September 07, 2008

Report on energy conservation and pollution reduction in China

Interfax China reported that in 2007, China's power industry cut its consumption of standard coal by 64.92 million tonnes and reduced sulfur dioxide emissions by 1.03 million tonnes.

According to the State Electricity Regulatory Commission report, these reductions were mainly attributable to increased energy efficiency, greater production from renewable energy sources and the implementation of demand side management a method designed to control excessive electricity consumption by encouraging efficiency.

The report said that ongoing readjustment of the country's power generation structure was hastened in 2007, most notably the elimination of inefficient power producers. Last year the country shut down a total of 553 small scale thermal power generators, with a total of 14,380 megawatts of installed capacity. The country also sped up the construction of renewable power and nuclear power projects.

Additionally, a total of 110,000 MW of additional thermal power generation capacity was installed with desulfurization facilities last year, putting the country's total power generation capacity with such facilities at over 270,000 megawatts, equivalent to about half the country's total thermal power capacity, at the end of 2007.

The rapid installation of desulfurization facilities decreased the country's sulfur dioxide emissions by 7.5% YoY in 2007, while thermal power output still attained up by 16.7% YoY. At the same time, the average amount of coal consumed by thermal power plants for each kilowatt hour of electricity produced dropped to 334 grams, 9 grams lower than in 2006.

In its report, the SERC also pointed out some of the problems the country faced last year in its energy conservation and pollution reduction efforts. The SERC said that some local power companies were not as supportive as central government controlled companies in the elimination of small scale inefficient thermal power generators, and that local companies often complained they were losing out by closing such generators.

The SERC said that some compensation should therefore be given to local power companies that are required to eliminate small-scale power generators. It also said that current electricity price levels, which are capped by the government, do not reflect changing prices for resources such as coal, oil and gas. The SERC said that this problem will probably not be solved anytime soon, since the government is hesitant to raise prices while consumers are already under pressure from inflation.

The SERC said the government should improve the current mechanism whereby electricity prices are linked with coal prices, and that it should construct a system in which electricity prices are different depending on whether they are in high or low consumption areas, and depending on the time of year.

Finally, the SERC said the government should adjust its energy policy to maximize the advantages of renewable energy projects, though it did not specify how it should do this.