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　　Introduction: China’s potential economic growth rate is declining, and the economy is expected to trend steadily in the medium to short term. Given ample supplies of coal for power generation and relatively low utilization hours of power-generation equipment, barring adverse weather conditions, the year-on-year growth rate of electricity output in 2015 is likely to fall within the range of 4.5%–5.5%, resulting in an overall balance between electricity supply and demand, though some localized areas may still experience tight supply-demand conditions.

　　  Current Status of China’s Electricity Market

　　  (1) Overview of Power Generation

　　  1. The growth rate of power generation has slowed markedly. In recent years, China’s power generation has maintained a high growth trajectory: from 2007 to 2011, it increased from 3,255.9 billion kilowatt-hours to 4,721.7 billion kilowatt-hours, a rise of about 45%, with an average annual growth rate of 11.1%. However, in 2012 the growth rate decelerated sharply to 4.7%, and further declined to 3.2% in 2014. Although a rebound occurred in 2013, with a growth rate of 7.5%, the overall trend has clearly shifted toward slower expansion. In 2014, national power generation totaled 5,463.8 billion kilowatt-hours, with hydropower up 18% year on year, nuclear power up 18.89%, and thermal power down 0.4%. The decline in thermal power generation was attributable to lower electricity demand driven by milder temperatures; if temperature effects were neutralized, thermal power generation should resume growth in 2015. Despite the recent slowdown in China’s power-generation growth, projections from major international energy agencies—including the EIA, IEA, and IEEJ—indicate that, through 2035, the global average annual growth rate of power generation will be 2.2%–2.3%, meaning China’s growth rate will still significantly exceed this benchmark.

　　  2. The rapid expansion of power-generation capacity has led to significant overinvestment. In 2012, China added the largest amount of new installed capacity—84.23 million kilowatts—representing a year-on-year increase of 7.93%; in 2013, the year-on-year growth reached 9.25%, and in 2014 it was 8.7%. In 2012, the average utilization hours of power-generation equipment at plants with a capacity of 6,000 kilowatts or more nationwide were 4,572 hours, down 158 hours from 2011; in 2013, the figure was 4,511 hours, a year-on-year decrease of 61 hours; and in 2014 it fell to 4,286 hours, a year-on-year drop of 225 hours. The sustained, substantial growth in installed capacity over three consecutive years, coupled with the steady decline in average utilization hours, indicates that the pace of investment in power-generation equipment has far outstripped the effective utilization rate of such equipment.

　　  (II) Overview of the Electricity Market

　　  1. The irrational structure of industrial electricity consumption has not undergone any fundamental change. For three consecutive years, the secondary sector in China has accounted for roughly 74% of total electricity consumption; within this, the heavy industry sector has consistently consumed about 60% of that share. Meanwhile, after recording annual growth rates exceeding 10% in 2012, electricity consumption in the tertiary sector and by residential users declined in 2013 and experienced a more substantial drop in 2014. Consequently, the long-standing problem of an overly high proportion of electricity consumption in the heavy industry sector remains unresolved. In 2014, due to average national temperatures in August being 0.2°C lower than the long-term norm and 1.5°C lower than the same period last year, both industrial and residential electricity demand fell markedly. Total national electricity consumption reached 5,523.3 billion kilowatt-hours, up 3.8% year on year; specifically, electricity consumption in the primary sector was 99.4 billion kWh, down 0.2%; in the secondary sector, 4,065 billion kWh, up 3.7%; in the tertiary sector, 666 billion kWh, up 6.4%; and for urban and rural household use, 692.8 billion kWh, up 2.2%. Electricity consumption in the heavy industry sector totaled 3,327.2 billion kWh, an increase of 3.6% over the previous year.

　　  In the high-energy-consuming sectors, electricity consumption in the nonferrous metals and chemical industries has maintained a sustained high growth trend, while the share of electricity consumption in the ferrous metals sector has shown no clear pattern of increase or decrease. In the building materials sector, after a slight decline in 2012, electricity consumption has risen for two consecutive years, overall indicating that energy-saving efforts in these high-energy-consuming sectors have been ineffective. From January to November 2014, the four major high-energy-consuming industries—ferrous metals, nonferrous metals, chemicals, and building materials—recorded electricity consumption of 402.2 billion, 288.4 billion, 285.6 billion, and 235.9 billion kilowatt-hours, respectively, with year-on-year growth rates of −0.9%, 4.5%, 3.4%, and 5.1%, respectively.

　　  2. Overall balance between electricity supply and demand, with localized shortages. The regions experiencing the fastest growth in total electricity consumption are mainly concentrated in Northwest China. From January to November 2014, the provinces whose year-on-year growth in national electricity consumption exceeded the national average (3.7%) were, in descending order: Xinjiang (13.4%), Inner Mongolia (10.7%), Fujian (9.3%), Hainan (8.9%), Guangdong (8.7%), Jiangxi (7.3%), Qinghai (7.0%), Chongqing (6.7%), Guangxi (5.7%), Shaanxi (5.6%), Yunnan (5.3%), Ningxia (4.8%), and Guizhou (4.2%). Xinjiang, Qinghai, Yunnan, Hainan, Shaanxi, and Inner Mongolia have maintained high growth for three consecutive years, while Tibet, Anhui, Gansu, and Jiangsu, after two years of strong growth, saw a significant decline in 2014. Meanwhile, Fujian, Chongqing, Ningxia, and Jiangxi have experienced accelerating growth over the past two years.

