China's Pursuit of Energy Savings
By China Water Risk 15 April, 2015
See why China has no choice but to pursue energy savings if it is to grow its economy with limited water
15 April, 2015 – China Water Risk published report titled “TOWARDS A WATER & ENERGY SECURE CHINA – Tough choices ahead in power expansion with limited water resources”.
The report explores strategies towards water and energy security in China as well as to provide an overview of water risk exposure across China’s power landscape.
Below is a teaser on the chapter “Battle to Conserve Energy – Double Savings In Energy & Water” from the report.
Click here for the full report. Click here for the overview
No choice but to pursue energy savings – it is the only trifecta win
China has no choice but to pursue energy savings if it is to grow its economy and continue to urbanise as both are power hungry. China’s electricity consumption per capita is far below the G20 average. As it seeks to grow this it will add power across all types but as detailed in our report “TOWARDS A WATER & ENERGY SECURE CHINA” (referred to as “the report”), every power type has some negative impacts either on water or on climate.
As 93% of power installed capacity requires water to generate electricity on a daily basis, saving energy means saving water. Indeed our report shows that billions of cubic metres of water can be saved through various scenarios of energy savings.
For China to curb its carbon emissions, its air pollution and avoid further pressure on limited water resources, energy savings must be achieved – it is the only trifecta win for energy, water and climate.
Over half of the world’s energy savings in the past 20 years have come from China
Already China has made tremendous improvements in this direction; over half of the world’s energy savings in the past twenty years have come from China. However, much potential still remains to be tapped in improving power generation efficiency and industrial electricity consumption.
As highlighted by our report, further efforts are required in China in both achieving energy efficiency and shifting its industry mix to less power-intensive industries. That is, if China is to balance its environment and economy.
Government already pursuing energy savings
|“We will set a ceiling on total energy consumption and strengthen energy conservation in key areas such as manufacturing, transportation, and construction. We will work hard to develop a circular economy and promote the recovery of resources from industrial and household waste. There is enormous potential in China’s market for energy conservation and environmental protection; we will develop the energy conservation and environmental protection industry into a new pillar of the economy.”|
Premier Li Keqiang, report on the work of the Government delivered at the 3rd session of the 12th National People’s Congress on 5 March 2015
Central government is already pursuing energy savings and is also providing substantial support in this direction. At the start of the 12FYP, State Council set a target to save 670 million tonne of standard coal equivalent (tce) in the 12FYP, representing 17% of the total primary energy consumption by 2015 as shown in the chart below:
Central government is already pursuing energy savings
12FYP target to save 15% of total primary energy consumption
To achieve this target State Council announced seven Strategic Emerging Industries (SEI), of which number 1 is ‘Energy Saving & Environmental Protection’ (SEI#1), with plans to grow it to RMB4.5 trillion (USD734bn) by 2015. Investment in key energy saving projects is expected to be RMB982 billion, and support for the transition towards a circular economy could be RMB568 billion.
Multi-front attack in the battle to conserve energy …
As detailed in our report, the battle to conserve energy is being led on several fronts simultaneously:
1. Moving towards more efficient power generation
Increasing efficiency in power generation is a direct way to reduce coal and water consumption for the same amount of electricity produced. China’s average efficiency in coal-fired power generation has rapidly grown over the last decade and is now on par with US levels.
Increasing efficiency in power generation means less water and coal … can reduce water demand in coal extraction of 147 million m3
In September 2014, the National Energy Association announced further plans to improve efficiency of coal-fired power plants by 2020. Our analysis in the report estimates this could save up to 85 million tonnes of coal and consequently reduce the water demand in coal extraction by 147 million m3.
2. Energy conservation through more efficient electricity consumption
Natural Resources Defense Council (NRDC) and other organizations estimated China’s electricity saving potential to be 702TWh by 2020. Other research from Yuan et al. (2014) show an even higher figure of 805TWh for the same date.
Our report estimates electricity conservation measures could save ~1 bn m3 of water per annum …
This energy saving potential lies mainly in the adoption of efficient electrical appliances, efficient machinery, frequency converters and efficient lighting.
If this amount of electricity was not saved but produced with coal-fired power generation instead, we estimate in our report that it would represent an additional water consumption of around 1 billion m3 per annum for the cooling of power plants.
