reform of China’s energy institutions and system
has made positive progress.
Reforming China’s energy system is a formidable task and cannot be achieved overnight.
Li Wei, Director of the DRC of China’s State
Council and Chinese lead of this DRC-Shell
collaborative research project, said in a recent
speech that in the context of the global energy
revolution, there are still some deeply rooted
contradictions and problems for China to address
before it can deliver a clean, low-carbon, secure
and efficient modern energy system.
2 In Special
report 4, we discuss how China can develop and
deepen its energy system revolution and institutional innovations, and we put forward a series of
constructive policy proposals.
1 Factors and Trends in Energy
System Reform
1.1 Energy Supply and Demand:
Global Energy Oversupply
and Strong Energy Demand
Growth in Asia’s Emerging
Economies
Historical experience suggests that it is difficult
to implement energy system reform at a time of
rapidly growing energy demand, as the priority is
to ensure energy supply security and meet
demand. In recent years, affected by such factors
as slowing world economic growth and industrial
restructuring, global energy demand has shown
little movement. On the other hand, the shale gas
revolution and large-scale investment and
development in response to high energy prices
have resulted in global energy oversupply and
lower energy prices. As China’s economy enters
the new normal of slower growth, demand for
energy will decline and lead to overcapacity in
the country’s energy sectors, including coal,
electricity and oil. Thus, it is unlikely that there
will be sharp fluctuations in energy demand and
large-scale energy supply shortages. To drive
energy system reform forward, improvements in
energy use efficiency can help strengthen relatively stable internal and external environments.
The annual growth rate in China’s energy
demand is forecast to fall below 2% by 2035, from
8% in 2000. This is attributed to China’s slowing
economic growth, improved energy efficiency and
changing patterns of consumption. China’s energy
demand is increasingly less dependent on
energy-intensive industries like steel and cement.
Instead, future energy demand will be closely
linked to economic restructuring—more structural
adjustments mean less energy demand, and vice
versa. For example, if China’s economic structure
shifts closer to that of the USA, energy demand
will decrease. As the global economy grows,
energy demand will also grow. Almost all new
energy supply in 2014–35 will be consumed by
rapidly developing economies. According to BP
Energy Outlook 2035 (2016), the average annual
growth rate in world primary energy demand in
2014–35 will be 1.4% and world total energy
demand will increase by 34% in the same period.
In the new normal economy, China’s energy
demand will grow slowly but sustainably. In
2025–35, China will account for less than 30% of
the increase in global energy demand, compared to
60% in the past decade (BP 2016).
The share of oil, natural gas and coal in global
energy demand has been stable over the past
decade (Fig. 1). In 2016, the share of oil, natural
gas and coal production was 38.95%, 28.55%
and 32.5% respectively.
Oil and natural gas production shows slight
but steady growth over the past decade, compared to coal, which has declined. As
coal-dominated energy producers begin to seek
alternative energy sources, the energy system
gradually evolves (Fig. 2).
Global primary energy demand did not
change significantly in 2006–16 (Fig. 3). Oil had
the largest share of global primary energy
demand, reaching 33% in 2016. Although many
countries are now reducing their consumption of
fossil fuels to lower their CO 2 emissions, this did
not have much impact on energy demand.
Renewable energy is expanding and its
2
Speech made by Director Li Wei at the China Grand
Energy Transition Forum 2017, August 19, 2017.
394
S. Yaodong and A. Gillespie
has made positive progress.
Reforming China’s energy system is a formidable task and cannot be achieved overnight.
Li Wei, Director of the DRC of China’s State
Council and Chinese lead of this DRC-Shell
collaborative research project, said in a recent
speech that in the context of the global energy
revolution, there are still some deeply rooted
contradictions and problems for China to address
before it can deliver a clean, low-carbon, secure
and efficient modern energy system.
2 In Special
report 4, we discuss how China can develop and
deepen its energy system revolution and institutional innovations, and we put forward a series of
constructive policy proposals.
1 Factors and Trends in Energy
System Reform
1.1 Energy Supply and Demand:
Global Energy Oversupply
and Strong Energy Demand
Growth in Asia’s Emerging
Economies
Historical experience suggests that it is difficult
to implement energy system reform at a time of
rapidly growing energy demand, as the priority is
to ensure energy supply security and meet
demand. In recent years, affected by such factors
as slowing world economic growth and industrial
restructuring, global energy demand has shown
little movement. On the other hand, the shale gas
revolution and large-scale investment and
development in response to high energy prices
have resulted in global energy oversupply and
lower energy prices. As China’s economy enters
the new normal of slower growth, demand for
energy will decline and lead to overcapacity in
the country’s energy sectors, including coal,
electricity and oil. Thus, it is unlikely that there
will be sharp fluctuations in energy demand and
large-scale energy supply shortages. To drive
energy system reform forward, improvements in
energy use efficiency can help strengthen relatively stable internal and external environments.
The annual growth rate in China’s energy
demand is forecast to fall below 2% by 2035, from
8% in 2000. This is attributed to China’s slowing
economic growth, improved energy efficiency and
changing patterns of consumption. China’s energy
demand is increasingly less dependent on
energy-intensive industries like steel and cement.
Instead, future energy demand will be closely
linked to economic restructuring—more structural
adjustments mean less energy demand, and vice
versa. For example, if China’s economic structure
shifts closer to that of the USA, energy demand
will decrease. As the global economy grows,
energy demand will also grow. Almost all new
energy supply in 2014–35 will be consumed by
rapidly developing economies. According to BP
Energy Outlook 2035 (2016), the average annual
growth rate in world primary energy demand in
2014–35 will be 1.4% and world total energy
demand will increase by 34% in the same period.
In the new normal economy, China’s energy
demand will grow slowly but sustainably. In
2025–35, China will account for less than 30% of
the increase in global energy demand, compared to
60% in the past decade (BP 2016).
The share of oil, natural gas and coal in global
energy demand has been stable over the past
decade (Fig. 1). In 2016, the share of oil, natural
gas and coal production was 38.95%, 28.55%
and 32.5% respectively.
Oil and natural gas production shows slight
but steady growth over the past decade, compared to coal, which has declined. As
coal-dominated energy producers begin to seek
alternative energy sources, the energy system
gradually evolves (Fig. 2).
Global primary energy demand did not
change significantly in 2006–16 (Fig. 3). Oil had
the largest share of global primary energy
demand, reaching 33% in 2016. Although many
countries are now reducing their consumption of
fossil fuels to lower their CO 2 emissions, this did
not have much impact on energy demand.
Renewable energy is expanding and its
2
Speech made by Director Li Wei at the China Grand
Energy Transition Forum 2017, August 19, 2017.
394
S. Yaodong and A. Gillespie