New capacity added

For the year 2007, overall electricity consumption in China is estimated to have grown 15% to 3.3 trillion kWh, reaching a historically high level. In terms of consumption mix, 75% demand goes to industrial usage, therefore the bulk of industrial value growth is mainly responsible for the rapid growth in electricity consumption. The current electricity consumption boom started in 2003, and there had been widespread power shortage in 2003 and 2004. As more generation capacity was invested in the following years, the tightness of electricity supply has eased to some extent. Supply shutdown situations have reduced significantly from 2003, and only a handful of places still need daily scheduled shutdowns. Utilization hours have also come down from the record 5,455 hours in 2004.

Heavy industries leading electricity consumption

In the first three quarters of 2007, electricity consumption by the industrial sector amounted to 1.8 trillion kWh, a 16.78% increase on pcp. Electricity consumption by light and heavy industries were up 10.04% and 18.42% respectively. Consumption mix is apparently weighing towards heavy industries, whose electricity usage amounted to 60% of total electricity consumption in China during the period.

In terms of energy consumption for each unit of added value, heavy industries are distinctively higher, about 2.5 times of light industries. And currently the heavy industries are growing much faster than light industries. Empirical evidence has shown that energy consumption growth only has a weak correlation with GDP growth, but a strong correlation with industrial value-adding growth. We've found that for every 1% growth in industrial added value, overall electricity demand will grow about 0.85%.

Regional situations

The "11th Five-Year Plan"(2006-2010) has provided a strategic planning direction for China's heavy industry, which will also be integrated with China's central region growth, western region development and recovering the old industrial base of north eastern region. From the regional electricity consumption situation in the first half of 2007, most of the high consumption growth areas belong to central and western provinces. This implies as implementation of the grand strategy of growing central region and developing western region, these areas have achieved rapid economic growth. Within these provinces, heavy industries are leading the rapid growth of electricity demand.

It is exactly because of such strong growth in heavy industries in recent years, the resultant massive investments in generation capacity are now coming into market. But the decline in generator utilization hours has been better than expected in 2007. As growth of new generators will slow down in 2008, utilization hours should remain steady.

For eastern provinces, as encouraged by the ease in supply and demand situation, electricity demand from heavy industries has again rebounded in 2007. Heavy industries in Guangdong Province have registered the biggest consumption growth among other provinces. The top six electricity consumption provinces, Guangdong, Jiangsu, Shandong, Zhejiang, Hebei and Henan, capture 46% of total national electricity consumption. Consumption in these six provinces grew 15.64% this year, higher than the national average of 15.12%. Therefore, although western provinces have the fastest electricity consumption growth, traditional big power users in the more developed eastern region still account for the largest proportion of electricity demand growth.

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