China’s 2021 electricity use may rise by 7-8pc: Update

Singapore, 26 April (Argus) — China’s electricity consumption this year will increase by 7-8pc from 2020 on stronger domestic activity, according to the latest forecast by the government-backed China electricity council (CEC). China’s non-fossil installed capacity could surpass coal-fired capacity this year, it said.

The CEC in February forecast a year-on-year increase in electricity consumption of 6-7pc for 2021, but has revised its outlook upwards to 7-8pc, citing expectations of stronger domestic and overseas economic activity.

Growth in electricity consumption could exceed 8pc this year if high summer temperatures affect large parts of the country for prolonged periods, the CEC said, which would significantly raise air-conditioning demand.

It also noted that the year-on-year increase in the second half of 2021 will be lower than the first half, because of a relatively low base in early 2020 from the impact of Covid-19. China’s first quarter power generation rose by a fifth on the year according to the national bureau of statistics, while the country’s main supplier, the State Grid Corporation of China, expects second quarter electricity consumption to rise by 9pc on last year. This suggests that Chinese power generation could grow by around 14.3pc on the year in the first half of 2021, slowing to 2.7pc in the second half of the year, assuming an overall annual increase of 8pc is recorded in 2021.

Across the full year, carbon-free generation from nuclear, hydro, wind and solar could rise by around 10pc, or 210TWh to 2,332TWh, according to Argus analysis, based on the government’s target to increase installed carbon-free generation capacity to 1.12TW. This would be insufficient to cover all of an 8pc or 590TWh increase in total generation, meaning thermal generation — a majority of which is coal-fired — would also need to grow strongly, potentially by around 380TWh, or 7pc. More than 90pc of this increase in thermal generation could come in the first half of the year.

Non-fossil installed capacity to rise

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China’s non-fossil fuel installed power capacity could surpass that of coal-fired capacity this year for the first time, the CEC said. Earlier this year it forecast the share of non-fossil installed capacity to rise by 2.5pc on the year to 47.3pc.

The latest adjustment comes in the wake of announcements by Chinese leader Xi Jinping during the recent global climate summit that China will strictly control coal-fired power generation and limit the increase in coal consumption during the latest phase of its five-year economic plan. Energy planning agency the NEA this month set a preliminary target to raise wind and solar-based power generation to curtail demand for coal-based electricity.

Realistic goals?

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One important factor in ensuring grid reliability of renewable energy is the ability to store energy because of the cyclical nature of renewables.

China’s total installed energy capacity rose to 33.4GW at the end of 2020, a year-on-year increase of 136pc, according to data from the China energy storage alliance (CNESA). The CNESA said energy storage technology in the country will see breakthroughs in efficiency and cost reduction during the 14th five-year economic plan.

But there has been mixed messages from the central government amid a looming summer coal shortage from unusually low domestic stocks. Economic planning agency NDRC held several meetings this month to urge domestic coal producers to ramp up output while also encouraging more imports. China imported 21.17mn t of all types of coal in March, an increase of nearly a quarter from February, although receipts declined by 2pc from March 2020, customs data show.

China’s domestic spot coal prices have risen sharply in recent weeks, underscoring the potential severity of summer shortages. Chinese NAR 5,500 kcal/kg prices were last assessed by Argus at 807.92 yuan/t fob Qinhuangdao on 23 April, up by Yn39.17/t on the week. In dollar terms, the price rose by $6.67/t on the week to $124.42/t, the highest since 29 January.

The NDRC has called for greater emphasis on increasing renewable energy output to reduce reliance on coal, but it also suggested more financial aid for coal producers and coal-fired power plants to alleviate immediate needs. This suggests a tacit acknowledgement by central government that coal-based electricity will remain key in the country’s energy mix for the foreseeable future.

By Kelvin Leong