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Transitioning Urbanization, Energy, and Economic Growth in China

By Lei Qiang
Manager, Strategic Research Institute,
Shenhua Science and Technology Research Institute
By Ning Chenghao
Deputy Director, Strategic Research Institute,
Shenhua Science and Technology Research Institute

Throughout history, instances of societal paradigm shifts have occurred as widespread urbanization and industrialization have rapidly taken hold. Such transitions have demanded a shift in energy sources, the amount of energy consumed, and the way in which energy is used. Perhaps the most well-known historical example took place in late 18th–early 19th century England as cities grew rapidly and the regional society shifted from one founded on agriculture to one based on industry. Higher density energy sources, primarily coal, displaced biomass and the Industrial Revolution was born.1

In modern times, the most prominent example of a rapid societal shift through urbanization is undoubtedly China—a country that has grown to be an economic powerhouse in only a few short decades. Urbanization, industrialization, and increased energy consumption have underpinned this growth. The increase in industrial production in China has been astounding. According to the United Nations, China’s total industrial production in 2007 was about 62% of that of the U.S. By 2010, however, China had overtaken the U.S. to be the world’s largest industrial producer and by 2012 China’s industrial output was about 126% of that of the U.S.2 From 2007 to 2011, as China’s cities grew, the country’s per capita primary energy consumption rose from 1551 to 2029 kgoe (kg oil equivalent).3 This energy was, and continues to be, largely based on China’s massive indigenous coal resources—67.5% of China’s primary energy came from coal in 2013.4

Since its reform and opening-up, China has urbanized rapidly, reaching an urbanization rate of 53% in 2014.

Since its reform and opening-up, China has urbanized rapidly, reaching an urbanization rate of 53% in 2014.

CHINA’S CURRENT STATE OF URBANIZATION

As China has industrialized, its cities have grown as workers have moved from rural areas to urban centers looking for a chance at improved employment and life prospects. The number of Chinese urbanites recently surpassed those living in rural areas, which is a considerable milestone in a country of 1.35 billion people.

The urbanization rate in China continues to increase (see Figure 1). It grew about fivefold from 10.6% in 1949 to about 53% in 2013. During this time the number of cities also increased from 193 in 1978, the beginning of China’s reform and opening-up, to about 660 in 2012.5,6

FIGURE 1. China’s changing urban and rural populations7

FIGURE 1. China’s changing urban and rural populations7

As shown in Figure 1, much of the increase in China’s urbanization has occurred over the last two decades.7 In the particularly rapid period of growth since 1995, the urban population has nearly doubled.8 Despite a recent slowdown in the country’s economic growth, with 46% of the population still living in rural areas there is reason to believe that urbanization will continue in China.

THE TIE BETWEEN URBANIZATION, INDUSTRIALIZATION, AND ENERGY

Many of China’s new urbanites have found employment in various industries, such as the country’s large manufacturing sector, as a result of which the percentage of employment outside agriculture increased from 47.8% to 68.6% over the last two decades.9 Industrialization, better access to energy, and more income to spend on energy has in turn driven up energy consumption. From 1995 to 2013 a clear correlation can be observed between urbanization and energy use: As the urbanization rate nearly doubled the per capita energy consumption also doubled. According to estimates, the annual average energy consumption of the urban population in China is about three to four times that of the rural population.10 Therefore, as urbanization is an ongoing trend, energy consumption can also be expected to grow.

FIGURE 2. Energy consumption, non-agricultural industries, and industrial added value7

FIGURE 2. Energy consumption, non-agricultural industries, and industrial added value7

While the most rapid growth has occurred recently, urbanization, industrialization, and energy consumption in China have been linked for the last half century (see Figures 1 and 2). In terms of the energy consumed by primary (i.e., agricultural), secondary (i.e., heavy industries, manufacturing, and construction), and tertiary (i.e., service-based) industries, China’s secondary industries consume about 70% of the country’s energy (this statistic includes residential use) and contribute about 50% to the gross domestic product (GDP).11

During the recent phase of rapid urbanization in China (1995–2013), correlation coefficients between the urbanization rate and economic growth, industrialization and economic growth, and energy demand and economic growth were calculated to be 0.92, 0.99, and 0.97, respectively. Urban areas contributed about 70% of the country’s total economic growth—about two times that contributed by rural areas (see Figure 3).12

FIGURE 3. Stimulation of national economic growth by urban centers12

FIGURE 3. Stimulation of national economic growth by urban centers12

The vast majority of China’s wealth is held within cities. From 1995 to 2013, the total fixed asset investment in China grew by a factor of nearly 21 (see Figure 4).9 This was especially true for the proportion of urban fixed asset investment, which approached 98% of the total fixed asset investment.9 The scale of investment grew by a factor of about 26 over this time frame, while GDP grew about tenfold—largely supported by the country’s urban centers (see Figure 5).9

Figure 4. Energy consumption and investment in fixed assets

Figure 4. Energy consumption and investment in fixed assets

Figure 5. GDP and investment in fixed assets

Figure 5. GDP and investment in fixed assets

CHINA’S NEW URBAN REALITY

Although further urbanization and energy consumption are on the horizon, clearly China will not follow its recent growth and energy consumption trajectories indefinitely. Like many other large urban areas, especially those in emerging economies, China’s cities face challenges, including problems with air quality, traffic and congestion, and overcrowding. In fact, a transition has already begun in China. The country now looks to make its industries and cities smarter through increased informatization, while focusing on new forms of industrialization and urbanization that can help address the major challenges faced by its cities.

The term “new industrialization” refers to the widespread use of information to promote and improve high-tech industrialization. It is believed that transitioning to higher tech manufacturing can result in increased economic returns, reduced resource consumption (including improved energy efficiency), minimized environmental degradation, and optimized employment. Similarly, “new urbanization” refers to improving the quality of urbanization by focusing on urban environments that are people-oriented, including better walkability, access to public transportation, and more green space.

