China Power Industry Research Report 2002Q2

VI. Prospects of Development in Power Industry

1. Analysis on Power Supply and Demand Trend in the Latter Two Season of This Year
In the latter half of year 2002 and the next year, Chinese power supply and demand will hopefully continue the trend since this year.
Analysis from power demand trend
Supported by rapid economic growth rate, power consumption in the latter half of the year will continue the rapid growth. Especially the rapid increased in investment will help the power demand to go on grow stably in the latter half of the year. But the development of some industries in highly power-consuming industries, such as iron and steel, aluminum smeltering, coal industry and chemical industry, will be under the restriction of greater supply over demand in domestic market and the challenge of imported products, so the growth in power supply in these industries perhaps will slow down.
The areas with rapid growth in power demand in the first half of year 2002 will be Zhejiang, Guangdong, Jiangsu, Fujian, Shandong and Hainan in coastal area, Sichuan, Ningxia, Inner Mongolia and Chongqing in the west and Jiangxi in the central part. The major demand is in the east and west, taking on a pattern of being high in the east and west while low in the central part, which is almost the same as growth pattern in power demand in year 2001. In the latter half of year 2002, power demand in East China will continue to keep rapid growth and North China will keep a growth rate lower than the national average level. Thereinto, under the influence of reduced growth in power consumption in coal industry, the growth in power demand in Shanxin, which was obviously higher than national average, will be lowered to the average. Due to relatively faster growth in power consumption in highly power-consuming industries, growth in power consumption in Hebei Province will rise to the national average. The predicted power consumption in Hu’nan Province in Central China will in evident slack posture, its growth rate reduced to lower by 5 percentage points than national average. Growth in power consumption in Jiangxi Province, once 2 percentage points lower than national average, is now 2 percentage points higher, realizing skipping growth. Growth in power consumption in He’nan Province, once 4 percentage points higher than national average, is now reduced to be the same, also reflecting the influence of slowing growth rate in power consumption in coal industry. Growth in power consumption in Sichuan-Chongqing district is higher by 8 percentage points than national average. It is, on the one hand, because of the leading force of highly power-consuming industries, and on the other hand, due to the influence of reduced power generation in local electric network. Northeast district will keep the slow growth at present and there are still no new growth points in power consumption. Northwest district will also keep the general growth in power consumption with a growth rate slightly lower than national average. Thereinto, due to rapid growth in production of highly power-consuming products, growth rate in power consumption in Ningxia, once 2 percentage points lower than national average, will rise to 4 percentage points higher. Guangdong Province in South China will keep rapid growth in power consumption, still one of the regions with short power supply. Power consumption in Guizhou Province keeps increasing for several years in succession. This is mainly because of the preferential price policy to highly power-consuming industries, which pushes the scale expansion of these industries. The reduction in growth rate in year 2002 shows that the peak for this expansion maybe has passed by.
Analysis from power supply capability
Ever since year 1998, Chinese power source construction has realized an annual installed capability put to production of 18 million kw and national capabilities put to production are all about 20 million kw in recent years. The gross capability should be able to meet the growing power demand. But in recent years, shot power supply still exists in some areas. It is mainly because the power source put to production in certain region does not match the growth in power demand there. Meanwhile, power transportation and distribution networks in some areas with rapid growth in power demand cannot meet the growing power demand, causing bottleneck. Besides, coal supply for power generation also has certain impact on power supply. There is another problem allowing ignorance, that is, the low ability of optimized resource distribution in Chinese power market and the small quantity of power exchange in different regions, which causes a fact that extra power in areas with residual capability cannot be transported to areas with short power supply.
In year 2002, the above-mentioned situation still exists, and what changes obviously is the growth in scale of optimized resource distribution in power market. The power quantity in power transportation from the west to Guangdong, from Fujian to East China, Northeast China to North China and the power exchange between Central China and East China all grow by large scale. The inter-provincial power exchange in several areas also grows to different extents. Therefore, if keeping fast growth in year 2002, some areas with fast growth in power consumption, such as Zhejiang, Jiangsu, Guangdong and Beijing, will be able to guarantee their power supply and there will be no limitation on power use in large scale. The generator units newly put to production in areas with fast growth in power consumption also play positive role in relaxing the short supply in these areas. For example, the starting production of Guangdong Ling’ao Nuclear Power Station will play significant role in meeting the rush hours in Guangdong in the summer.
In synthesizing various aspects, we can foresee that the growth rate in social power consumption will be 9.2% and 8.0% respectively in the third and fourth season of year 2002, and the accumulated growth rate in power consumption will be 9.0% and 8.7%. The growth rate in power consumption will 8.75% in the whole year with a total power consumption of 1.6 trillion kwh.

　

2. Estimate on Power Supply and Demand Trend in Year 2003
The analysis is made on both advantageous and disadvantageous factors.
The advantageous factors for growing power demand in year 2003 include: first, national economy will keep good developing posture, realizing properly rapid growth. According to present relationship between power and economy, power demand will reach the same level as economic development; second, the 150 billion Yuan state bonds issued in 2002, mainly used for infrastructure construction, will push to certain extent the power demand; third, civilian investment will hopefully further increase and therefore push the growth in economy and power consumption; fourth, some good factors like the opening of the sixteenth Party Convention will increase the anticipation towards economic growth.
The disadvantageous factors for power demand growth in year 2003 include: first, due to restriction of market demand and imported products, the supply of major highly power-consuming products is exceeds the demand in domestic and international markets. Chinese highly power-consuming industries will face the challenge of price reduction and increased stock, and the equipment utilization rate will be lower than that in year 2001. The total industries will be in slack posture; second, impact of imported products will keep growing after China’s accession into WTO, producing unfavorable influence on growth rate in power consumption in areas highly dependent on foreign trade.
In primary analysis, year 2003 will see smaller scale in generator units put to production compared with that in recent years and East China, Guangdong and Beijing-Tianjin-Tangshan district will still have short power supply while Northeast China, Shandong and Fujian will still have residual power production. Power supply and demand in other areas will generally be in balance. In the whole country, the supply and demand is in balance and parts areas have short supply. Measuring with several models, analyzing with the newly built Monitoring and Early Warning System on Power Supply and Demand and referring to experts’ experience in various aspects, we predict that the power demand growth rate will be about 7.5%, lower than that in year 2002. More than 2/3 experts we invite think the demand growth rate will be between 7.5% and 8%.



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