The “Jigsaw Puzzle” of China’s Energy Development 中国的能源发展“拼图” by XIONG Xing

CORN January 2015 Edition.

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China’s energy industry has made great advances since “reform and opening” began in the late 1970s. China has built up a comprehensive energy supply system comprised of coal, electricity, petroleum, natural gas, and renewable energy resources. Likewise, its universal energy service and civil energy use conditions have improved markedly.[1] Nevertheless, China’s energy development still faces many challenges, including severe resource constraints, low energy efficiency, environmental costs and energy insecurity. The country’s energy resource endowment is very limited and its per-capita share of energy is low. Its energy consumption has grown so quickly in recent years so as to far outstrip domestic supply, while fossil energy resources have been exploited on such a large scale as to cause environmental damage. In short, China’s current energy industry resembles a “Jigsaw Puzzle” of sorts—a collection of differentiated parts that have yet to be pieced together into a coherent picture.

To curb excessive consumption of energy resources and to achieve the comprehensive, balanced and sustainable development of the economy, society and ecology, China is strengthening its efforts in energy conservation and emissions in order to increase energy efficiency. To do this, China relies on scientific, technological and systems innovation to further develop new and renewable energy resources, as well as more clean and efficient use and development of fossil fuels. The country endeavors to develop a modern energy industry which is secure, stable, economical and clean, all as part of the Chinese government’s broader efforts to build a moderately prosperous society and pave the way for the future economic development.

PastedGraphic-2In 2012, the State Council of China published a White Paper on the conditions of the country’s energy policy. As national energy development policy, it declared that China will adhere to “saving priority, based on domestic, diversified development, environmental protection, science and technology innovation, deepening reform, international cooperation, and improving people’s livelihoods”. Several benchmarks set in this regard: it promised to reduce the energy-intensity of the economy by 16%, increase non-fossil fuel energy to 11.4% of total supply, and cut the carbon-intensity of GDP by 17%.[2] To meet these benchmarks, China needs all-round promotion of energy conservation, the vigorous development of new and renewable energy, the promotion of clean development of fossil-fuel resources, the improvement of the universal energy service, accelerated progress in energy technology, greater institutional reform in the energy sector, and stronger international cooperation on energy-related matters.

PastedGraphic-4With this in mind, in June 2014, Chinese President Xi Jinping conducted the sixth meeting of the Central Finance Leading Group, during which he formally proposed an energy security strategy for China. His proposed strategy included great adjustments to energy consumption, supply, technologies and systems. Similarly, in November 2014 at the APEC Leaders’ Informal Meeting in Beijing, Xi mentioned the words “energy revolution” twice, and compared this with the scientific and technological revolution and industrial revolution as a new round of global “revolution”. Furthermore, on November 19th, the State Council issued the “Plan for Energy Development Strategy Action (2014-2020)”, which put forward a three-pronged slogan of “saving, cleaning, security” to speed up the construction of a clean, efficient, safe and sustainable modern energy system.

PastedGraphic-5China wants to promote energy development by technological innovation, particularly in the areas of energy consumption and supply. This is important given the current state of energy security in China. In particular, by 2020, the domestic primary energy production amounted to 4.2 billion tons of standard coal; the energy self-sufficiency remained at around 85% and the oil reserve-production ratio increased to 15%. This means that a basic energy reserves emergency system has been built, but by 2020, the plan calls for the non-fossil energy portion of China’s primary energy consumption ratio reach 15%, the proportion of natural gas to over 10%, while the coal consumption ratio is to be controlled within 62%.[3] The plan, as discussed by the State Council, is therefore to have a perfect system of energy security constructed by 2020. But it is far from these targets at the moment, which shows the extent to which China’s energy development is suffering from a disjointed, though increasingly elaborate, “jigsaw puzzle” in this new era of domestic energy reform.

Accordingly, there are five ways to resolve the puzzle of China’s energy development. The first way to do so is to curb unreasonable energy consumption and to strictly control total energy consumption. This can be accomplished by strengthening energy conservation in industry, transportation, and energy conservation among all citizens. In the past, China has carried out some successful energy conservation projects including the innovation of coal-fueled industrial boilers, surplus heat and pressure utilization; energy saving in electrical motors; construction of energy-saving buildings; the green lighting project; and energy saving in government bodies.[4] Similarly, a “reverse coercion mechanism” could be established for lowering the intensity of energy consumption and rationally controlling total energy consumption to help strengthen energy utilization management in industry, construction, transportation, and public organizations.

