Economy

Markets

Industries

Insights

Reports

Events

Energy: King coal losing his power in electricity industry

By Ou Lu (China Daily)
Updated: 2009-02-16 07:56

A thermal power plant under construction in eastern China. [Asianewsphoto]

China is likely to continue cutting investment in coal-fired power plants as the lackluster economy may result in a power glut this year, but it will increase its efforts to build more nuclear reactors and wind farms to improve its energy mix, according to Zhang Guobao, head of the National Energy Administration (NEA).

Speaking at a recent meeting on the nation's energy strategy, Zhang said the country's investment in the power industry is expected to reach 580 billion yuan this year.

Related readings:  Power firms seek coal abroad  China's January coal exports down 36%  Energy sector rises to the challenge

However, in its power industry investment forecast published on Feb 14, the China Electricity Council (CEC), a government-backed industry association, said investment may hit 650 billion yuan this year, encouraged by the government's 4 trillion yuan economic stimulus package.

According to the CEC forecast, investment in power generation may remain around 300 billion yuan, with more of it going to sectors such as nuclear power, while the remaining 350 billion yuan will be assigned to build and upgrade power grids.

Electricity demand will remain weak this year, but it is likely to rebound in the second half and may increase by 5 percent this year, CEC said.

China is speeding up the approval of energy projects to help spur domestic industry, which expanded in the last quarter at the weakest pace in seven years.

"Large-scale energy projects require huge investment and could give a boost to manufacturers and raw material suppliers," Zhang told People's Daily on Dec 29.

As China implements a more active fiscal policy, with a lower interest rate and more tax incentives, investment in large-scale power projects will be less costly, Zhang pointed out.

The country will begin construction of nuclear power plants with a total capacity of 8.4 gigawatts this year alone, including projects in Sanmen of Zhejiang province, Taishan in Guangdong province and Haiyang in Shandong province, according to Zhang.

"Starting from this year, the country will build several large wind farms over the next 10 years, each with a generating capacity in excess of 10 gigawatts, in Gansu, Hebei and Jiangsu provinces, and Inner Mongolia autonomous region," Zhang said.

The country will also speed up the construction of large coal bases to help the nation withstand potential energy crises. Construction of coal bases will begin in Xilinguole League in Inner Mongolia and Shanxi province.

"In addition, transmission lines will be built to link coal-fired power plants close to these coal bases with Shandong and Liaoning provinces," Zhang said.

China currently relies on coal-fired plants to supply about 80 percent of its total energy needs. However, transporting coal by rail can often be problematic, as shown by the damage caused to the nation's railway network by last year's massive snowstorms.

The authorities were then forced to shut many coal-fired plants, leading to blackouts in many cities, he said.

Spending on coal-fired plants will be less aggressive this year. "As much as 80 gigawatts in generating capacity may be added this year and 80 percent of this will come from large generators with a capacity of more than 300 megawatts," the CEC report said.

The oversupply of electricity offers a "good opportunity for China to optimize its power industry" by shutting down small, polluting coal-fired plants, said Zhang.

"We will try to phase out small plants with a total capacity of 13 gigawatts this year," he said.

Nuclear expansion

China may soon revise its energy development plans to nearly double its nuclear power capacity in the next decade, according to sources close to the NEA.

The authorities will also "start building eight more nuclear power plants in the next three years, with 16 reactors whose total installed capacity will surpass 10 gigawatts", NEA sources were quoted as saying by the 21st Century Business Herald.

There are currently 11 nuclear reactors in operation in the country with a combined capacity of about 9 gigawatts, supplying around 1 percent of the country's energy needs.

NEA head Zhang Guobao last year said the country would raise the share of nuclear power in the national energy mix from 4 percent in 2006 to 5 percent by 2020. The target capacity for nuclear power was set at 40 gigawatts by 2020.

The revised energy development plan aims for nuclear power to generate 70 gigawatts by 2020.