There should be considerable opportunity to implement such changes in existing and new cities. While some may believe that urbanization and the associated increase in energy consumption may be leveling off in China, this seems unlikely considering the sheer size of the population that is not yet urbanized. In addition, there are plans in the pipeline to build out urban centers. For example, the Chinese government has recently announced that it is looking to urbanize large areas along the Yangtze River,13 and looks to designate about 317,000 square kilometers for the proposed project. This proposed development is an example of the government’s desire to bring larger urban centers and the associated opportunities to the middle of the country, which to date have mostly been enjoyed by coastal China. This new project could be an ideal opportunity to implement new urbanization and new industrialization.

RECOMMENDATIONS FOR CHINA’S NEXT GENERATION OF URBANIZATION AND ENERGY USE

China has made progress toward a new paradigm of improved urbanization and energy consumption, but much remains to be done. In this new phase of development, the fundamental transition from an economy driven by secondary industries to one driven by tertiary industries will accelerate. As the country moves toward growing the service sector there will be efficiency improvements and changes in China’s energy mix—a mild decoupling of GDP and energy consumption could occur as has been observed in other countries. The energy industry, which is founded on the country’s coal resources, is facing multiple new challenges and must also adapt.

The most important challenge to China’s energy sector is to minimize the environmental impact associated with its growth. Thus, the 12th Five-Year Plan made recommendations to optimize urbanization, industrialization, and sustainable economic growth in China—the 13th Five-Year Plan is expected to include similar recommendations. With the development of new urbanization and new industrialization as well as industrial restructuring and upgrading, the Plans suggest that the conventional, extensive, and inefficient use of fossil fuels should be phased out and replaced with high-efficiency, low-emissions (HELE) technologies.

According to research by Shenhua Science and Technology Research Institute, coal is expected to account for about 55% of the primary energy mix in China in 2035, and thus there are no foreseen fundamental changes expected in the energy mix. Therefore, the country’s investment in upgrading its coal-fired fleet of power plants to improve efficiency and reduce emissions makes sense.

China looks to increase the proportion of alternative energy sources in its coal-dominated energy mix.

China looks to increase the proportion of alternative energy sources in its coal-dominated energy mix.

Other technologies now exist that could also reduce the environmental footprint of coal utilization. In China, and elsewhere, coal is primarily utilized through combustion. However, there is much value in coal conversion strategies, such as gasification and direct coal conversion, which focus on the functional nature of coal as not only a source of fuel but also as a raw material (i.e., making full use of the elemental C and H in coal for heat generation and chemical synthesis).14 Such an approach can expand on China’s production of coal-to-gas, coal-to-oil, coal-based olefins, and coal-based ethylene glycol, while meeting demand for electricity and thermal energy.

In addition to improving coal utilization, the Chinese government has committed to strongly back development of alternative energy and renewables, as was highlighted in the 12th Five-Year Plan and is expected in the 13th Five-Year Plan. For example, there is a concerted effort to actively develop hydropower, nuclear power in a safe and effective manner, and wind energy; accelerate the diversified use of solar; actively develop shale gas and shale oil; advance other forms of alternative energy (e.g., biomass and geothermal); and promote the application of a distributed energy system. In the future, alternative energy and renewables will play a more prominent role in supporting the national economy as well as new industrialization and new urbanization.

TECHNOLOGY OPPORTUNITIES

Industrialization and urbanization are common threads woven throughout historical and modern societal development and are largely dependent on sufficient access to high-density energy. For this reason, and because coal is widely distributed geographically, dramatic increases in coal production and utilization are often associated with major societal transitions, such as the rapid urbanization and industrialization experienced in China.

The described societal shift has helped China to lift hundreds of millions of people out of poverty and provide energy access to nearly all of its people in just a few decades. The country is almost certainly the world’s most successful example of successful poverty alleviation. Coal has been the principal fuel behind this shift. However, China’s coal fleet grew quickly and is not fully equipped with modern emissions control technologies. Thus, the country is working to improve the efficiency and reduce emissions from its vast coal-fired power fleet.

Through supporting the development of energy, especially that from coal-fired power plants, China has fulfilled the growing demand for power during the process of urbanization.

Through supporting the development of energy, especially that from coal-fired power plants, China has fulfilled the growing demand for power during the process of urbanization.

Looking to China’s example, other countries and regions around the world are also urbanizing and industrializing. Many of these countries are also quickly growing their coal-fired power fleets. Today, with a suite of HELE technologies available, there is a real opportunity to ensure that these plants will use the best possible technology options. With greater international support, it is likely that the use of such technologies will increase and thus reduce the environmental impact of coal in countries that desperately need more energy. Therefore, some of the challenges associated with urbanization, industrialization, and increased energy use that have been observed in the past could be avoided in the future.

REFERENCES

  1. Lei, Q., & Ning, C. (2014). On the relationship between energy, urbanization, and industrialization—From the perspective of energy evolution. Development Research, 11, 60–66.
  2. Ross, J. (2013). China’s new industrial revolution. China.org.cn, www.china.org.cn/opinion/2013-08/27/content_29838533.htm
  3. World Bank. (2015). Data: Energy use (kg oil equivalent per capita), data.worldbank.org/indicator/EG.USE.PCAP.KG.OE/countries
  4. BP. (2014). Statistical review 2014 workbook, www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy/statistical-review-downloads.html
  5. World Bank. (2015). Data: Urban population (% of total), data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS
  6. Qiao, X. (2014). The transition process of “human urbanization” and “urbanization of things”: 1978–2011. Regional Economy, 4, 88–99.
  7. Government of the People’s Republic of China. (2014). National Bureau of Statistics of PRC, wind info.
  8. World Bank. (2015). Data: Urban population, data.worldbank.org/indicator/SP.URB.TOTL
  9. Government of the People’s Republic of China. (2014). National data, data.stats.gov.cn/
  10. World Bank. (2008). Urbanization in China on an unprecedented scale, econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:21812803~pagePK:64165401~piPK:64165026~theSitePK:469382,00.html
  11. Government of the People’s Republic of China. (2014). China statistical yearbook—2014, China Statistics Press.
  12. Zheng, X. (2014). The contribution of urbanization to China’s economic growth and its realization. Chinese Rural Economy, 4–15.
  13. Reuters. (2015, 5 April). China to step up urbanization along Yangtze River, www.reuters.com/article/2015/04/05/us-china-yangtze-idUSKBN0MW0FB20150405
  14. Zhang, Y. (2013). Clean coal conversion: Road to clean and efficient utilization of coal resources in China. Cornerstone, 1(3), 4–10, cornerstonemag.net/clean-coal-conversion-road-to-clean-and-efficient-utilization-of-coal-resources-in-china/

