy consumption growth, or the relationship between population and energy, or the comparison of energy density per unit of GDP. That’s nice. However, it will be better to know the reason of those unusual figures, in stead of staying at the level of knowing the figures, which only confuses people.

Finally, this article is not aimed at criticizing any people, even including Ed. Just to give some facts and views for sharing.