China energy and environmental challenges
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Transcript of China energy and environmental challenges
The Regulatory Assistance Project
110 B Water St.Hallowell, Maine USA 04347
Tel: 207.623.8393Fax: 207.623.8369
50 State Street, Suite 3Montpelier, Vermont USA 05602Tel: 802.223.8199Fax: 802.223.8172
27 Penny LaneCedar Crest, New Mexico USA 87008
Tel: 505.286.4486E-Fax: 773.347.1512
China’s Energy and Environmental Challenges
Committee on International RelationsFrederick Weston
NARUC Winter Meetings17 February 2008
Who We Are RAP is a non-profit organization, formed in 1992 by
experienced utility regulators, that provides research, analysis, and educational assistance to public officials on electric utility regulation.– Our aim is to assist governments to develop and implement
economically and environmentally sustain energy policies We’ve been working in China since 1999, funded by the
Energy Foundation, the World Bank, and the Asian Development Bank
We advise central and provincial governmental officials on the economic and environmental regulation of the electric sector, market structure and reform, energy efficiency, clean energy resources, pricing, etc.
Background To begin with the obvious: Conditions in China
are very different than conditions here China is a developing country, but it’s very
different than most developing countries Energy growth and the related environmental
problems are staggering– Economic growth of ~10%/year– Growth in electricity demand ~ 15%/year
• Increases in energy intensity since 2002, after two decades of improvements
China’s Energy Growth
• GDP: Rising at 9.6 percent
• Energy: Rising at 11%
• Electricity: Rising at 15.5%
• Oil up 18% in 2004 (1/3 US)
Source: International Energy Outlook, 2004
90
100
110
120
130
140
150
160
170
2001 2002 2003 2004 2005
2001
= 1
00
GDP
Actual Energy
Energy Target
• 2020 Goal: 4X GDP, 2X Energy, Urbanization nearly 2X
Health Impacts
400,000400,000 premature deaths premature deaths
75,155,00075,155,000 asthma attacks asthma attacks
Every year:Every year:
• Air pollution levels exceed WHO standards
• China has 16 of the 20 most air polluted cities globally
Source: World Bank; World Health Organization
New Generation Capacity In 2005 and 2006, China added approximately 100
GW per year of new electric generation capacity, well over 90% of which was coal-fired– That’s almost two Californias per year or more than
three New Englands Note:
– In the US, 98% of coal use goes to producing electricity– Whereas, in China, only 50% is for electricity
• The other half is for industry and residential heating and cooking
Development Targets By 2020:
– Quadruple 2000 GDP (4 x $1.08 trillion)– Double energy consumption (which, without care, could easily be tripled)– Increase per capita GDP from $850 in 2000 to $3000 (real $2000) in 2020– Attain “Three Transcendences”:
• 1. Sustainable development• 2. Peaceful rise as a great power• 3. Be governed by the rule of law; create a harmonious socialist society
By 2010:– Reduce energy intensity (Btus/$GDP) by 20% below 2005 levels– Reduce absolute emissions by 10% below 2005 levels– The country has already fallen seriously behind in meeting these targets
Policy Emphases GHGs are on China’s list of environmental concerns, but
so far they rank below other pollutants– In area, China is comparable in size to the US– In 2006, China’s SO2 emissions total approximately 26 million
tons, of which half came from the power sector• The 11th Five-Year Plan calls for a 62% reduction by 2010
– US SO2 emissions totaled 9.4 mn ton in 2006, of which 70% came from the power sector
The Chinese have put a high priority on energy efficiency and environmental protection, but the challenges they face are enormous– A related problem: the performance of governmental officials is
most often measured in terms of economic growth
Power Sector Reform China is committed to power sector reform even
though it is likely to make matters worse– The necessary conditions for reform (system operations
