Over the last decade, China’s economic expansion has only been matched by the expansion of its electric power infrastructure, which has more than tripled in the same period, the majority of which was powered by coal. However, today, environmental concerns about urban air pollution are prompting the authorities to opt for cleaner technologies while demand continues to surge.
The future of China’s power market
IHS has compiled the report Solving the Tangram, which looks at the future of provincial gas and power markets in China. It explores how supply, demand, cost and prices in each of China’s 31 provinces will interact with evolving policies to shape the future of the country’s energy sector.
Over the last 10 years in China approximately 80 GW a year of power plants have been added. The majority of the additions are coal units and the emissions associated with the expansions have led to concerns about the degradation of the environment.
To combat the above, structural adjustments in the wider economy have been combined with energy efficiency improvements to moderate future demand. However, under a scenario of sustained growth and globalisation, electricity consumption is expected to increase by 4.1% /y on average between now and 2035. This sees China’s electricity demand doubling by 2026 and its power load being larger than that of the US and Europe combined by 2035.
So, should the nation continue to build new power infrastructure while diversifying cleaner technologies such as natural gas, wind and solar, which are more costly than coal?
Moving away from coal
Currently natural gas provides only 2% of China’s power generation due to high costs and limited supply, but the volume consumed is expected to increase tenfold by 2035. Yet, many fear that the growing share of more expensive energy sources will lead to a dramatic rise in power prices. However, the IHS report shows that the average cost of power generation in China will not increase despite the rising use of new fuels and technologies.
One of the conclusions drawn by the report is that the cost of power supply will not rise in China despite rapidly rising penetration of cleaner yet more expensive sources of energy. Xizhou Zhou, director and head of China Energy at IHS said: “rising fuel costs, increased energy import dependency, and growing dissatisfaction with environmental quality will still have to be addressed, but it is important for investors to understand that China can no longer be viewed as a single energy market.”
There are increasing differences among provinces in the fuel availability and prices. The retail natural gas price in Ningxia in northwest China is roughly half of that in Beijing today. “The Chinese power markets will become increasingly varied provincially, mirroring the variations in resource endowment, geographic location and differing stages of economic development,” commented Zhou.
“China will find itself navigating one of several energy growth pathways to diversify from coal into cleaner technologies for its electric power, build a sizeable natural gas market and secure sufficient energy to sustainably grow the economy by lowering its energy prices.
“Our research shows that the clean air drive will not come with a higher electric power bill as more expensive energy such as natural gas and solar can be offset by the continued expansion of cheaper sources like hydro. In other words, China can have its cake, and eat it too,” concluded Zhou.
Adapted from press release by Claira Lloyd
Read the article online at: https://www.worldcoal.com/coal/10122013/ihs_predict_rising_natural_gas_use_in_china_as_country_seeks_to_diversity_energy_mix_coalnews332/