 

The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.
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China’s Coal Industry Must Follow the Path of Sustainable Production Capacity

By Xie Heping
President of Sichuan University, Academician of the Chinese Academy of Engineering
Liu Hong
Energy Research Institute, National Development and Reform Commission
Wu Gang
Sichuan University

In the last 10 years, affected by strong market demand, China’s coal output has continued to increase and its production capacity has expanded at an unprecedented rate, with an annual increase in production of 200 million tonnes on average. In 2012, the total output of coal reached 3.66 billion tonnes. However, based on China’s existing coal mining technologies, this level of output greatly exceeds the sustainable coal production capacity in terms of resources, the environment, and safety. Behind this huge production statistic are excessive waste of coal resources, a large number of casualties among workers, and serious damage to water resources and the environment. These problems are the basis of resistance for the continued development of China’s coal industry.

Sustainable Production Capacity

A longwall mining system can be employed during highly mechanized mining

According to our latest research, which comprehensively examines the various constraints of resources, technology, environment, safety, etc., sustainable capacity for China’s coal mining is only around 1.1 billion tonnes, approximately one- third of current total coal production. In other words, due to limited resources, poor geological mining conditions, natural disasters, environment-based restrictions, and water limitations, only one-third the rate of current coal production in China can be considered rational; the other two-thirds exceeds sustainable capacity and can be considered over-exploitation.

China’s Maximum Sustainable Coal Production Capacity Under Constraints

Although China is rich in coal resources, based on the current massive production rates, every step to enhance the production capacity will be subject to constraints from many unfavorable factors. First, coal production capacity is constrained by resource reserve conditions. Coal resources buried at a depth of 1000 m account for 53% of China’s total reserves. After long-term large-scale exploration, shallow coal resources in the key coal production areas have been depleted, leaving an average mining depth of approximately 600 m. Coal exploration becomes more difficult as the mining depth increases, plus there is also a lag in technology. Therefore, the problems associated with deep mining will increase.

Second, coal production is constrained by safety. Some coal fields in China are more difficult to mine because of their complicated geological structure and high gas content, which leads to frequent mining accidents. The annual death toll in China’s coal production accidents has exceeded 2000, which is the highest in the world in terms of mortality rate per million tonnes. Especially in northern China, the coal fields have inherent safety risks due to the serious threat from the Ordovician limestone water at the bottom of the coal bed.

Third, coal production is constrained by the environmental impacts of mining (i.e., environmental capacity). The hydro- geological conditions and ecology in most of China’s coal-rich regions are fragile because of severe soil erosion, frequent geological disasters (i.e., mudslides, landslides), and low vegetation cover. With further mining exploration, the environment near the mines will be subject to more serious damage, which could result in a considerable threat to the social development and quality of life for the residents in mining regions.

We have conducted a regional analysis to calculate the sustainable production capacity limit under the major constraints of the environment, water resources, geological mining conditions, and safety.

In terms of environmental constraints, due to the fragile ecology of Shanxi, Shaanxi, Inner Mongolia, and Ningxia, the coal production capacity in these regions should be limited to 2.1 to 2.2 billion tonnes. In southwest China, where the use of high-sulfur coal is restricted, the production of middle and low- sulfur coal is approximately 300 million tonnes. Considering the overall situation, the annual mining capacity under the environmental constraints in China should be 4.2 billion tonnes (i.e., equivalent to 3.0 billion tonnes of standard coal).

Coal exploitation is extensive in Shanxi, Shaanxi, Inner Mongolia, and Ningxia. However, due to water shortages in these areas, production capacity should be limited to 2.4 billion tonnes. Water resources have little impact on the sustainable production capacity in other regions, which amounts to 1.9 billion tonnes. Therefore, taking into consideration the constraints from water resources in China, the annual sustainable mining capacity is 4.3 billion tonnes (equivalent to 3.1 billion tonnes of standard coal).

With respect to the occurrence of resource reserves and constraints related to mining conditions, a considerable portion of coal resources are inappropriate for large-scale mechanized production. The mining capacity suitable for mechanized exploitation is approximately 4.7 billion tonnes (equivalent to 3.4 billion tonnes of standard coal); 3.5 to 3.8 billion tonnes (equivalent to 2.5–2.7 billion tonnes of standard coal) of annual capacity are available for high-efficiency mechanized exploitation.

In term of safety, which is determined by geological mining conditions, water resources, and technology, the annual mining capacity in China should be 3.5 billion tonnes (equivalent to 2.5–2.7 billion tonnes of standard coal). Safety during coal mining poses the largest constraint to coal production expansion.

Based on the above analysis, we propose that China’s maximum annual coal production capacity should be limited to 3.8 billion tonnes (equivalent to 2.7 billion tonnes of standard coal) to maintain the healthy and sustainable development of China’s coal industry. See Table 1 for the detailed data on sustainable production capacity based on the various constraints.

