China should abandon energy intensive growth mode

Jun 07, 2011 12:00 AM

Data released by the Bureau of Economic Operation Adjustment under the National Development and Reform Committee on June 1 has shown what is behind the tension between supply and demand in regard to coal, electricity, oil and gas.
The bureau warns that China should no longer take the road of an "irrational economic structure, extensive growth mode and excessive dependence on resource and energy consumption".

Prominent problem between power supply and demand
Currently, many provinces, such as Jiangsu, Zhejiang, Hunan and Hubei, have implemented power rationing in the off-season of power supply and demand. The power shortage has also become the focus of various media.
The NDRC announced that starting on June 1, the electricity prices for enterprises in provinces such as Shanxi, Qinghai and Gansu will be raised, and the on-grid prices will also increase yuan 0.02 per kilowatt-hour. The NDRC hopes to reduce electricity demand through adjusting electricity prices.

Experts said that China's electricity gap has currently reached 18 mm kilowatts, and the power shortage in places such as Hunan, Jiangsu, Zhejiang and Chongqing is very serious.
The electric energy production and power consumption maintained fast growth in the first four months of 2011. However, "judging from the development trend, the problem between electricity supply and demand will be more prominent along with the rapid growth in industrial production and the arrival of the summer electricity consumption peak period," Li Yang, director of the bureau said.

Extensive growth is the main cause
Data from the NDRC shows that gas used for electric production significantly increased in April. The daily supply of six gas power plants in places such as Henan and Jiangsu increased from 4.5 mm cm to 13.8 mm cm and the daily gas supply of the Zhengjiang pipe network also increased from 5.3 mm cm to 7 mm cm.
However, it seems the rise in supply is still unable to meet the growing energy demand. The root cause lies in the serious issues of China's irrational economic structure, extensive economic growth mode and excessive reliance on energy consumption.

Relatively higher economic growth rates in some regions have caused rapid energy demand growth. A total of 28 provinces and municipalities have posted double-digit first-quarter GDP growth rates.
The momentum for the excessive expansion of some energy intensive industries has not been effectively controlled. The average comprehensive energy consumption growth rate of six major energy intensive industries was 0.4 percentage points higher than that of industrial enterprises above a certain scale in the first four months of 2011.

Changing economic growth mode remains hard
Li said that the central government will take four major measures to ease the energy supply shortage.

  • The first is to exploit potential to increase the power supply;
  • the second is to increase effective coal supply and urge coal-producing regions and enterprises to boost output in a safe manner and ensure stable power supply;
  • the third is to ensure stable refined oil and gas supply;
  • the fourth is to strengthen the energy demand management to prioritize the power supply for residents and major sectors and promote the transformation of the economic growth structure and development direction.

According to the latest report released by the China Electricity Council, the combined power consumption of the four major sectors of chemicals, construction materials, steel and nonferrous metallurgy reached 351 bn kilowatts in the first quarter, only lower than the peak level in the second quarter of 2010.

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