China’s 12th Five-Year Plan Pushes Power Industry in New Directions

The Five-Year Plan is the expression of the centralized planning goals for China’s economy. The 12th Five-Year Plan, approved by the Chinese Government on March 14, 2011, established many social and economic goals, including significant expansion of the country’s power generation industry in many new directions.

The Five-Year Plan is China’s most important government policy document. It describes a series of economic development initiatives, maps strategies for economic development, sets growth targets, and launches reforms. During the just-completed 11th Five-Year Plan period, rapid power industry growth met the needs of economic and social development, but the growth of the power industry was disorganized. As part of the 12th Five-Year Plan, the structure of power generation development will be optimized, including the proper balance of coal transportation and power transmission. In addition, the controversy over the direction of grid transmission and distribution must be reconciled. The Plan also puts forward specific requirements for energy conservation measures.

China’s major power companies have already begun formulating their development strategies to meet five specific requirements set out by the Plan: develop clean energy, optimize the production of coal-fired electricity, rationally allocate peaking power, develop distributed energy, and construct a strong and smart grid. The purpose of this article is to discuss those requirements and the development strategies for China’s power industry.

Goal 1: Develop Clean Energy

The 12th Five-Year Plan will change the power generation structure in which new and renewable energy resources figure prominently. According to the Plan, non–fossil fuel generation should account for 11.4% of total primary energy consumption by 2015, and renewable energy resources should be 20% by 2020. In order to reach emission reduction targets, the proportion of new and renewable energy in China’s overall energy mix will continually increase. Clean energy sources include hydro, biomass, wind, solar, and nuclear power.

In 2010, the total installed electricity production capacity in China was 968.34 GW (Table 1). To meet the Plan’s clean energy goals, hydro power will play the most important role in the development of new and renewable energy and contribute considerably to energy saving and emissions reductions in the next 10 years (Figure 1).

Table 1. Installed electricity capacity in China, 2010 and projected to 2020. Source: China Electricity Council, National Grid Energy Research Institute

1. A great wall of China. The 22.5-GW Three Gorges Dam, which is under construction along the great Yangtze River in China’s Hubei Province, is the world’s largest power project, costing an estimated ¥180 billion ($28.4 billion) to build. Courtesy: Wikipedia

The contribution of nuclear power, although now about 10.8 GW, will increase greatly, as a percentage, in the future. Due to intermittency and instability issues, the installed capacity of wind power will be lower than hydro power and nuclear power by 2020. At the same time, the installed capacity of solar photovoltaics will not increase considerably before 2020 because of technology and economic concerns.

National Grid Energy Research Institute (NGERI) has completed a study of several scenarios of the coordinated development of clean energy and power systems during the 12th Five-Year Plan, particularly with regard to energy security and economy. The results of the study showed that China’s total installed capacity is expected to soar to 1,786 GW by 2020. The installed capacity of renewable energy will reach about 600 GW by 2020 (Table 1), according to the National Development and Reform Commission. Renewable energy will increase in overall percentage from 26.54% in 2010 to 34% in 2020.

It should be noted that the construction period for nuclear power and hydro power is very long. Thus, it is very critical for China to construct and place into operation a number of clean energy generation projects during the 12th Five-Year Plan period.