Sustainable Production Capacity Table 1

Table 1. Maximum production capacity of China’s coal resources under constraints (units: million tonnes)

A Standard System to Define Sustainable Coal Mining Capacity in China

Our definition of sustainable coal mining capacity refers to the maximum coal mining capacity that can be achieved using safe, highly efficient, and environmentally friendly methods under the premise that the coal reserves can be sustainably mined for a specific time period. Based on the requirements to sustain production capacity under the constraints determined based on resources, safety, technology, the environment, and equipment, we set up an assessment index system to evaluate sustainable production capacity. Three indexes are proposed to define sustainable mining capacity: safety, environment (i.e., green), and mechanization. This assessment system consisted of preparing a hierarchy of metrics, referred to as grade-A and grade-B indexes, wherein the grade-A indexes are primary indexes and the grade-B are secondary indexes. Figure 1 lists the 12 grade-A indexes; there are also 22 grade-B indexes that are not shown.

Sustainable Production Capacity

Figure 1. Assessment index of the sustainable coal production capacity

Safety

The safety level refers to the degree of safety and health protection for coal miners in the process of production and operation, placing an emphasis on a low accident rate, low incidence of occupational diseases, and guaranteed occupational safety and health in accordance with the “people-oriented” development concept. This index contains four grade-A indexes and seven grade-B indexes.

Environment

The environmental (i.e., green) level refers to the degree of protection provided to the environment in and around the mining areas during coal production. The environment level is based on complying with environmental regulations and addressing the environmental problems caused by traditional mining processes. It requires achieving the environmental benefits associated with a high recovery rate of coal resources, while minimizing the overall impact to the environment. In addition, the environmental level is characterized by the simultaneous extraction of other resources without negative environmental impacts. This index contains four grade-A indexes and eight grade-B indexes.

Mechanization

The mechanization level refers to the degree of utilization of the most efficient mining mechanization appropriate for the specific geological conditions. The mining mechanization level emphasizes efficient mining and the overall production efficiency rate, widespread use of technology and improvement through analytical assessment, and better equipment adaptability. This index consists of four grade-A and seven grade-B indexes.

Using our assessment system, we completed a comparative study on the sustainable capacities of coal mining, ranking the world’s major coal mining countries. The results are provided in Table 2.

Sustainable Production Capacity Table 2

Table 2. Comparison of sustainable coal mining capacity between China and the advanced coal mining countries in the world

Scale and Regional Distribution of Sustainable Coal Mining Capacity in China

According to the assessment system, we estimated the sustainable coal mining capacity in China, including a breakdown of the major coal production areas, and came to the conclusion that the current sustainable production capacity in China is approximately 1.1 billion tonnes, that is, approximately one-third of the current national annual output.

In addition, we developed a preliminary forecast for potential improvement of China’s sustainable coal mining capacity in the future. By 2030 it is projected that the sustainable coal mining capacity in China’s existing mines could increase to 1.50–1.63 billion tonnes. Sustainable coal mining capacity in new mines may reach 1.58–1.89 billion tonnes by a conservative estimate, or up to 1.90–2.11 billion tonnes based on an optimistic estimate. The total sustainable capacity of coal mining in 2030 is estimated to be 3.0–3.5 billion tonnes, which can basically meet the projected coal demand in China at that time. After 2030, China’s annual coal demand is not expected to increase or change dramatically, so the total sustainable coal production capacity will be maintained at approximately 3.0–3.5 billion tonnes.

According to our analysis of major coal mining regions within China, the sustainable mining capacity in Shanxi, Shaanxi, Inner Mongolia, Ningxia, and Gansu is approximately 648 million tonnes, accounting for ~60% of the national sustainable capacity. It is estimated that by 2030, the sustainable mining capacity in this region could increase by 1.06–1.13 billion tonnes. The sustainable capacity of coal mining in east China is approximately 330 million tonnes, or ~31% of national sustainable capacity. By 2030, the sustainable mining capacity in this region could increase by 300–350 million tonnes. The sustainable mining capacity in northeast China is about 55 million tonnes, or 5.1% of the national sustainable capacity. The predicated sustainable mining capacity in this region could increase by 90–100 million tonnes by 2030. Sustainable mining capacity in south China is approximately 20 million tonnes, or 1.86% of the national sustainable capacity. This can be expected to increase by 30–50 million tonnes by 2030. Sustainable mining capacity in the Xinjiang-Qinghai area is about 25 million tonnes, or 2.32% of the national sustainable capacity and 25% of local coal output. Such capacity in this region could increase by 20–30 million tonnes by 2030. See Table 3 for the sustainable capacity and regional distribution of coal mining in China.

Sustainable Production Capacity Table 3

Table 3. The sustainable coal mining capacity in 2010 in China by coal production region

Development Path Toward Sustainable Coal Mining Capacity

In order to facilitate China’s progress toward achieving a sustainable coal mining capacity and to thoroughly improve mining-related issues and prevent over-exploitation, it is necessary to establish an improved policy and standards system and set the mandatory market threshold (i.e., production limit) based on the sustainable capacity. To increase the sustainable capacity of coal mining in China, we propose taking measures such as integration of the country’s coal resources as well as merger and reorganization of coal mining enterprises to accelerate the development of large- scale modern groups that will possess advanced technical capabilities, and especially make progress on construction and demonstration of the nationally planned 14 large-scale coal production bases with the mindset of achieving sustainable capacity development.

