On Friday, June 11, China's national electricity consumption hit a new record of 5.967 billion kilowatthours (kWh). This is not good news given the growing power shortages that many parts of the country are experiencing, and bodes ill for the remainder of the summer – last year's peak usage came on July 29.
Power and energy are becoming a huge problem for the Chinese government, impacting on balance of payments, industrial output and export figures.
China surpassed Japan as the world's number two importer of oil in 2003, and the surge in oil imports continue, one of the factors that has pushed the global price of oil above US$40 a barrel, and also contributed to China registering a net trade deficit in several recent months.
China wants to reduce its dependence on imported oil, particularly from the perpetually unstable Middle East which currently accounts for two-thirds of China oil imports. It has announced plans to make a fundamental shift away from fossil fuels as a way of meeting its voracious energy needs.
Another priority the central government has set is a reduction in the role of coal in energy production. China currently derives 75% of its power from coal burning, which is both damaging to the environment and inefficient in terms of the costs of mining and transportation. Not to mention the high death rates in the country's notoriously dangerous coal mines.
In 2003, China accounted for one third of global growth in oil demand, with oil imports up 40% over the previous year. Half of China's consumption is expected to be met by imports by the year 2007, according to a recent report by the Ministry of Communications. The country lacks the oil reserves and domestic production capacity necessary to mitigate any shocks from market fluctuations.
Meanwhile, the entire nation is facing significant and sustained power shortages, with the existing power generation infrastructure overwhelmed by the electricity demands from industry and from the ever more middleclass cities.
The State Electric Power Regulatory Commission announced that electricity demand in the first four months of 2004 totaled 650.5 billion kilowatt-hours, or 16.1% more than for the same period in 2003. But power generation during the period was the same period was 647.3 billion kilowatt-hours.
Thermal power stations accounted for 86.7% of power generation, hydropower 10.5% and nuclear power the remaining 2.8%. But recent official pronouncements indicate these proportions could change significantly over the coming years.
Various announcements suggest a major increase in nuclear and hydroelectric power generation, and much greater research and development of renewable energy sources such as wind and solar energy.
Nuclear power has quickly moved up the government's priority list. Officials have estimated that China will need to build 32 new nuclear reactors by 2020. This year, China plans to issue tenders for the construction of four. It is widely speculated that the companies who win these could be in line to win more. Companies including Westinghouse of the US/UK and France-based Areva, have been working to get the inside track on this year's tenders. Westinghouse even managed to get US Vice-President Dick Cheney to put in a good word for them during his April visit to Beijing.
Hydropower has also become increasingly important to China's power consumption. The Three Gorges Dam on the Yangtze River is of course a key part of this strategy. The dam, by far the biggest hydroelectric generating plant in the world, began producing electricity in July last year. The last of its 26 turbines will go into operation in 2009, by which time the dam will have an installed power generation capacity of 18.2 million kilowatts, and an output capacity of 84.7 terawatt hours (twh) of power annually. That is something like the power generation capacity of 18 nuclear power stations.
There are numerous other smaller dams being constructed that are being harnessed to supply growing power demand. A major trend is the damming of rivers in Sichuan and Yunnan to produce electricity for sale to Guangdong province in the south.
Companies specializing in wind power such as InfraVest are likely to find China an increasingly receptive market. The German firm announced in May that it will invest US$29.2 million in China's first offshore wind power plant to be located in Guangdong province, where blackouts and power shortages are common. The plant will have an installed generating capacity of 20 MW and is expected to be operational in 2006. InfraVest will likely face stiff competition from General Electric's wind power subsidiary, which sells 51% of the world's turbines and has an established presence in China.
The recent explosion in private car ownership has pushed up oil consumption dramatically, and various groups are weighing the merits of gasoline alternatives such as ethanol, and even more advanced solutions such as hydrogen fuel cells.
Vancouver-based Palcan Fuel Cells is one of the companies hoping to take advantage of increased government interest in zeroemission hydrogen fuel cells. Palcan has invested in a plant with Shanghai Mingliang Plastic Co to produce proton exchange membrane fuel cell stacks. Daimler-Chrysler signed an agreement this year in which the carmaker will supply Beijing with zero-emission fuel-cell buses in 2005.
International environmental group Greenpeace recently saluted China for its announced goal of obtaining 10% of its energy from renewable resources, saying China has the opportunity to "leapfrog" dependence on fossil fuels in favor of greener energy sources. With some analysts predicting that China's daily oil consumption could double to 12 million barrels per day by as early as 2010, China at least appears committed to supporting alternatives and developing sustainable options.