China Power System Transformation |
Context and status of power system transformation in China |
Context and status of power system transformation in China
Background
China has made major achievements in its economic development. With its gross domestic product (GDP) rising from USD 7.9 trillion (United States dollars) in 2013 to USD 11.6 trillion in 2017, China has maintained its position as the world’s second-largest economy and accounted for more than 30% of global economic growth during that five-year period. China’s performance in recent years was highlighted at the 19th National Congress meeting (Xi, 2017):4
Supply-side structural reform has made further headway, bringing a steady improvement in the country’s economic structure.
The development of infrastructure has been promoted and emerging industries such as the digital economy are thriving.
The level of urbanisation has risen, with more than 80 million people having transferred from rural to urban areas.
Regional development has become more balanced; several regional development plans have been promoted, including the co-ordinated development of the Beijing-Tianjin-Hebei region, the development of the Yangtze economic belt, the revitalisation of the northeast industrial base, the rejuvenation of middle-China, and the development of China’s western provinces.
More than 60 million people have been lifted out of poverty, and the poverty rate has dropped from 10.2% to less than 4%.
Economically shifting gears
China is the world’s second-largest economy and has experienced rapid GDP growth over the past two decades. Even with the recent slowdown, it continues to expand at an impressive speed, with a GDP growth rate of 6.9% in 2017. In recent years the Chinese government has realised that the previous model of resource-intensive economic growth was not sustainable, and therefore proposed a new model of economic growth driven by consumption and the service sector.
To bring about the changes it seeks, the Chinese government proposed a supply-side structural reform plan, with a view to reducing the level of corporate debt and overcapacity in key industrial sectors, including coal and power. Supply-side structural reform has emerged as the main economic policy framework. The pace and depth of this reform will have a major impact on China’s economic transition, as well as its energy sector transition (IEA, 2017a).
4 The National Congress of the Communist Party of China is a party congress that is held every five years. The National Congress is theoretically the highest body within the Communist Party of China.
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IEA. All rights reserved
China Power System Transformation |
Context and status of power system transformation in China |
Ecological civilisation
China’s rapid economic rise has had a major impact on its environment and on public health. Therefore, the government proposed the pursuit of “ecological civilisation” and set targets to 2020, which included the following in relation to the power sector (State Council, 2015a):
Environmental damage cost recovery will be factored into pricing, and tax policies will reflect the priority of energy conservation, environmental protection and clean energy utilisation.
Distributed energy resources will be developed to augment centralised power generation; efficient power generation and dispatch is to be promoted; and renewable power generation resources are to be prioritised.
Energy consumption trading and carbon trading will be promoted.
The rising environmental issues, especially people’s concerns about air pollution, alongside China’s pledge to the international community on climate change, accelerated the government’s progress on preparing a more visionary plan. A “Beautiful China” blueprint was proposed at the 19th National Congress meeting in 2017 (Xi, 2017). Beautiful China is a two-step long-term blueprint proposing that development takes better account of environmental carrying capacities, and promotes a growth pattern that respects planetary ecological boundaries. It targets the preliminary realisation of ecological civilisation and a much better environment by 2035, and the full realisation of ecological civilisation and an environmentally friendly economy and society by 2050.
Power system transformation
China has made optimising the structure of its power supply a top priority since the early 2000s. Its goals were to reduce the share of coal in power generation and increase the use of renewable energy, natural gas and nuclear power. The 13th Five-Year Plan set binding targets to reduce the share of power from coal in total energy consumption to 58% by 2020 and to increase the share of power from non-fossil fuels to 15% by the same date (NDRC, 2016). China continues to set ambitious targets for renewable energy capacity and generation, which have consistently driven impressive acceleration in renewables deployment over the past decade.
China is embarking on a process of power market reform that was initiated in 2015. This reform plans to reduce the involvement of government in several key stages of the power market, while at the same time reinforcing its supervisory and planning roles. The expected key outcomes of this reform are to reduce average electricity costs through competition, and to increase system flexibility and the utilisation of clean energy.
System flexibility is seen as a crucial aspect of power system optimisation.5 Increasing the flexibility of coal power has been identified by the government as a near-term step toward overall system flexibility. It committed to retrofitting 133 gigawatts (GW) of co-generation capacity and 86 GW of pure condensing coal-powered plants to enhance their operational flexibility by 2020.6 This represents about one-fifth of the installed coal-powered capacity.
5System flexibility is crucial to variable renewable energy (VRE) penetration. Wind and photovoltaic (PV) curtailment rates were 12% and 6% in 2017 respectively. In some regions the curtailment rate exceeded 20%. The high curtailment rate reflects the need for a more flexible power system.
6China has a large co-generation capacity. These units in the winter heating season operate at high loads, therefore exacerbating the curtailment of VRE. Retrofitting co-generation aims to decouple heat and power generation by using electric boilers or heat storage tanks.
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