The development of a sustainable coal mining capacity in China can be implemented in “three steps”. First, from 2010 to 2020, there will be a mandate to “maintain the existing sustainable capacity coal mines, upgrade some coal mines to a sustainable capacity level, and focus on new coal mines that follow a sustainable capacity standard”. Specifically, this means that it is important to (1) maintain the mining capacity of the existing one- third of mining operations that have already reached the standard of sustainable capacity, (2) improve another one-third that have yet to meet the standard, but can be upgraded by means of technological development and innovation, and (3) gradually eliminate the remaining one-third of mining operations that will not be able to meet the standard. We propose that it is possible, and necessary, for China’s coal industry to make the adjustments listed above to be on the path toward achieving a sustainable coal mining capacity before the year 2020. As the second step, from 2020 to 2030, we propose achieving the goal of a sustainable coal mining capacity throughout China. And finally, from 2030 to 2050, we believe that China’s coal industry could establish a sustainable coal production industry and become a world leader in in the field of coal exploration.

The authors can be reached at xiehp@scu.edu.cn and liuhong@eri.org.cn.

 

Coal Exporters

Coal reserves are available in almost every country worldwide, with recoverable reserves in nearly 80 countries. Although the biggest reserves are in the U.S., Russia, China, and India, coal is actively mined in more than 70 countries. By contrast, Russia, Iran, and Qatar control 53.2% of the world’s gas reserves, and over 50% of the world’s oil reserves are located in the Middle East. Most coal is consumed domestically; only 15% is traded internationally. In a number of countries coal is also the only domestically available energy fuel, and its use is motivated by both economic and energy security considerations. This is the case in countries and regions such as Europe, China, and India, where coal reserves are much higher than oil or gas reserves. Most of the world’s coal exports originate from countries considered to be politically stable, a characteristic that reduces the risks of supply interruptions. A list of the top coal exporters is shown in the table below.

Coal Exporters

Source (text): WCA Coal Matters Factsheet (www.worldcoal.org) Source (table): IEA Coal Information 2011 (wds.iea.org)

The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.

China’s Changing Energy Mix: An Interview with Fan Bi

An Interview with Fan Bi, Deputy Director General of the National Policy Research Office of the State Council, People’s Republic of China

By Li Xing and Chen Junqi
Copy Editors, Cornerstone

As a developing country, China faces accelerated industrialization as well as rapid urbanization. Such progress requires access to affordable, clean, and reliable energy. Today, China’s per capita energy usage is lower than the global average; however, energy is not always used efficiently and is dominated by coal-fired power plants. To gain insight into the future energy mix in China, Cornerstone sat down with Mr. Fan Bi, who is the Deputy Director General of the National Policy Research Office of the State Council, People’s Republic of China. Before his current position, Mr. Fan Bi was with the National Development and Reform Commission (formerly the State Planning Commission) Policy Research Center and Investment Research Center. Mr. Fan Bi has over 20 years experience in policy research focused on macroeconomics, energy, environment and other aspects of public policy.

Fan Bi

“Coal will remain the main source of energy in China for a long time. Therefore, high-efficiency and clean utilization of coal is an indispensable part of China’s clean energy development.”

Q: China is the only country out of the world’s top 10 energy consuming countries that has an energy mix dominated by coal. How is the energy mix in China expected to change in the future?

A: Global energy development is continually evolving and has already generally undergone a firewood era, coal era and the oil and gas era. China’s current coal-dominated energy mix, in addition to being determined by large coal reserves, is also related to the fact that China is a developing economy. In other words, coal is the energy source of the poor.

At present, most OECD nations have moved into an energy era dominated by oil and gas. However, in China, coal accounts for 68.8% of energy consumption, while oil and gas account for only 23.1%. For this reason, it can be said that China is still in an energy era dominated by coal.

Changes in China’s energy mix in the future will be consistent with global energy trends. It is expected that in 2020, fossil fuels will remain the dominant source of energy in China. The percentage of coal as an energy source will decrease, but will remain above 50%. The percentage of oil and natural gas in China’s energy mix will increase to some degree. The large-scale exploration of shale gas in North America will likely lead to price reductions for natural gas in the international market, thus natural gas will help meet increasing Chinese demand. In addition, shale gas exploration and use in China are also expected to rise considerably. As a result, the proportion of natural gas in China’s energy mix is likely to increase dramatically.

From the perspective of regional development, the location of energy-intensive industries is also changing. In the near term the proportion of service-based industries will increase while that of heavy industries will decrease. The energy-intensive industries will, for the most part, move towards west China where energy is more abundant.

It is important to note that in recent years in China energy-intensive activities are geographically moving towards the sources of energy production. The significance of these trends is: first, it reduces the cost of energy use; the price of electricity in west China is much lower than that in east China. Second, it reduces the risks associated with transmitting energy across long distances. Third, it ensures that the service-based industries developing in east China have sufficient resources to continue their growth, while also supporting economic development in west China. It is expected that by 2020, the growth rate of energy consumption of east China will decrease while that of west China will increase. This means that the gap between the development in the east and west will narrow. In other words, China will move towards a more balanced development.

Q: What is expected regarding the development of clean energy in the future?

A: Currently, the installed hydro power capacity is 249 GW. By 2020, the capacity is planned to increase to 380 GW. The installed wind power capacity in China now stands at more than any other country in the world. By the end of 2012, it had reached 60.8 GW. The installed solar power capacity is also increasing rapidly. By the end of 2012, it had reached 3.3 GW. The year of 2012 was the first time that the growth rate of solar power exceeded that of wind power. By 2020, wind and solar power capacity will rise quickly and the planned capacities will reach 200 GW and 50 GW, respectively. Wind and solar will play an important role as supplemental sources of energy.

Apart from hydro power, most renewable energy is characterized by instability. In addition, the cost is relatively high, thus making it difficult to make their use widespread. Even so, by 2020, China will implement strong policy to support and expand the use of renewable energy in the hopes that the costs can be reduced and renewable energy can gradually replace fossil energy.

Nuclear power is a safe, reliable, mature and clean source of energy. Therefore, the safe and efficient development of nuclear power is another strategic choice to supply power in the future. By 2020, the installed nuclear power capacity is expected to be 60 GW.