infrastructure, open entry, many independent suppliers, adequate market and regulatory oversight, etc.) are a long way off
– The most significant issues can be addressed faster and with less risk through other means
• For example, reform of dispatch rules– Typically, markets are not designed to deliver energy
efficiency and environmental protection• The same is true in China
Innovative Policies While power sector reform has slowed, in part because of the California crisis
and in larger part because of significant shortages in the past several years, the Chinese have adopted several policies that reflect important advances:
– The energy efficiency power plant (EPP)—energy efficiency aggregated to perform like a conventional power plant
• In the US, a number of states ostensibly treat energy efficiency as a resource, but system remains biased toward supply-side resources (e.g., capacity markets, socialized funding of regional transmission investments)
– China: differential pricing—higher electric prices for the less efficient users• No equivalent in the US. One approach that we might take would be to set energy
efficiency standards for industrial production, e.g., kWh/tons of steel, with fees or penalties for failure to meet specified goals
– China: environmental dispatch, based on CEM data• Early equivalent steps in the US: pricing emissions (SO2, CO2) through trading programs,
but no taxes or other means yet to reorder dispatch or investment preferences– China: closure of small, inefficient power plants
• No similar policy in the US, but, if there were, our approach might be phased-in and escalating energy efficiency standards for power plants, with fees or penalties for failure to comply.
Efficiency Power Plant An Energy Efficiency Power (EPP) is a bundled set of energy
efficiency programs designed to deliver the energy and capacity equivalent of a large conventional power plant (CPP)
An EPP can meet the same energy needs as a CPP, but. . .
A CPP– Burns 340 grams/kWh of coal or more– Emits 4 grams SO2/kWh and similar amounts of NOX
– Costs between 35 and 40 fen/kWh Whereas an EPP
– Burns no fuel,– Emits no pollution – Costs about 15 fen/kWh
Energy Efficiency Power PlantsJiangsu EPP Electricity Savings
0200400600800
10001200140016001800
Year 1 Year 2 Year 3 Year 4
Cum
ulat
ive A
nnua
l Pea
k D
eman
d M
W/y
r (g
ener
atio
n vo
ltage
)
New Cooling/Lighting Equipment Industrial Motor Drive Systems Residential Appliances
Shanghai EPP Electricity Savings
0
200
400
600
800
1000
1200
Year 1 Year 2 Year 3 Year 4
Cum
ulat
ive
Ann
ual P
eak
Dem
and
MW
/yr
(gen
erat
ion
volt
age)
New Cooling/Lighting Equipment Industrial Motor Drive Systems Residential Appliances
Source: Asian Development Bank
Jiangsu:
• Save 17,000 MW in 10 years
• 1/4 the cost of a coal-fired power plant (average cost: US 1.6 cents/kWh)
Shanghai:
• Saves 198 MW in 2 years
• Saves US $69 million
• Average cost: US 1.6 cents/kWh
Emissions Policies National goal for reducing SO2 emissions
– Not yet mandatory. Pilot trading schemes Pollution levy
– Fee per metric tonne of pollutant (SO2 and NOX) emitted
– Has the effect of linking emissions to output (e.g., lbs/MWh in the electric sector), thereby rewarding thermal efficiency improvements
There’s no move yet to impose a carbon cap-and-trade program in China
To Sum Up: Current Electric Sector Policies
Regulatory reform– Preference for competitive markets– State Electricity Regulatory Commission– National Development and Reform Commission– Expected creation of a Ministry of Energy
Pricing policies– Time-of-use rates– Differential pricing– Pollution levies– Environmental dispatch
Demand-Side Management– Load curtailments– EPPs
Least-Cost Planning– Called Scientific Energy Planning
New Efforts The Chinese are engaged on the big issues. SERC
and NDRC are considering:– How can China better integrate energy policy with
environmental policy, and– How can the power sector be better structured and
managed to address climate change? These are questions that all policy-makers should
be asking In March, RAP and EF are taking a team of six US
regulators to China for ten days to engage on precisely these issues.