Energy conservation measures are being emphasized as especially important factors to consider. Appeals from research institutes and energy experts call for elevating the energy conservation strategy to a much higher level in national policy. It is estimated that 60% of energy conservation potential in China exists in the industrial sector.
Since 1980, through national policies, great achievements in energy conservation have been obtained, owing to efforts by central and local governments, industrial sectors, and energy end users. Studies indicate that energy saving measures during the period resulted in a reduction of 773 Mtoe, and contributed to environmental protection by cutting roughly 20 million tons of sulphur dioxide emissions, 263 million tons of cinders, 13 million tons of ashes and dust, and 440 million tons of carbon emissions.
The potential savings and impacts over the next two decades could be considerable. Research teams at Tsinghua University have noted, for example, that energy use per unit of major industrial products in China is 25% to 90% higher, on average, than those in developed countries. It is estimated that the energy saving potential could reach 70 Mtoe in the near term by means of technology improvements. Additionally, up to 210 Mtoe could be saved from structural adjustments in industrial and product sectors.
Realizing potential benefits will have to overcome barriers arising from China's transition to a more market-oriented economy, and the establishment and implementation of rules and legislation, including those in China's Energy Conservation Law promulgated in the late 1990s.
Oil resources in China are very limited, and oil imports accounted for about 30% to 40% of demand over the past decade. The proportion is projected to reach 52% in 2020, assuming domestic production capacity of 200 million tons and consumption of 420 million tons. Natural gas, nuclear power, and renewable energy sources are the most feasible options in an energy substitution strategy.
China's natural gas industry is just in the initial stages, though it grew rapidly over the past decade. Production has doubled since 1990, to reach 32.7 billion cubic meters in 2002. Four major gas fields are developed (Shanganning, Chuanyu, Qinghai and Xinjiang) in west China, and a few fields operate in east China. Plans are to expand natural gas output to up to 150 billion cubic meters by 2020, if pipeline construction proceeds as planned. Even then, however, domestic gas production would fall short of the projected demand of 220 billion cubic meters.
Alongside other initiatives, China is pursuing international cooperation for developing and importing natural gas. An agreement with Russia includes importing natural gas and building a pipeline from northern Siberia to China. Work is expected to start in 2005, with operation planned in 2010.
Nuclear power development still is in early stages, though China started building plants in the late 1980s. Three nuclear power stations where a combined nine units are in operation have a total capacity of 6100 megawatts (MW). All are located in east coastal areas, where the economy is well developed but energy resources are poor.
Nuclear's potential is linked to demands for easing serious power shortages on the east coast and other areas. In 2003, China's National Development and Reform Commission promulgated a long-term programme of nuclear power development that sets a target of 36 gigawatts (GW) in total capacity by 2020. The programme aims to help reduce dependence on coal and contribute to a cleaner energy structure.
In China nuclear power mainly replaces coal-fired power. Cost comparisons in China's east coastal regions show that grid prices of nuclear power now are higher than for coal. However, when the costs of installing desulphurization equipment at coal plants is calculated, then nuclear's price competitiveness improves.
To reach the 2020 nuclear target, strategic measures need to be adopted. They should address attaching priority to development in east coastal regions; investing in the most economic and mature nuclear reactor technologies; and identifying the best funding approaches.
At this time, funding limitations hinder nuclear development, since top priority is given to hydropower and other thermal power sources. Past nuclear financing modes were mainly dependent on domestic investment, but they are not suitable to the current situation. Foreign funds will become a very important financing source, though this has raised, and will continue to raise, issues related to such partnership ventures, including plant ownership.