Coal will remain the main source of energy in China for a long time. Therefore, high-efficiency and clean utilization of coal is an indispensable part of China’s clean energy development. Regarding clean coal-fired power generation, at present China has installed the most ultra-supercritical power plants in the world. In addition, China has supported commercial-scale demonstrations of circulating fluidized bed and IGCC power plants. China also supported the research and development of high-efficiency coal-fired power generation, including 700° ultra-supercritical technology and oxyfuel combustion. It is expected that by 2020, China’s installed capacity of coal-fired power plants will still account for 65% of the national installed power generation capacity, but pollutant emissions will dramatically decrease by using world class efficiency and improved capture technologies.

Finally, China is the global leader for clean coal conversion to fuels and chemicals and has successfully launched a series of large-scale demonstration projects. By 2020 these technologies are expected to move from the demonstration scale to being considered fully commercial. After commercialization these technologies will be the foundation for a world-class clean coal conversion industry based in China.

Q: China is now proactively implementing the reform of its energy system. What is the direction of this reform?

A: Energy must be thought of in a strategic manner because it is directly related to national security. However, energy is also a commodity that is priced and distributed based on market forces. Since the 1970s, many world leaders have been working to engage in market-based energy reform. Most nations, whether they are considered developed or developing, are working towards deregulation of energy supplies, removing monopolies and introducing competition into the energy field.

In the planned economy period, China tightly controlled coal, electricity, oil and transportation, resulting in extended energy supply shortages and inefficient energy use. In 1993, China has lifted its control on coal prices in some regions and sectors, thus allowing the market to self-regulate through supply and demand, which stimulated an increase in coal output. In 2002, China allowed for the power plants and grid to be operated independently and electricity to be sold and purchased on a competitive market. Since then, the installed electricity capacity has been increasing by 100 GW annually. History has shown that the market-based energy system has triggered a significant increase in energy output and resulted in improved power plant efficiency. In the future, China will continue down this path of reform and even increase reform efforts to establish a modern energy market. In this way, the supply-demand relationship will completely determine the price of energy; competition will optimize and lead to resource distribution and contracts will control transactions.

Some sectors in the energy field are naturally monopolies. The key to the institutional energy reform lies in viewing competitive businesses and noncompetitive businesses differently. Competitive businesses should be opened to the market by introducing competition and diversified investors, and allow the demand-supply relationship to determine the price. For non-competitive businesses, reform could be carried out in order to ensure equitable access to energy, improved service reliability, and strengthened government supervision of its business operations, efficiency, cost and income. Another focus of the reform will be on improving government management abilities. For the fields where market based reform is not reasonable, the government will fulfill its duty of macro management, market supervision and public service.

Q: How do you view Chinese involvement in energy in the global context?

A: The market-based energy reform does not only include the reform of domestic energy, it also includes participating in the global community so that China can take full advantage of two energy markets: the domestic Chinese market and the international market. China will think about energy differently; energy security will be based on mutual beneficial cooperation, diversified development and coordinated security. Traditionally, the thinking around energy security was based on ever-increasing self-reliance for oil, as well as obtaining as much petroleum as possible from overseas. The thinking around new energy security will shift from self-reliance to collective security through cooperation. China will enhance the mutual international energy diplomacy with energy exporters and energy transit countries to improve political mutual trust and energy security. At the same time, China should actively promote and participate in the governance and administration of the global energy market.

China’s leaders were the first to advocate establishing the mechanism of a global energy market governance in the G20 framework, which received a positive response from the international community. China should make full use of G20 as a platform and push forward the dialogue among the energy supplying nations, energy-consuming nations, and energy transit nations, to encourage discussion of the important issues such as energy policies, market development, pricing mechanisms and security of transport routes, etc. This will lead to establish of a binding mechanism and campaign of collective action in the world. This is of great significance for the energy security of China and of the world.

World

This is of great significance for the energy security of China and of the world.

 

The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.

The Development Strategy for Coal-Fired Power Generation in China

By Huang Qili
Member of the Chinese Academy of Engineering
Former Chief Engineer, SGCC Northeast China Grid Company

Coal is the Foundation of the Energy Mix in China

China is the largest coal producer and consumer in the world. In 2012, China produced 3.65 billion tonnes of coal. By the end of 2010, China’s proven coal reserves were 114.5 billion tonnes, approximately 13.3% of the total proven global reserves. Coal accounts for over 96% of China’s fossil energy reserves, and coal output accounts for more than 85% of all fossil energy output. Since 1990, the proportion of coal production and consumption in China’s total energy mix has always been greater than 70%, considerably higher than the approximately 20% in the U.S. and about 30% globally. It is predicted that, in 2030, China’s coal consumption will still account for more than 55% of its primary energy.

Shanghai Waigaoqiao Power Plant

Shanghai Waigaoqiao Power Plant, One of the Many Advanced Coal-Fired Power Plants Constructed in China in Recent Years

At the end of 2012, China’s total installed power generation capacity was 1,144.9 GW, of which 758 GW was from coal-fired power plants. Hydro power contributed 248.9 GW (including pumped storage of 20.31 GW) accounting for 21.7% of installed capacity. There were 38.27 GW of gas power, accounting for 3.3% of the installed capacity. The 12.57 GW of nuclear power contributed 1.1% of installed capacity. Wind and solar power contributed 60.83 GW (5.3%) and 3.28 GW (0.3%), respectively. These statistics are shown graphically in Figure 1. In 2012, coal’s contribution to China’s energy production was a larger percentage than its share of the installed capacity; the electricity production of coal-fired power plants was 3,680 billion kWh, accounting for 73.9% of the total 4,980 billion kWh of electricity produced.1

Development Strategy Figure 1

FIGURE 1. Current Electricity Power Generation Capacity in China

Coal has been in the past, and will continue to be, the dominant energy source for China, which can be largely attributed to the large proven coal reserves. Table 1 provides predictions for China’s coal-fired power generation installed capacity for 2015–2050.2 Because coal in China will play a continued role in the energy mix, those who construct and operate coal-fired power plants must lead the way toward high-efficiency, clean, and low-carbon utilization of coal in China.

