The NEA held a press conference on 21st July to release information on energy supply and demand in the first half of 2017. Mr. Li Fulong, Deputy Director of the Department of Development Planning pointed out that energy consumption picked up in the first half of 2017 and energy supply was expected to remain ample in the second half of the year.
In the first half of the year, China’s economic growth, though slower than before, sustained a steady speed. Against such background, the growth of energy consumption picked up significantly with new drivers, optimized energy mix, accelerated transition and improved quality and efficiency. To be more specifically, energy consumption has the following six features:
First of all, energy consumption picked up in general with the consumption of coal showing positive growth. In the first half of this year, the consumption of coal in China reached 1.83 billion tons, increasing by 1% on an annual basis. Except for construction materials, power, steel and chemical engineering industries all showed positive growth in the consumption of coal.
The consumption of oil remained stable. In the first half of this year, oil consumption in China stood at about 300 million tons, a year-on-year increase of 5%, in which diesel consumption decreased lightly, gasoline consumption grew by a slower pace and the consumption of jet fuel and oils used as petrochemical material maintained relatively fast growth.
Natural gas consumption increased by a large margin. In the first half of the year, total natural gas consumption stood at about 114.0 billion cubic meters, a year-on-year growth of 11.7%. Urban gas consumption, industrial fuel consumption and gas consumption for power generation all maintained relatively rapid growth.
Power consumption grew at a significantly faster pace. In the first half of this year, total social power consumption reached 2950 TWh, a year-on-year increase of 6.3%, 3.6 percentage point higher than that of the same period last year. As for different industries, power consumption of the secondary industry and the tertiary industry grew at 6.1% and 9.3% respectively, 5.6 percentage points and 0.1 percentage points higher than that of the same period of last year. The urban and rural household power consumption increased by 4.5%, 3.2 percentage points lower than that of the same period of last year.
Secondly, energy mix kept being optimized with the share of coal consumption shrinking. In the first half of this year, coal consumption accounted for about 59.8% of total energy consumption, 0.6 percentage points lower than that of the same period last year. The share of clean energy consumption was improved with natural gas and non-fossil fuel consumption accounting for 20% of the total, an increase of 0.3 percentage points compared with that of the end of last year.
Thirdly, new momentum for energy demand kept emerging to replace the old momentum. The share of power consumption of the secondary industry decreased while the share of power consumption of the tertiary industry and household power consumption was on the rise, showing that the supply-side structural reforms, the economic transition and innovative development in China have been quite effective and their effect is just revealing.
In the first half of this year, power consumption of the secondary industry accounted for about 71% of the total, 0.1 percentage points lower that of the end of last year; power consumption of the tertiary industry and household power consumption took up 27.3% of the total, an increase of 0.2 percentage points compared with that of the end of last year. This shows that emerging industries and industries related to the upgrade of household consumption has become an important driver of the increase in power consumption. In June, power consumption of the pharmaceutical industry, general equipment manufacturing industry, transportation electric and electronic equipment manufacturing industry of the secondary industry and the information transmission computer service software industry of the tertiary industry have been growing at a faster pace than that of the national average for 14 to 43 months with its contribution to total power consumption growth increasing from 10.5% in January and February to 17% in June. At the same time, traditional industries that used to be important energy consumers became less important in driving the growth in power consumption. Since Q3 last year, the top four energy consumers, iron and steel, non-ferrous metal, construction material and chemical engineering, saw their contribution to the growth of total power consumption picking up gradually, driving social power consumption growth by 3.3 percentage points in the first two months of this year. However, the figure began to drop gradually since then and dipped to 1.3 percentage points in June.
Fourthly, energy supply continues to improve. Efforts to reduce excessive coal capacity and the risk of overcapacity in coal-fired thermal power generation achieved new progress. The task of reducing excessive coal capacity for the year of 2017 has been fulfilled by 74%. At the same time, China promoted the capacity building of advanced coal mines under the principle of reduction replacement. The Risk Warning of Coal-fired Thermal Power Construction in 2020 was published to guide local area to optimize construction plans of coal-fired thermal power projects. The initial task of the dock out, suspension and delay of the construction of coal-fired thermal power capacity has been divided to urge provinces (regions and cities) to implement the goals of supervision and control and clarify detailed rules for implementation.
