In 2007, China had total installed electricity generating capacity of 624 gigawatts (GW), and 3,042 billion kilowatt-hours (Bkwh) of generation, 83 percent of which came from conventional thermal sources. In 2006, China generated 2,718 Bkwh and consumed 2,529 Bkwh of electricity. Since 2000, both electricity generation and consumption have increased by over 110 percent. Installed capacity is expected to grow in the next decade to meet rising demand, and China could add another 80 GW of new installed capacity in 2009.

Rapid growth in electricity demand this decade has spurred significant amounts of investment in new power stations. Although much of the new investment was earmarked to alleviate electricity supply shortages, the economic crisis of late 2008 resulted in declining power demand growth. Some industry analysts forecast the possibility of oversupply as an assortment of new projects are scheduled to come online in the next few years. The government anticipates that power demand will rebound once the Chinese economy recovers, and is focused on using some of the stimulus package to invest in further development of the transmission network, integration of regional networks, and bringing on planned new generating capacity.

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 generate about half of China’s electricity. Much of the remainder is generated 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.

While the generation sector has some market competition, the transmission and distribution sectors are heavily state-controlled. 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 by 2020. Also in 2002, the State Electricity Regulatory Commission (SERC) was established, which is responsible for the overall regulation of the electricity sector.

Wholesale and retail electricity prices are determined and capped by the NDRC which can limit the profit margin of generators. Generators accrued considerable financial losses during the peak of thermal fuel prices in mid-2008 and market-based fuel prices could not be passed on to the grid and other electricity end-users. This was another factor leading to power supply shortages as some generators were forced to shut down. Coal prices have collapsed in 2009; however, still remain above current market rates as price negotiations continue between these parties. This phenomenon could have contributed to a surge in coal imports to China in the first half of 2009 as power generators are seeking less expensive fuel sources. Also, electricity rates currently favor industrial customers and can be over 40 percent lower than other retail customers. The NDRC is currently drafting a reform of electricity prices due to be released at the soonest in 2009.

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 2006-2010, calls for the country to increase the share of natural gas and other cleaner technologies into the country’s energy mix and close several smaller coal-fired plants that were less efficient and heavy polluters. Recently, the NEA announced the government plans to remove 31 GW of coal generation in the next three years. Coal consists of roughly three-quarters of the power generation feedstock and the EIA forecasts they will maintain this market share through 2030.

Natural gas will see the greatest percentage rise in installed electricity generation capacity over the next decade, but coal is expected to show the largest increase in absolute terms. There are several examples of China’s effort to bring new natural gas-fired power stations online some in conjunction with LNG terminals coming online, though the fuel will continue to play a marginal role in the power sector’s fuel mix based on the higher cost of LNG and imported pipeline supplies versus coal. 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. The 1,170MW-Qianwan LNG power plant located in Guangdong Province, started up in January 2007. China is also constructing several other combined cycle units in Guangdong including the 1,170-MW Huizhou power plant and the Shenzhen Energy Group plant that will use LNG from the new Dapeng terminal. There are approximately 20 gas-fired power plants in operation or under construction and generating about 20 MW. Also, there are several coal-fired and oil-fired power plants that are being converted to run on natural gas in Guangdong.

In 2007, China was the world’s largest producer of hydroelectric power. In the same year, China generated 430 Bkwh of electricity from hydroelectric sources, representing 14.1 percent of its total generation. Also, installed generating capacity was around 170 GW in 2008, accounting for about a fifth of total installed capacity. These figures are 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 along the Yangtze River, which will include 32 separate 700-MW generators, for a total of 22.5 GW. When fully completed, it will be the largest hydroelectric dam in the world. The Three Gorges project already has several units in operation as of 2009, but the project is not expected to be fully completed until 2011.

Wind is the second leading renewable source for power generation, and China is the world’s fifth largest wind producer, generating 5.6 Bkwh in 2007 and 95 percent growth from 2006. China’s installed capacity in 2007 was 6.06 GW, more than double the amount in 2006. The NDRC aims to increase wind capacity to 10 GW by 2010. 

China is also actively promoting nuclear power as a clean and efficient source of electricity generation. Although nuclear capacity (nearly 9 GW) 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. China’s government forecasts that about 60 to 70 GW will be added by 2020. EIA forecasts that China will increase its nuclear generation to about 424 Bkwh by 2030, growing 8.9 percent per year between 2006 and 2030.

As of mid-2009, China has 8 new nuclear power plants under construction and another 8 in the planning stage, the biggest of which is a 4.4-GW nuclear complex at Haiyang in Shandong province, set to begin commercial operation in 2014.

China also intends to build strategic and commercial uranium stockpiles through overseas purchases as well as further developing domestic production in Inner Mongolia and Xinjiang.