Development Strategy Table 1

TABLE 1. Prediction of the Sources of China’s Power-Generation Installed Capacity, 2015–2050

Strategic Development of Coal-Fired Power in China

As China continues its industrial modernization and urbanization over the coming decades, coal-fired power plants will play a critically important role in making the energy mix of China cleaner and more efficient. According to the Development Planning Department of the National Energy Administration, from 2010 to 2050 China will consume approximately 150 billion tonnes of coal, of which approximately 99 billion tonnes, or 66%, will be used for power generation.3 As coal-fired power generation continues to develop, it is necessary to put a strong emphasis on further improving efficiency and reducing the emissions of criteria pollutants and greenhouse gases simultaneously. To accomplish this, it is necessary to think comprehensively about the strategy for coal-fired power development from a macroenergy perspective.

Several strategic suggestions for improving coal-fired power plants in China are offered below.

(1) The development of coal-fired power plants should be based on giving equal attention to “innovation” and “promotion” (i.e., widespread adoption). China’s new power plants should be designed and built to be the most efficient in the world. For existing plants, the best technology options must be implemented to improve efficiency and reduce emissions. China also should support the development of clean coal technologies and then, once they are commercial, make these technologies widely available to the power generation industry.

There are already examples of improving efficiency and reducing emissions through technology. Today, pulverized coal and circulating fluidized bed boiler technologies are widely used and considered to be well-developed power generation technologies in China; the larger scale units with higher steam temperatures and pressures have dramatically increased the efficiency of China’s fleet of coal-fired power plants. With further technology-based innovations, highly advanced ultra-supercritical pulverized coal plants and large-scale circulating fluidized beds power plants will continue to increase efficiency and reduce overall emissions. Today, China already operates some of the most efficient power plants in the world. It’s very important to apply mature and advanced technologies widely and enhance the overall coal-fired power generation technology in China.

(2) Coal should be efficiently utilized for different purposes to make full use of its potential. Therefore, China should strive to develop advanced ultra-supercritical generating units with higher steam parameters and increased efficiency. At the same time, we should develop staged coal conversion to produce liquid fuels and chemicals. Finally, technologies should be implemented to recycle heat, precious metals, and other byproducts of coal combustion and gasification that might otherwise be considered waste.

By fully exploring the conversion pathways of different components in coal (C, H, O, N, S), researchers will develop new ways to convert coal into desired products. Conversion of coal can be realized by combining the coal pyrolysis, gasification, and combustion processes. Through these different pathways, low-cost coal gas, tar, and steam can be produced as coproducts of a single system. When coal is gasified to create syngas, it can be used for the production of chemicals or used as a fuel. Tar from gasification can be broken down into various kinds of aromatic hydrocarbons, alkanes, and phenols, and it also can be made into gasoline, diesel, and other products through hydrogenation. The steam generated from coal can be used for power generation and heat. The ash resulting from coal combustion contains aluminum, vanadium, gallium, and other precious metals which may be obtained through extraction. Through these pathways, the energy and resources in coal can be used in such a way that waste is minimized.

The coal-to-chemicals industry should focus on coal as a resource while the coal-fired power generation industry should focus on the energy contribution from coal. China should integrate the coal-to-chemicals industry and coal-fired power generation industry to realize the most efficient use of coal through the cogeneration of power, chemicals, thermal energy, coal gas, and precious metals, all based on coal as the starting material.

(3) Energy from fossil fuels and emerging renewable energy power generation should be jointly developed to create hybrid power systems. In the past few years, wind and solar power have developed rapidly in China. However, electricity production from these sources is largely intermittent and unstable. Moreover, renewable energy potential and proximity to energy demand vary significantly. In addition to wind and solar, hydro power is strongly influenced by seasonal and regional characteristics. How best to integrate renewables, which are greatly affected by weather and seasons, with stable coal-fired power plants poses significant design and managerial challenges. These challenges must be solved through research and development, and should be solved so as to make full use of renewable energy and the high-efficiency of coal-fired units.

Key Technologies for the Continued Advancement of High-Efficiency Coal-Fired Power Generation

Advanced Ultra-supercritical Coal-fired Power Generation Technology

Since the beginning of the 21st century, China has made great advancements in improving coal-fired power generation. The first 1 GW ultra-supercritical coal-fired unit was placed in operation at the end of 2006 at the Zhejiang Yuhuan Power Plant. Since then, orders for 1 GW ultra-supercritical units are known to have far exceeded 100. By the end of July 2012, 46 units had been constructed and are operating. China has become a world leader in the number of installed and ordered large-scale (i.e., >1 GW) ultra-supercritical units.

Once ultra-supercritical power generation with 600°C steam temperatures was considered commercially mature, several countries launched plans to develop advanced ultra-supercritical power plants with steam temperatures above 700°C (e.g., the European AD700 plan, the American A-USC (760) plan, and the Japanese A-USC). The purpose of these plans is to increase coal-fired power generation efficiency to more than 50%. In addition, on July 23, 2010, the Chinese National Energy Administration announced the establishment of a “National Innovation Union of 700°C Ultra-supercritical Coal-fired Power Generation Technology,” formally launching China’s 700°C ultra-supercritical technology development plan. This plan is mainly focused on research related to the optimal design of unit systems and major equipment as well as the development of the necessary thermally resistant alloys.5,6 Construction of the 700°C steam temperature demonstration project is expected to begin in 2018; the targeted demonstration completion date is approximately 2020. The government should make great efforts to support relevant scientific research and project demonstrations, such as the ultra- supercritical demonstration, to support technology development. In addition, the government should also encourage widespread implementation of these highly efficient plants after they reach commercial maturity.