3. Cut electricity demand from industry by increasing efficiency
Cutting electricity demand in industries can bring significant savings. Indeed at 85% of total electricity consumption, controlling industrial power use is where the biggest energy & water savings lie.
Significant energy savings lie in industry as it consumes 85% of China’s electricity …
… and 97% of total coal consumption
The report shows the Top 3 sectors as being the Power Sector itself (27%), Metallurgical (18%) and Building materials (12%). These sectors are also massive direct users of coal and are therefore primary targets in cutting energy demand. Moreover, the report highlights that industry accounts for 97% of total coal consumption.
The 12FYP set out energy efficiency targets for main energy intensive products as well as quotas of outdated and excessive capacities to be shut down in 21 industrial sectors. Most of these targets have been achieved faster than expected. In 2014 only, the comprehensive energy consumption per tonne of crude copper, steel and cement in 2014 decreased by 3.76%, 1.65% and 1.12%. On 4 April 2015, State Council announced that it will further strengthen standards of energy conservation for all major energy-intensive industries, with at least 80% of these standards to meet international advanced performance levels.
A word of caution, the report warns that despite these efforts, the absolute amount of energy consumed continues to increase as total industrial output grew faster than efficiency gains. Therefore further adjustments are required for China to restrain its energy consumption growth.
Industry mix must be optimised and ultimately moved towards circular economies
Sole efficiency improvements will give limited results and China needs to optimise its industry mix. Industry needs to shift away from water intensive and polluting as well as power hungry sectors towards high-end manufacturing. Central government is already advocating for such a transition.
China is moving 10 polluting & power intensive industries towards circular economies …
…meaning less: water, energy & waste
Yet if the economy continues to power ahead, any energy saving gains will be negated by faster industrial output growth. Therefore, as discussed in our 5 Trends for 2015, “to balance the economy & the environment to ensure long term prosperity, government has no choice but to herd China’s key sectors towards a circular economy.” This means meaning less water, less energy, less resource waste and more recycling.
As shown in the chart below where we have analysed electricity consumption across sectors with wastewater discharge, the ten industries targeted are among the most water-polluting and electricity hungry in China – obvious targets.
Some sectors and investors may be blindsided by these water inspired regulatory shifts
State Council’s roadmaps & targets for coal, power generation and steel industries are mapped out in our report.
China is currently undergoing a transition period of economic development. The report warns that analyses and policy direction point towards a tougher stance on some industries either through a war on pollution or cutting demand in energy.
|“The slowdown in economic growth in China provides the opportunity for China to reset its current model of growth … We expect the government’s “battle” in energy conservation to continue in 2015 and into the 13FYP. Although the economy might suffer in the short term, such efforts could transform the whole economy; and in the long run move China towards a more sustainable economy.”|
TOWARDS A WATER & ENERGY SECURE CHINA, China Water Risk, April 2015
Some sectors and investors may be blindsided by these water inspired regulatory shifts; on the other hand, there are significant opportunities to be reaped if prepared. China’s pursuit of energy savings is an uphill battle and a mammoth task, but one that has to be done.
- Towards Water & Energy Security – China Water Risk published report titled “Towards A Water & Energy Secure China”. Tough choices lie ahead in power expansion with limited water. Find out what strategies are employed and get a comprehensive overview of water risk exposure across China’s power landscape
- China: Not Ready To Move Away From Coal – Professor Xie Kechang, Vice President of the Chinese Academy of Engineering, on the future role of coal, strategies to ensure energy security & challenges ahead for coal-to-chemicals
- Balancing Water For Agri & Coal – China’s coal mines lie next to its farmlands and it plans to save water used in agriculture to fuel coal growth. In “Towards a Water & Energy Secure China”, China Water Risk explores strategies to control water use between agriculture & coal to ensure both food & energy security
- Wind & Solar: Hidden Water Risks – China is looking at aggressive renewable expansion with wind & solar set to soar. But could this intensify toxic hidden water risks from rare earth mining? Also some solar technologies require more water than coal to generate power. We explore these hidden risks in our report “Towards A Water & Energy Secure China”
- China Nuclear: The Future is Unclear – Will China’s nuclear ambitions be thwarted by water risks and contamination fears? China Water Risk explores inland nuclear expansion and alternative scenarios for densely populated regions in our report “Towards a Water & Energy Secure China”
For more detailed analysis on China’s battle to conserve energy see the Chapter “Battle to Conserve Energy – Double Savings In Energy & Water” in the full report here.
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