The quality of refined oil continued to improve. “China 5” standard has been basically adopted by oil refineries all over China. Since the beginning of 2017 when China began to supply “China 5” standard gasoline and diesel for vehicle use nationwide, oil supply remained ample and stable. Starting from 1st July, China began to supply diesel with a sulfur content of no more than 50ppm.
The focus of energy investment further shifted to public infrastructure. The investment in power source, coal mine and oil and gas development projects grew at a slower pace while that in the development of energy transmission channels increased. In the first half of 2017, the investment in power sources saw a year-on-year decrease of 13.5% nationwide. The investment in coal mining and selection and oil and gas development increased by 0.2% and 6.4% respectively. Grid investment was up by 10%. All these indicated a continued optimization of energy investment structure. The structure of power source is being constantly improved. By the end of June, the installed capacity of power generation from non-fossil energy in 6000KV and above power plants in China totaled at 560 GW, accounting for 34.7% of the total, an increase of 1.6 percentage points compared with that of the same period of last year.
Fifthly, energy supply and demand remained ample in general. Since the start of this year, China has been taking strengthened efforts to promote supply-side structural reforms in the energy sector with energy production remaining stable. According to the initial estimation, in the first half of this year, national energy production reached 1.69 billion tons of standard coal, in which the production of crude coal reached 1.71 billion tons, a year-on-year increase of 5%, the production of crude oil stood at 96.45 million tons, a year-on-year decrease of 5.1% and the production of natural gas was 74.1 billion cubic meters (including shell gas and cabled methane), a year-on-year increase of 8%. Global energy price stayed at a low point with a growth in energy export. In the first half of the year, the accumulated net import of energy stood at about 430 million tons of standard coal, in which the import of coal was 120 million tons, a year-on-year increase of 25.7%; the import of oil was 200 million tons, a year-on-year increase of 12.1% and the import of natural gas was 41.7 billion cubic meters, a year-on-year increase of 16.2%. Energy supply remained ample in relation to energy demand. In the end of June, there was enough coal stock in key power plants in China, although the stock of coal dropped a little due to the extreme hot weather in recent days. The stock of refined oil was also enough. In the first half of this year, power generation facilities have been used for 1,790 hours on average, a decrease of 7 hours compared with that of the same period of last year, in which thermal power was used for 2,010 hours, an increase of 46 hours compared with that of the same period of last year, staying at a relatively low level in general.
Sixthly, the profit of the energy industry differs from sector to sector. It is known to all that the profit of upper-stream and lower-stream industries of coal became diversified due to the pick-up in energy price. From January to May, coal exploitation and washing and dressing made a profit of RMB123.3 billion and related companies saw improved operation performance. Coal-fired thermal power industry became money-losing due to an increase in production cost. The oil and gas exploitation industry in China achieved a profit of RMB 21.3 billion in the first five months of this year and the energy refining industry made a profit of RMB93.7 billion.
According to Li Fulong, it is expected that in the latter half of the year, traditional energy-consuming industries related to real estate and infrastructure will witness slight and gradual growth in energy demand. With the implementation of supply-side structural reforms, streamlining administration and delegating powers and the innovation-driven strategy as well as the growing financial support to the real economy, energy consumption of the manufacturing industry is expected to grow. Driven by consumption demand and industrial transition and upgrade, energy consumption of strategic emerging industries, the service industry and domestic consumption related industries will still have a good momentum and it is expected that energy supply will remain enough in the latter half of the year.
There are mainly three features: (1) energy consumption remains the momentum for growth. More specifically, the demand of coal and oil stayed stable; the demand of natural gas grew rapidly and the demand of power continued to grow; (2) the share of clean and low-carbon energy began to rise. Driven by the accelerated implementation of replacing coal with electricity and gas and the development of clean and low-carbon energy, energy mix was further optimized; (3) energy supply remained stable and orderly to maintain a general and ample balance between supply and demand. According to the plan for 2017, China will reduce excessive capacity of coal by 150 million tons and dock out and suspend or delay coal-fired power units of 50 GW.