In 2004, China had total installed electricity generating capacity of 391.4 gigawatts (GW), 74 percent of which came from conventional thermal sources. In 2004, China generated 2,080 billion kilowatthours (Bkwh) and consumed 1,927 Bkwh of electricity. Since 2000, both electricity generation and consumption have increased by 60 percent.

In 2002, the Chinese government dismantled the monopoly State Power Corporation (SPC) into separate generation, transmission, and services units. Since the reform, China’s electricity generation sector is dominated by five state-owned holding companies, namely China Huaneng Group, China Datang Group, China Huandian, Guodian Power, and China Power Investment. These five holding companies manage more than 80 percent of China’s generating capacity. Much of the remainder is operated by independent power producers (IPPs), often in partnership with the privately-listed arms of the state-owned companies. Deregulation and other reforms have opened the electricity sector to foreign investment, although this has so far been limited.

During the 2002 reforms, SPC divested all of its electricity transmission and distribution assets into two new companies, the Southern Power Company and the State Power Grid Company. The government aims to merge SPC’s 12 regional grids into three large power grid networks, namely a northern and northwestern grid operated by State Power Grid Company and a southern grid operated by the Southern Power Company. Chinese officials hope to achieve an integrated national electricity grid by 2020. Also in 2002, the State Electricity Regulatory Commission (SERC) was established, which is responsible for the overall regulation of the electricity sector.

According to one industry study conducted at the end of 2005, over 120 GW of generating capacity is currently under construction in China. Rapid growth in electricity demand has spurred significant amounts of investment in new power stations. Although much of the new investment has been earmarked to alleviate electricity supply shortages, some independent analysts forecast the possibility of oversupply as an assortment of new projects are scheduled to come online between 2007 and 2009. To ward off a possible supply glut, Chinese government officials have made an effort to approve new projects at a steady and measured rate.

Conventional thermal sources are expected to remain the dominant fuel for electricity generation in the coming years, with many power projects under construction or planned that will use coal or natural gas. As with coal mining, the Chinese government is looking to shut down or modernize many small and inefficient power plants in favor of medium-sized (300 to 600 MW) and large (1000 MW and up) units. China’s eleventh five-year plan, covering the period 2005-2010, calls for the country to increase the share of natural gas and other cleaner technologies into the country’s energy mix.

There are several examples of China’s effort to bring new natural gas-fired power stations online. In July 2006, Huaneng Power International, which is China’s largest listed electricity generation company, started operations at a new natural gas-fired power plant in Shanghai. The facility has a capacity of 1,200 MW, making it China’s largest natural gas-fired power station. Construction is also underway at the 2,000-MW Huizhou power plant near Shenzhen that will use 560,000 metric tons of LNG per year from the new Guangdong terminal. Also in Guangdong, at least six other 300-MW natural gas-fired units are planned or under construction, and 1.8 GW of other existing coal and oil-fired power plants are being converted to run on natural gas. The first natural-gas fired plant in Beijing started operations in July 2006. The new unit has a capacity of 150 MW, and several companies are working to open additional larger natural gas-fired generators in Beijing before the 2008 summer Olympics.

Although many analysts forecast that natural gas will see the greatest percentage rise in installed electricity generation capacity over the next decade, coal is expected to show the largest increase in absolute terms. In the first half of 2006, the continued uncertainty over future Russian natural gas supplies and the rising costs of planned LNG imports may push China even more toward coal for its future energy needs. China has vast coal reserves, much of which have yet to be developed, and coal projects tend to be much cheaper than natural gas or other sources.

In 2004, China was the world’s second-largest producer of hydroelectric power behind Canada. In the same year, China generated 328 billion kilowatthours of electricity from hydroelectric sources, representing 15.8 percent of its total generation. This figure is likely to increase given the number of large-scale hydroelectric projects planned or under construction in China. The largest power project under construction is the Three Gorges Dam, which will include 26 separate 700-MW generators, for a total of 18.2 GW. When completed, it will be the largest hydroelectric dam in the world. The Three Gorges project already has several units in operation, but the project is not expected to be fully completed until 2009.

Another large hydropower project involves a series of dams on the upper portion of the Yellow River. Shaanxi, Qinghai, and Gansu provinces have joined to create the Yellow River Hydroelectric Development Corporation, with plans for the eventual construction of 25 generating stations with a combined installed capacity of 15.8 GW. 

China is also actively promoting nuclear power as a clean and efficient source of electricity generation. Although it makes up only a small fraction of China’s installed generating capacity, many of the major developments taking place in the Chinese electricity sector recently involve nuclear power. EIA and independent sources forecast that China will add between 15 and 30 GW of new nuclear energy capacity by 2020, but even with this expansion, nuclear power will only represent between 2.5 and 4.5 percent of total installed generating capacity.

As of mid-2006, China had eight new nuclear power plants under construction, the biggest of which is a 6-GW nuclear complex at Yangjiang in Guangdong province, set to begin commercial operation in 2010.