Shanghai Waigaoqiao Power Plant

The 1000 MW Ultra-supercritical Unit at the Shanghai Waigaoqiao Power Plant.

Shanghai Waigaoqiao Power Plant is an example of an ultra-supercritical plant that is already in operation. This plant is equipped with 2×1,000 MW ultra-supercritical units; construction and initial operation of these units were completed in March and June 2008, respectively. For these units, the designed coal consumption rate was 295 g/kWh with a design net efficiency of 41.6%. Subsequent to the initial power plant design and construction, several technological innovations were made, such as energy-saving desulfurization technology, elastic regenerative technology, steam heating launching technology, operation optimization and energy saving and comprehensive treatment technology of solid particle erosion, etc. Based on these improvements, the net unit efficiency has been improving year-after year. By the end of 2011, with an overall capacity factor of 75%, the actual net coal consumption rate was 276 g/kWh and the net plant efficiency was 44.5% (including desulfurization and denitration). Based on the original design, the plant efficiency would be nearly 46.5%, which is a 5% increase over the design value, demonstrating that energy savings and emissions reductions were simultaneously achieved.5-6

Circulating Fluidized Bed (CFB) Combustion

China is an international leader in technology development for circulating fluidized bed combustion for power generation. Because CFBs have unique advantages with regards to fuel adaptability, load following, emissions reductions, and operating costs, it is likely that the utilization of CFBs will continue. Currently, the total installed capacity of the CFBs in China is 73 GW, accounting for approximately 17% of the total coalfired power generation installed capacity.7 New CFBs are becoming increasingly efficient, larger, more reliable, and have decreasing emissions. The world’s largest and most efficient 600 MW supercritical CFB was placed into operation at the end of 2012.7

Through technical innovation related to evaluation of the gas-solids flow regime, Tsinghua University demonstrated substantial improvement of electricity utilization, combustion efficiency, and availability ratio. The technology demonstrated at Tsinghua University leads the way in the advancement of CFBs for power generation. It can be expected that, within this century, coal-fired CFB technology will experience continued development, and become increasingly important for obtaining high-efficiency coal-fired power generation.

Polygeneration Based on Coal Gasification

Generating synthesis gas after gasification of coal is the foundation for polygeneration (or coproduction). Using coal as the feedstock, polygeneration technologies can result in a range of products, such as electricity, chemicals, heat, liquid fuels, and natural gas. Both electricity and higher value products (e.g., chemical products and fuel gas used by urban residents) can be produced at the same facility. Integrated gasification and combined cycle (IGCC) technology is a combination of gasification used for the production of clean coal-based electricity production. Electricity generation based on IGCC has demonstrated significantly lower emission levels and can also facilitate the separation of CO2.

Power plants that implement polygeneration operate in such a way that they achieve the goals of efficient electricity production and full utilization of coal as a resource. This technology offers benefits across multi-disciplinary fields, and it is one of the best options for the high-efficiency, clean, and low-carbon utilization of coal. Therefore, development and demonstration of polygeneration facilities should be supported in such a way to promote the technology and increase the number of demonstration projects. China should strongly support research and development to tackle the problems facing polygeneration (such as overcoming issues with the combustion gas turbine and high-efficiency combustion chamber, etc.) so as to move polyproduction toward commercial maturity.

Use Coal and Renewable Energy as Hybrid Power Generation Options

In this century, China should begin to modify its energy mix to increasingly include clean energy options such as renewables. We should combine fossil energy with renewable energy to encourage the mutual development of coal-fired power and renewable energy generation. Renewable energy could assist the development of fossil energy and fossil energy could drive the development of renewable energy. For example, the heat energy produced by solar energy can enter the regeneration system of a coal-fired power plant to replace part of regenerative extraction steam; power generated by renewables such as solar, wind, and small hydro power can enter the local power plant’s electricity utilization system to supply more power without changing the levels of coal combustion; renewables could also be used to save coal capacity while still creating the same amount of total power. The huge regeneration system and power plant electricity utilization system of large-capacity coal-fired units can absorb the fluctuations associated with wind and solar power. If the geographical placement of the coal-fired power generation, renewable energy, and the power grid are considered together in comprehensive planning, the instability and geographical limitations associated with renewable energy can be mitigated to ensure the safe and high-efficiency operation of power generation systems based on both coal and renewables.

Conclusions

China’s energy reserves have predetermined that coal will dominate the energy mix in China for the foreseeable future. Coal-fired power plants account for an overwhelming majority of the installed power capacity in China. Making efforts to develop and promote high-efficiency, clean, and low-carbon coal-fired power generation technology has great significance to promote the scientific development of coal-fired power generation. This is an important policy that is directly related to the sustainable development of the national economy.

REFERENCES

1. National Power Planning Research Center. Forecast of Power Generation Capacity and Power Demand Development of China in the Future, China Energy News, 2013-02-18 (1).

2. Huang Qili, Gao Hu, Zhao Yongqiang. China’s Medium and Long-term (2030, 2050) Development Strategic Objective and Approach of Renewable Energy, Chinese Engineering Science, 2011, 13(6): 88–94.

3. Xu Gang, TianLonghu, Liu Tong, et al. Analysis on CO2 Emission Reduction Strategy in China’s Electric Power Supply, Proceedings of the Chinese Society for Electrical Engineering, 2011, 31(17), 1–8.

4. Han Zhenxing, Liu Shi, Li Zhihong, et al. Coal Combustion Technology Comparison with Different Types of Power Generating Units, Thermal Power Generation, 2012, 41(2), 1–3, 7.

5. Feng Weizhong. Energy Saving Technology of Waigaoqiao Phase III 1GW Ultra-supercritical Unit, Energy Research & Utilization, 2011, (6): 42–47.

6. Zhang Yanping, Cai Xiaoyan, Huang Shuhong. Research and Development Status of Material in 700

 

The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.