Sunday, January 06, 2008

How will China’s increased power consumption affect worldwide energy prices?

The country’s demand for electricity will likely reach 1.5 billion kilowatts by 2020 based on its macro-economic growth target, said the general manager of State Grid, China’s largest electricity distributor in terms of assets, doubling the country’s current electricity consumption.

The booming demand would create a widening gap with the country’s power supply in the long term, although the current situation was mostly balanced, said Liu Zhenya. China’s power generation capacity was estimated to have reached 700 million kilowatts at the end of 2007, up from 600 million kilowatts at the end of 2006.

China aimed to quadruple its gross domestic product by 2020 from 2000, which will require about 1 kilowatt of power per capita, Liu said. The country has a population of around 1.3 billion. Aiming to increase the nation’s power supply, the company would develop ultra-high voltage power grid networks to transmit electricity from main hydropower plants in the west and coal-fired power plants in the north to the country’s densely populated eastern region, where power demand is intensive, he said. The region has been suffering from blackouts due to insufficient or irregular power supply.

In August 2006, State Grid began building a pilot transmission line that will see 1,000 kilovolts of alternating current link southeastern parts of Shanxi Province with Jingmen City in the central province of Hubei. It will soon start building a second ultra-high voltage power line, a 800-kilovolt direct current line, running eastwards from the Xiangjia dam in Sichuan Province to Shanghai.

State Grid would also import electricity from neighboring Russia, Mongolia and Kazakhstan, Liu said, to ease a potential domestic supply shortage. He said he expected the company to import a combined 120 billion kilowatt-hours of electricity a year from Russia and Mongolia by 2020.

Can power companies deal with China’s massive appetite for energy over the next couple of years, and why?