　　  Regional growth in total electricity consumption is broadly consistent with trends in peak load growth across different regions. From January to November 2014, the Northwest region recorded the fastest increase in peak load, at 5.7%, followed by the North China region, with a growth rate of 3.0%. In contrast, the East China, Central China, and Northeast China regions experienced relatively slower growth in peak load, increasing by 1.9%, 0.9%, and 1.4% year on year, respectively.

　　  While overall national power supply remains broadly balanced, some localized areas are experiencing power shortages. However, these regions are not typically characterized by rapid growth in electricity consumption; rather, their deficits stem primarily from constrained local power resources and adverse weather conditions, compounded by a lack of external power support. From January to November 2014, driven in part by fewer-than-average high-temperature days during the summer, the nationwide power shortfall was smaller than the previous year, with a cumulative peak deficit of 5.4 million kilowatts. Specifically, the deficits were as follows: Tianjin, 360,000 kW; the southern Hebei grid, 2.39 million kW; northern Hebei, 870,000 kW; Shandong, 3.6 million kW; Jiangsu, 1.12 million kW; Anhui, 200,000 kW; Fujian, 130,000 kW; Henan, 900,000 kW; Shaanxi, 1.16 million kW; and Tibet, 85,000 kW.

　　  (3) Low Level of International Cooperation

　　  At present, cross-border grid interconnection has become a major development trend, with many countries having established cooperative arrangements for grid interconnection in order to make full use of global energy resources, particularly clean energy. However, China has made extremely slow progress in the field of international power cooperation. From January to November 2014, the country’s total electricity imports and exports amounted to 23.03 billion kilowatt-hours, accounting for only 0.4% of the national electricity consumption of 5,011.6 billion kilowatt-hours during the same period—a year-on-year decrease of 7.2%. Specifically, electricity imports totaled 5.56 billion kilowatt-hours, down 13.6% year on year, while electricity exports reached 17.47 billion kilowatt-hours, a decline of 5.0% compared with the previous year. The top three regions and countries in terms of cumulative export volume were Hong Kong (60%), Macao (22%), and Vietnam (11%). Notably, Hong Kong and Macao together accounted for 82% of China’s total electricity exports; consequently, actual power cooperation between the Chinese mainland and other countries is even more limited.

　　  (4) The structure of power investment is becoming more rational.

　　  According to IEA projections, from 2012 to 2035, power-sector investment in China will account for 67% of total energy-sector investment, making it a key focus area for future energy investment. In 2014, nationwide power-sector investment totaled RMB 776.4 billion, up 0.5% year on year; of this, power-generation investment reached RMB 364.6 billion (including RMB 96 billion for hydropower, RMB 95.2 billion for thermal power, RMB 56.9 billion for nuclear power, and RMB 99.3 billion for wind power), while grid investment amounted to RMB 411.8 billion, down 5.8% year on year. Notably, grid investment increased by 6.8% year on year. Overall, power-sector investment has shown a steady but modest upward trend; however, power-generation investment has been gradually declining, whereas grid investment has been on the rise.

　　  In 2014, thermal power accounted for 45.7% of new power-generation capacity, while hydropower accounted for 21%. For three consecutive years, the share of new thermal-power capacity has been markedly lower than the current roughly 80% share of thermal power in total generation, whereas the share of new capacity from other clean-energy sources has exceeded their share in total generation, reflecting China’s trend toward strengthening its clean-energy generation capacity.

　　  Characteristics of transformation.

　　  The overall trend in power-generation development remains broadly stable. From January to August 2014, cumulative new-energy power generation increased by 12.5% year on year, while thermal power generation declined by 1.9% and hydropower generation by 0.8%, with nuclear power generation rising by 0.4%. These data indicate that new-energy power generation is expanding at a relatively robust pace, whereas thermal power generation is experiencing a modest decline. With the exception of the substantial drop in nuclear power resulting from the shutdown of Japanese nuclear reactors, hydropower and nuclear power have generally exhibited small, fluctuating changes, reflecting the broadly stable trend in power-generation development.

　　  Electricity consumption, by contrast, has been volatile. First, among OECD countries, the year-on-year increase in electricity generation in those experiencing growth has generally been smaller than the year-on-year decline in those with falling output; this trend was particularly pronounced in 2014, consistent with the recent sustained decline in electricity generation across the OECD, largely attributable to the severe hit to energy demand in OECD economies during the global financial crisis of 2008. According to IEA projections, by 2035 the average annual growth rate of energy consumption in OECD countries will be only 0.6%, compared with 2.3% in non-OECD countries; however, based on electricity data, this forecast appears overly optimistic. Second, among the top ten countries in terms of cumulative year-on-year growth in electricity generation over more than two consecutive years, only Chile has shown steady expansion, while the other countries exhibit no discernible pattern in their growth rates. Conversely, among the countries with more than two consecutive years of year-on-year declines in cumulative electricity generation, Hungary stands out for its consistently substantial reductions, whereas the declines in other countries lack a clear pattern, with several nations alternating between periods of strong growth and sharp contraction—features that underscore the instability of electricity consumption in OECD countries.

