China forecasts slowing power demand

Th latest official Chinese projections suggest that electricity demand will grow at well below the recent double-digit level in coming years. But the country could still require twice as much generating capacity in 2020 as in 2010.

The double-digit growth rate has already gone, albeit against the background of the international economic malaise. Chinese power demand increased by 6.7% on year to 749.7 TWh in the first two months of 2012, according to figures published by the China Electricity Council (CEC).

Indeed in January demand fell 6.5% on year, although this was primarily because the lunar new year holiday occurred earlier than in 2011. The contraction was more than offset by the 22.9% rise in February when consumption jumped both because of the different timing of the holiday and the leap year extra day.

Industrial electricity use rose by less than 5% on year during the two-month period to 543.9 TWh. While below the average growth in overall demand, industrial electricity use still accounted for 72.5% of total consumption.

Within overall industrial electricity demand, the heavy industrial sector – which is dominated by often- inefficient, state-owned enterprises – saw growth of 6.6% on year during the two months to reach almost 440 TWh. By contrast, the export-led and privately- oriented light industrial sector posted an on-year decline of 3.9% in electricity consumption for the period.

Residential sector electricity demand grew by a robust14.9% to 111.7 TWh, driven by colder than average weather and the continued drive towards urbanization. Service sector demand grew by 10.3% to 94 TWh.

Meanwhile the CEC reported that power generation increased by 7.1% on year in the first two months of 2012 to reach 718.7 TWh. Because the output of small power plants is omitted from the generation data, production appears lower than consumption in most official Chinese statistics.

The output of fossil-fueled, predominantly coal-fired plants increased by 6.8% on year to reach 608.9 TWh during the two months, whereas hydroelectric output fell 0.3% on year to 68.7 TWh during the period. Nuclear output was up almost 17% to 12.6 TWh, whereas wind output jumped more than 23% to 14 TWh.

Looking ahead, Chinese power demand is projected to rise at an annual average rate of 8.8% during the five- year period ending 2015, according to the central growth projection in the latest forecasts issued by the CEC. The council projects that the growth rate will then slow to an annual average of 5.6% through 2020.

China consumed 4,692.8 TWh in 2011, with installed capacity reaching 1,056,000 MW at the year end. Coal- fired output dominated supplies at more than 3,690 TWh within the 3,825.3 TWh of fossil-fueled output, which was up 14.8% on year and represented more than 80% of total electricity output.

The CEC estimates that electricity consumption in 2015 will be between 6,020 TWh and 6,610 TWh, based on lower and upper annual average growth projections of 7.5% and 9.5%, respectively. By 2020, consumption is estimated to range from 8,000 TWh to 8,810 TWh, based on annual average growth rates of 4.6% to 6.6% from 2016.

These rates are subdued compared with recent years. Demand grew by 14.6% in 2010 and 11.7% in 2011, with the CEC projecting a fall to 9.5% in 2012 when consumption is projected at 5,140 TWh. The slowing growth in demand is attributed largely to intensified government attempts to restructure the economy and eliminate inefficient electricity use.

But the CEC believes that China could still face a tight power supply situation in 2012 and beyond because the rate of additions to the national generation fleet is also projected to slow. The shortfall in 2012 could be between 30,000 and 40,000 megawatts, albeit with marked regional and seasonal variations, the CEC says, adding that the shortage could increase to 50,000 MW in 2013.

The additional capacity projected for commissioning in 2012 is estimated at only 85,000 MW. This would include 50,000 MW of fossil-fueled plant compared with the 58,860 MW added in 2011, whereas hydroelectric additions are projected to increase to 20,000 MW in 2012 from the 12,250 MW added in 2011.

The low projected growth rate is borne out by the actual figures for the first two months of 2012. Only 3,900 MW was commissioned, including 2,700 MW of coal,
700 MW of wind and 400 MW of hydropower capacity, compared with the 12,300 MW which entered service in the same period of 2011.

The CEC’s projection of power sector investment in 2012 at almost Yuan 740 billion ($117.4 billion) is little changed from 2011.

However, less than Yuan 360 billion is expected to go on new generating capacity, compared with Yuan 371.2 billion in 2011, whereas spending on the transmission and distribution sectors is expected to increase from Yuan 368.2 billion in 2011 to Yuan 380 billion in 2012.

Investment in fossil-fueled and especially coal-fired plants is projected to fall by more than 26% to Yuan 105.4 billion in 2012, according to the CEC, whereas spending on hydroelectric and nuclear power plants is expected to rise by 14.8% and 14.2% to Yuan 94 billion and Yuan 74 billion, respectively. Investment in wind farms is projected to fall about 20% to Yuan 82.9 billion.

The CEC estimates that total grid capacity will reach 1,463,000 MW by 2015. This is projected to include 928,000 MW of coal-fired and 40,000 MW of gas-fired plant, 342,000 MW of hydroelectric, 43,000 MW of nuclear, 100,000 MW of wind, 5,000 MW of solar, and 5,000 MW of biomass and other plant.

By 2020, installed capacity is estimated at 1,935,000 MW – double the 962,190 MW or so installed at the end of 2010. The figure is projected to include 1,170,000 MW of coal-fired and 50,000 MW of gas-fired plant, 420,000 MW of hydroelectric, 80,000 MW of nuclear, 180,000 MW of wind, 25,000 MW of solar, and 10,000 MW of biomass and other plant.

In order to meet the investment requirements and reduce unnecessary consumption, the CEC has said that in real terms the average retail electricity price should reach Yuan 728.7/MWh ($115/MWh) by 2015, a 27.6% increase from the 2010 level and equivalent to an average 5%/year rise.

Platts, a leading global provider of energy, metals and petrochemicals information.