Coal-rich China sees shift in power mix: Fitch

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Electricity consumption alone is becoming an increasingly unreliable gauge of China’s economy, as the economy will gradually shift toward tertiary industries that are less energy dependent, an analyst with global ratings agency Fitch said Wednesday.

There will be a subsequent reduction in the need for power and the power sector moves toward a cleaner future, said Jenny Huang, associate director of Fitch’s Corporate Research.

The structure of the Chinese economy is changing as growth slows, with the service sector and domestic consumption coming to the fore, according to the China Power Sector Blue Book, released by Fitch on Wednesday

Data from the National Energy Administration (NEA) showed electricity consumption growing in April, picking up 1.3 percent year on year. Generation capacity had more than tripled to 1,360 GW in 2014 from 2002 levels, average annual growth of 12 percent. Such growth is unlikely in the future, Fitch said.

Annual power capacity growth will slow to 7 percent between 2013 and 2020, based on the NEA’s preliminary 2020 target of around 2,000 GW installed capacity, according to Fitch.

The government is focused on energy efficiency and reducing emissions to cut overall energy intensity by 16 percent in the 2010-2015 period, along with phasing out many heavy industries.

The shift in China’s energy mix toward cleaner fuels demands aggressive expansion of clean power capacity to nearly 40 percent in 2020 from 33 percent in 2014. Greenhouse emissions are set to peak around 2030.

China overtook the US to become the world’s top electricity consumer in 2011, accounting for 22 percent of global electricity use, but for each unit of GDP output, its power consumption is 1.4 times that of the Republic of Korea and 2.3 times that of the US

By the end of 2014, 67 percent of China’s power generation capacity came from thermal power plants, but dependence on coal has raised environmental concerns. Coal is the most carbon-intensive fuel and contains many pollutants.

China burns more than 3.5 billion tonnes of coal each year, half of which is for power and heating. By comparison, the US burns less than 900 million tonnes and the EU uses 1 billion tonnes. Coal-fired power stations generate more than 60 percent of nitric oxide, about 40 percent carbon dioxide and 25 percent of dust pollutants, in China’s pollution mix.

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