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 Workshop 13-16 May 2005, Beijing, China

Part A: Background Information of Energy Situation in China Yanjia Wang

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 15% 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

Remaining recoverable reserves per capita (2003) Poor on Domestic Conventional Energy Resources Source: Coal Economic Research 2005 Special Issue. Page 10 Remaining recoverable reserves per capita (2003) China USA Japan World Average Coal (ton) 89 859 6 79 Oil (ton) 2.48 14.43 0.06 24.85 NG (m3) 1408 17973 312 27875

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

Primary Energy Consumption Source: China Energy Statistical Yearbook 2003 Coal Oil

Primary Energy Mix（％） Source: China Energy Research Society, Energy Policy Research, 2003.6 World Year 1980 1990 2000 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

Less Coal for Final Users Source: China Energy Statistical Yearbook 2003

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

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

China’s Petroleum Supply Course Partial dependence on oil import Self-reliance Partial oil export Increasing oil import and declining oil export Net oil importer with a growing annual amount Net importer of oil products Net importer of crude oil 1949 1966 1973 1991 1993 1996 Now

Higher and Higher Dependency on Import Oil Source: China Energy Research Society, Energy Policy Research, 2003.6 Prod.

Oil Import Dependency

2nd Power Generation Industry in the World Source: Coal Economic Research 2005 Special Issue. Page 37 Year Capacity/GW Generation/TWh 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 1386.5 1107.9 243.1 16.7 2001 338.49 253.01 83.01 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

ENERGY EFFICIENCY IN CHINA Source: Handbook of Energy & Economic Statistics in Japan, 2004 Coal Economic Research 2005 Special Issue. Page 10

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

…but much remains … Source: “Energy Efficiency Programmes in Developing and Transitional APEC Economies”, ISBN 4-931482-25-2 2003 World Average 0.264

China is still Looking for the Way of Development

Industry is the Main Energy Consumer Source: China Energy Statistical Yearbook 2003 Resident Service Trans. Industry Agri.

‘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)

Outline of Medium-Long Term Energy Development Planning (2004-2020) (Draft) Source: Shanghai Security Nwespaper July 1st 2004 http://finance.sina.com.cn Top priority given to energy conservation and efficiency improvement To make adjustments on energy profile– coal dominant, power oriented, as well as oil, natural gas and new energy Better distribution of energy facilities– east and west, urban and rural, transportation capacity Full utilization of domestic and overseas resources and markets– self sufficient and international cooperation

Outline of Medium-Long Term Energy Development Planning (2004-2020) (Draft) Rely on technology innovations Make great efforts on minimizing environmental impacts by energy production and consumption Full attention given to energy security– diversification, stockpiles Improvement of energy policy-making

Main Areas of Energy Technology Development Source: Tsinghua, China Energy Outlook 2004 Energy efficiency technologies Higher efficient and cleaner utilization of coal Technical system to support oil security Advanced nuclear power technologies Large-scale hydropower generation technologies Increasing reliability of power grids Renewable energy Hydrogen and fuel cell

China Medium and Long Term Energy Conservation Plan Taking energy conservation as an important component of changing the economic growth pattern (saving energy through changing the economic growth pattern) Integrating energy conservation with economic structural adjustment, technology innovation and management enhancement Integrating the function of market mechanism with government macro-regulating Integrating lawful management and policy incentives Three key sectors (industry, transportation, building) Public participation (governmental agencies’ role)

Measures for Energy Security Oil conservation Domestic resource exploration Overseas resource development Shipping security Fuel substitution (coal liquefaction, Ethanol, bio-diesel) Stockpile

Actions in 2005 Electricity pricing Law for Promoting the Development and Application of Renewable Energies Set up State Energy Committee/Office Oil industry reform

Electricity Pricing Associated with Coal Price Market coal vs planning electricity 440 power plants among 1140 plants lost 7.8 billion 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.

Law for Promoting the Development and Application of Renewable Energies Finished legal procedure on Feb. 28th, 2005 and will effect 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 the national level. Encourages and supports various types of grid-connected 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.

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.

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.

Aling ZHANG, Yanjia WANG, Alun GU PART B China LEAP Model: Inputs to and Results of National and Regional Alternative Paths for China Aling ZHANG, Yanjia WANG, Alun GU Tsinghua University May 13-16 Beijing

Outline Background of this study Basic assumptions Business as usual Path National Alternative Path & Regional Alternative Path Cost comparison and emission comparison

Background 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

Background of this study 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)

Basic 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

Business as usual Path

Business as usual Path Assumptions 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

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

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

National Alternative Path Assumptions 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

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

Output: Electricity Generation of NAP 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

National Alternative Path GHG 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

Regional Alternative Path Assumptions 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

Net final fuel demand of RAP 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

Output: Electricity Generation of RAP For the regional cooperation, natural gas will play very important roles in the electricity generation in 2030

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

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.

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

Conclusions 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

Next Step Continuous modification LEAP TED substantial Hydrogen economy CDM Project and energy structure in China District heating added in the China LEAP model

Thank you ! gal@tsinghua.edu.cn 010-6279 4098(O)