- To boost non-fossil fuel share in electricity to 39% by 2025 vs 29% now
- Energy security to be ‘premise’ for China’s modern energy system
- Coal to have supportive role, plant to see the conservative phase-out
China plans to raise the share of non-fossil fuels in its electricity supply to 39% by 2025, up from around 29% currently, says an article published in S&P Global.
It is backed by rapid capacity expansions and countermeasures to cope with renewables’ intermittency, according to its 14th Five-Year Plan for Modern Energy System.
The plan, which covers energy sector targets for the 2021-2025 period, has a conservative approach to coal usage and emphasizes more on retrofitting rather than phasing out existing coal-fired generation units, according to the National Energy Administration and China’s top economic planner the National Development and Reform Commission.
Most importantly, the plans highlight energy security as “the premise” on which China’s modern energy system will be built, with detailed guidance in a dedicated chapter titled “Enhancing the stability and safety of energy supply chains.”
Focus on energy security
The chapter focuses on stabilizing domestic oil supplies, expanding natural gas production, expanding energy storage capacities, and retrofitting, instead of rushing to phase out coal-fired generation units. This is notable because of the events of the past year that have pushed energy security to the forefront for Asian economies such as the coal shortages in the second half of 2021, record-high oil, gas, and coal prices, and the Ukraine crisis.
The plan also outlines the role of coal in China’s large coal-dominant economy and its energy future, saying that coal will shift into a supportive role, “providing fundamental security and system flexibility.”
“We shall stick to the bottom line, stand on domestic capacities, fix shortcomings, diversify supplies, build up energy storage, enhance the production-distribution-storage-trade system, consistently improve our capability to cope with risks, safeguard industrial chains and supply chains, and ensure a stable development of our economy,” the FYP showed.
China’s energy future will be based on the principle of “establishing the new before destroying the old,” which has been mentioned frequently in recent policy documents, implying that Beijing will coordinate rather than create competition between fossil fuel and non-fossil fuel sources.
The plan aims to phase out 30 GW of inefficient coal-fired power capacity, accounting for 2.7% of the current installed capacity of around 1,100 GW, according to China Electricity Council.
It requires another 200 GW of coal-fired generation to be retrofitted to enhance flexibility, especially small units below 300 MW, which allows them to be restarted at short notice to back up solar and wind capacity, to resolve intermittency issues.
The plan’s guidance for oil and gas also focuses on energy security. It aims to boost natural gas production to 230 Bcm/year, which is a 12% increase from 2021 levels, and maintain domestic crude production at 200 million mt, or 4.02 million b/d, from 2022 to 2025.
China’s crude output was 198.98 million mt in 2021 and hit a six-year high of approximately 4.16 million b/d in January-February, data from the National Bureau of Statistics showed. Currently, China relies on imports for over 70% of its crude supplies, despite imports falling 4.9% year on year to 10.58 million b/d in January-February, data from the General Administration of Customs showed.
For natural gas, the exploration and development of tight gas in the Ordos Basin, and shale gas in the Sichuan Basin and Tarim Basin are listed as key projects for energy security. The FYP called for expanding natural gas storage capacity to 55-60 Bcm by 2025, accounting for about 13% of the country’s total natural gas consumption, mainly comprising underground gas storage depots and LNG terminals.
Compared to the previous five-year plans, the 14th plan for the first time emphasized the development of domestic oil and gas upstream projects, international cooperation with producers and consumers, and developing international trading capabilities.
The FYP aims to increase annual energy supply to 4.6 billion mt of standard coal equivalents by 2025, a 12.7% increase from 2020 levels, or 520 million mt standard coal equivalent.
Out of this growth, 67% will come from clean energy production bases in west China, and 29% from non-fossil fuel energy in eastern and central China, along with 60 GW capacity of cross-provincial power transmission, the plan showed.
This covers Yunan, Guizhou, Sichuan, and Tibet for the development of hydro, solar, and wind power, and the provinces in northwest and central China, like Gansu, Ningxia, Inner Mongolia, Shaanxi, Shanxi, and Xinjiang.
By 2025, the FYP aims to reach 3,000 GW power generation capacity, an 800 GW increase from current levels, of which conventional hydropower will reach 380 GW, pumped storage hydropower 62 GW, and nuclear to 70 GW.
No specific targets are set for wind and solar. In October last year, China committed to increase its total installed capacity of wind and solar power to over 1,200 GW by 2030, according to its Nationally Determined Contributions, or NDCs, submitted to the UN.
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Source: S&P Global