The establishment of a multivariate supply system that involves the efficient and clean use of fossil fuels energy and the development of renewable energy is the second way of resolving China’s puzzle. Because coal, oil, and gas are still the major energy resources and account for about 90% of China’s primary energy consumption and continue to play a dominant role in energy supply, a multivariate supply system is the only feasible way to push forward the clean development of fossil energy.[5] This includes developing the clean-burning technology of coal, spurring clean and highly efficient development of thermal power, intensified efforts in prospecting and exploitation of conventional oil and gas resources, actively promoting the development and utilization of non-conventional oil and gas resources, and enhancing the construction of energy storage and transportation facilities.

But for the future, new and renewable energy sources will need to be developed. The environment also needs urgent protection through emission reduction and increased sustainable development. By developing new and renewable energy sources, by the end of 2015, China seeks to increase the percentage of non-fossil fuel energy generation to 11.4% as part of primary energy consumption and that of installed generating capacity to 30%.[6] This requires actively developing hydropower, nuclear power wind power, solar power biomass energy and other types of renewable energy, and promoting distributed utilization of clean energy in safe and efficient ways.

Thirdly, by promoting industrial upgrading through technological innovation, the negative effects of energy consumption can be reduced. Science and technology are the most powerful driving forces of modernization, and to this effect, China has outlined some key aspects of energy technology development, including exploration and exploitation, processing and conversion, power generation, transmission, distribution, and new energy. It also contains an overall plan to build a national energy technology innovation system that integrates research into key technology and technological innovation platforms. Thus, practically-speaking, this third way involves promoting progress of energy equipment technology, launching major technological demonstration projects, and improving the innovation system of energy technology.

The fourth way of solving China’s energy “jigsaw puzzle” involves strengthening international collaboration. China plays an active and constructive role in international energy cooperation. It has established multilateral or bilateral cooperative mechanisms in the field of energy with the US, EU, Russia, Canada, Australia, Brazil, Saudi Arabia, Venezuela, among other countries, on issues relating to oil, natural gas, coal, electric power, renewable energy, technology, and equipment. China is also a member or important participant in many multilateral organizations and mechanisms, including the energy working group of the APEC, G20, Shanghai Cooperation Organization (SCO), the BRICs, and maintains close relations with the International Energy Agency (IEA) and OPEC. The Chinese government also encourages foreign investment that explores the development of oil, natural gas and unconventional oil and gas resources, such as shale gas and coal-bed gas. It also invites foreign investment to build new-energy, hydroelectric, clean-combustion, and nuclear power stations, and supports multinational energy corporations to set up research and development centers in China.

Finally, China’s puzzle can be solved through reforms of its energy market system. Because reform constitutes a strong dynamic force in transforming modes of development, so as China resolutely implements reform in the energy sectors, it will likewise bring about other positive changes, which include the strengthening of top design and overall planning, helping to build a system and mechanism for the scientific development of the energy industry, ameliorating the environment for energy development, bringing about a great development in energy production and utilization, and helping to safeguard China’s energy security. Therefore, implementing energy sector reform will ultimately help to build an effective and competitive energy market system. These reforms include improving the market mechanism, reforming the administration of the energy sector, and accelerating the building of a legal regime for the energy sector.

Any of these solutions taken alone will not solve China’s energy “jigsaw puzzle”. Like any puzzle, all the parts of China’s energy development will have to work together to produce a coherent picture. For example, technological innovation in the absence of international cooperation, or energy market reform without consumption curtails, will not amount to the sustainable and efficient energy strategy that China needs. A coordinated approach that brings together different pieces of the “jigsaw puzzle” is especially urgent given the rising energy demands and energy-related challenges that China faces now and will continue to face in decades to come.

 


暨大16XIONG Xing (Jason) is a Ph.D. Candidate at the Institute of International Affairs, Central China Normal University. He received academic training from Zhongnan University of Economics and Law, Wuhan University, the Johns Hopkins University-Nanjing University (SAIS Nanjing) and National Chi Nan University (Taiwan, China) successively.

He can be reached at Valley212 [at] 163.com


 

[1] The State Council of China, China Energy White Paper, 2012.

[2] IEA. Energy Balances of Non-OECD Countries. Database. International Energy Agency, 2014.

[3] The State Council of China, Plan for Energy Development Strategy Action (2014-2020).

[4] National Development and Reform Commission of China. Implementation Plan for Evaluation System of Energy Consumption, 2014.

[5] Information Office of the State Council of China, China’s Energy Conditions and Policies, 2012

[6] Xinhua News Agency. “Key Targets of China’s 12th Five-Year Plan”. People’s Daily, March 05, 2011.


This commentary reflects only the author’s personal opinion.

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