　　  2. Key U.S. Electricity Indicators. U.S. electricity generation is dominated by coal-fired, natural gas–fired, and nuclear power, with no clear upward or downward trend; the share of these three major sources has remained stable, while hydropower has declined slightly year by year and renewable energy has increased steadily. From January to September 2014, total net electricity generation in the United States reached 3,117.501 billion kilowatt-hours, up 1.30% year on year. Specifically, coal-fired generation totaled 1,231.8 billion kWh, accounting for 39.5% and increasing by 2.6% year on year; natural gas–fired generation amounted to 844.7 billion kWh, representing 27.1% and declining by 0.7% year on year; nuclear generation reached 596.2 billion kWh, or 19.1%, up 1.1% year on year; hydropower generated 200.6 billion kWh, or 6.4%, down 5.7% year on year; and renewable energy generated 206.1 billion kWh, or 6.6%, an increase of 9.8% year on year.

　　  U.S. electricity sales were lower than electricity generation, with no significant increases or decreases observed across different sectors. From January to September 2014, total electricity sales nationwide reached 2,846.295 billion kilowatt-hours, up 1.4% year on year. Specifically, residential sales increased by 2% year on year, commercial sales rose by 1.6%, industrial sales grew by 0.3%, and transportation sector sales expanded by 3.7%.

　　  3. Key electricity sector indicators in Japan. In recent years, Japan’s power generation has shown a slight downward trend, with an average annual growth rate of –0.3% from 2007 to 2011. Thermal power remains the dominant source of electricity, and its share has increased, particularly in the wake of the Fukushima nuclear accident. From January to August 2014, the combined power generation of Japan’s ten major power utilities totaled 607.021 billion kilowatt-hours, of which thermal power accounted for 447.078 billion kWh, or 73.6%, hydropower for 42.396 billion kWh, new-energy generation for 1.686 billion kWh, and purchased power for 119.664 billion kWh; a small amount was also generated through pumped-storage operations. Given the relatively small share of new-energy generation, Japan has yet to demonstrate the clear advantages that international trends in new-energy development would suggest, and it engages in very limited cross-border cooperation on electricity supply; between January and April 2014, Japan’s electricity imports and exports were both zero. Following the increase in the consumption tax, Japan’s economic growth contracted more sharply than expected in the second quarter of 2014, as high public debt and a very low potential growth rate have weighed on the expansion of electricity consumption.

　　  4. Key electricity sector indicators for India. India has long maintained robust growth in power generation. From January to October 2014, cumulative power generation reached 867.161 billion kilowatt-hours, up 9.95% year on year. Of this total, thermal power accounted for 717.657 billion kWh, or 82.8%; hydropower contributed 116.099 billion kWh, or 13.4%; nuclear power generated 28.738 billion kWh, or 3.3%; and Bhutan’s imports amounted to 4.667 billion kWh, representing 0.5%.

　　  Thermal power, hydropower, and nuclear power are India’s primary sources of electricity generation. Although electricity output has continued to grow at a robust pace, the share of each source has changed only slightly, reflecting a stable primary-generation mix. However, India’s reliance on imported electricity is extremely low, while electricity consumption is expanding rapidly; currently, one-quarter of the population still lacks access to reliable power. Given that coal remains the main driver of India’s power growth—and considering the poor quality of domestic coal—India will face substantial pressure to reduce emissions in the future. Strengthening energy cooperation with other countries and accelerating the development of clean energy as well as the cleaner use of coal are therefore crucial for addressing India’s current energy challenges.

　　  2015 Forecast of Key Power Industry Indicators

　　  China’s potential economic growth rate is declining, and the economy is expected to trend toward stability in the medium to short term. Given ample supplies of thermal coal and relatively low utilization hours for power-generation equipment, barring adverse weather conditions, the year-on-year growth rate of electricity generation in 2015 is likely to fall within the 4.5%–5.5% range, resulting in an overall balance between electricity supply and demand, though some localized areas may still experience tight supply-demand conditions. On the investment front, according to planning targets, by 2020 the “four vertical and seven horizontal” ultra-high-voltage AC backbone grid and 19 UHV DC transmission projects are slated for completion, which will keep grid investment on an upward trajectory over the medium to long term. Meanwhile, given the occurrence of curtailment of hydropower and wind power in certain regions in 2014, investments in new clean-energy generation capacity are expected to rise in order to enhance the utilization of clean energy. In terms of international cooperation, as cross-border grid collaboration becomes increasingly common, the internationalization of power grids is emerging as a major future trend. Relevant domestic authorities have recognized this development and have set a goal of achieving comprehensive breakthroughs in international business areas such as “three utilities and one capital” by 2015; accordingly, the level of international cooperation is expected to increase substantially in 2015 and beyond. At the global level, both electricity generation and electricity consumption are projected to grow at faster rates in 2015 than in 2014.