Effects of Urbanization on Generation in China

In 2013, urbanization in China reached 53.73%. Urbanization has become an important field for national reform. On the one hand, urbanization is effective for improving quality of life and narrowing the urban-rural gap. On the other hand, the economic development strategy promoted by the new Chinese government shifts from being driven by exports to expanding domestic demand, and urbanization becomes a significance factor in that. In 2013, the Central Economic Working Conference put forward the requirement to pursue a new urbanization that takes an “intensive, smart, green and low-carbon” path, which means new urbanization will have far-reaching influence on power generation.

First, the ongoing promotion of urbanization will result in ever-increasing energy requirements, thus providing traditional energy supply businesses with new opportunities. Meanwhile, the shift in population distribution poses challenges for thermal generation businesses. Second, new urbanization emphasizes efficient and clean utilization of energy resources, which provides clean energy supply businesses with new opportunities.

Influence on Thermal Generation

In China, thermal generation will still be the main generation form for a long time. The central government has formulated new development strategies for energy facility construction—energy industry development together with urbanization—which will affect the distribution of thermal power:

• Optimization strategy for traditional thermal power distribution. Thermal power units in China are distributed mainly near coal mines and load centers now. In the future, industrialization and urbanization will proceed intensively and will be characterized by the dense distribution of industry, population, cities, and towns. Therefore, the optimal distribution of thermal power should consider energy resources, planning energy industry development together with urbanization distribution according to the rule of maximizing comprehensive benefits while at the same time guaranteeing the urban energy supply.
• Coordinated planning of wind, solar, and thermal power sources. China has proposed the planning of comprehensive energy bases and city clusters. Among the five bases, four are also located in the key position of urban belts. In addition, according to the planning target for energy bases, half of their capacity will be delivered outside the urban area. Therefore, site selection for thermal power should consider both energy resources and urbanization distribution to accelerate the coordinated dispatching of wind power, solar power, and hydropower.

Influence on Distributed Generation

From now until 2020, urban development planning will be combined with land reform, and new development zones of dozens of square kilometers will be constructed. Under this trend, urban planning will pay more attention to the coordination between public facilities and resource supplies such as water, electricity, and fuel gas:

• Distributed gas-fired generation. Currently, high-efficiency gas generation accounts for a low share among total energy end-use utilization in China, while low-efficiency coal is in just the opposite position. Therefore, the utilization of natural gas should be enhanced urgently.
• Distributed generation with renewable energy. The urbanization trend in China includes establishing dominant towns in rural areas. Because of the low energy density of distributed renewable energy, its capacity per unit area is relatively low compared with traditional fossil energy. Therefore, it is appropriate for servicing small-scale houses and commercial buildings in these dominant towns.

Influence on New Energy Generation

Green is the new urbanization’s character, so new, low-carbon resources should be explored to meet increasing demand for electricity:

• Explore shale gas generation. Shale gas is yet in the early stage in China. However, in light of the similar distribution of shale gas resources and load centers, local generation from shale gas will gradually replace coal-fired units. In addition, the Northwest has abundant intermittent renewable energy, so sufficient local shale gas can meet its increasing peak-shaving requirements.
• Develop inland nuclear power. Nuclear power stations in China are distributed in southeastern coastal areas. In the future, with new urban planning, they should be near load centers to meet the ever-increasing electricity demand.
• Add environment-friendly generation. Urbanization will promote establishing dominant towns among rural areas based on agriculture. Therefore, generation through refuse incineration (waste to energy) and biomass will gain great importance.

In addition, although large amounts of private capital have entered the power industry since the opening of the generation market in 2003, because of the intrinsic character of the state-owned monopoly, most generation business is still owned by the state. Private companies can hardly undertake large generation projects due to capital shortages. Therefore, during the transition stage, they should comprehensively consider their geographic location, capital volume, and technical advantages, thus maximizing advantages and minimizing disadvantages.

New urbanization in China is rapidly expanding, so generation companies should assess the situation and identify their future strategy. Generation companies worldwide should choose a suitable direction for transition during urbanization, based on each country’s urban planning, industrial policy, and resource endowment.■

— Zeng Ming is a professor at North China Electric Power University (NCEPU) and a senior consultant to the National Development and Reform Commission, National Energy Administration, State Grid Corp. of China, and China Huaneng Group. Duan Jinhui, Wang Liang, and Gu Shanshan are doctoral students at NCEPU.