CEC Report on the Analysis and Forecast of China Power Demand-Supply Situation in the First Quarter of 2022

In the first quarter, China's power industry implemented the policies of the State Council, implemented the requirements of relevant government departments, and took effective measures to improve the security and stability of the nation’s energy and power, and ensure people's livelihood, power generation, and heat supply. The power industry brought its mission of "For the People" into practice.

In this period, the country's power system was operated safely and stably, and the nation’s power supply and demand were generally balanced. The power industry guaranteed China's epidemic prevention and control, economic development and social stability with strong support.

I. Power Demand-Supply Situation in the First Quarter of 2022

1. Power Demand

In the first quarter, China’s power consumption of the whole society reached 2,040TWh, a year-on-year increase of 5.0%, 2.0 percentage points lower than the two-year average growth rate in the same period in 2021, and 1.7 percentage points higher than the year-on-year growth rate in the fourth quarter of 2021.

In terms of months, from January to February, the power consumption of the whole society increased by 5.8% year-on-year, 4.8 percentage points higher than the growth rate in December of last year. Under the counter cyclical adjustment measures, the macro-economy continued to recover its development trend, and the cold temperature in February boosted the growth rate of the power consumption in Febrary. In March, affected by the spread of the epidemic in many regions and provinces, the growth rate of the power consumption across the country fell back to 3.5%.

- The power consumption of the primary industry was 24.1TWh, a year-on-year increase of 12.6%, 2.0 percentage points lower than the two-year-average growth rate in the same period of 2021 and 1.2 percentage points higher than the year-on-year growth rate in the fourth quarter of 2021. 

The rapid urbanization of rural areas, the significant improvement of rural electricity consumption conditions, the continuous development of electrification, and the transformation of production ways drove the rapid growth of electricity consumption in the primary industry. The better power consumption situation in the primary industry reflected to a certain extent that the current agricultural and rural economy was running well.

- The power consumption of the secondary industry was 1,320TWh, a year-on-year increase of 3.0%, 4.4 percentage points lower than the two-year-average growth rate in the same period of 2021 and 1.9 percentage points higher than the year-on-year growth rate in the fourth quarter of 2021. 

In terms of months, from January to February and in March the power consumption of the secondary industry increased by 3.4% and 2.3% year-on-year respectively. Affected by the epidemic and other factors, the growth rate fell in March.

In the first quarter, the power consumption of manufacturing industry increased by 2.3% year-on-year. In terms of categories, the total power consumption of the four energy-intensive industries increased by 0.5% year-on-year. Among them, the power consumption of ferrous metal smelting industry and building materials industry decreased year-on-year, and the power consumption of cement industry in building materials decreased by 13.7% year-on-year, which was related to the current depressed real estate market. 

The total power consumption of high-tech and equipment manufacturing industry increased by 5.0% year-on-year. Among them, the power consumption of electrical machinery and equipment manufacturing industry, instrument manufacturing industry, computer / communication and other electronic equipment manufacturing industry, pharmaceutical manufacturing industry increased by more than 7% year-on-year. The total power consumption of consumer goods manufacturing industry increased by 2.9% year-on-year, and the power consumption of most industries in consumer goods manufacturing industry increased by 2.5% to 4.5% year-on-year. 

The total power consumption of other manufacturing industries increased by 6.4% year-on-year, of which the power consumption of oil / coal and other fuel processing industry increased by 10.3% year-on-year.

- The power consumption of the tertiary industry was 355.1TWh, a year-on-year increase of 6.2%, 1.7 percentage points lower than the two-year-average growth rate in the same period of 2021 and 2.8 percentage points lower than the year-on-year growth rate in the fourth quarter of 2021. 

In March, the epidemic happened in many regions and provinces caused a great impact on some face-to-face contact service industries and some collective and gathering service industries, and the year-on-year growth rate of the power consumption in the tertiary industry fell from 7.2% from January to February to 4.0% in March. Among them, the year-on-year growth rate of the power consumption in transportation / storage and postal industry fell from 12.4% from January to February to 1.5% in March, the year-on-year growth rate of the power consumption in accommodation and catering industry fell from 11.3% from January to February to 1.7% in March, and the year-on-year growth rate of power consumption in leasing and business services fell from 11.8% from January to February to 4.8% in March. In the first quarter, the rapid development of electric vehicles drove the power consumption of charging and battery swapping service industry to increase by 45.6% year-on-year.

- The residential power consumption was 341.7TWh, a year-on-year increase of 11.8%, 8.0 percentage points higher than the two-year-average growth rate in the same period of 2021 and 3.8 percentage points higher than the year-on-year growth rate in the fourth quarter of 2021. 

In terms of months, the power consumption from January to February and March increased by 13.1% and 8.8% year-on-year respectively. The double-digit growth of the power consumption in the first two months was mainly affected by the cold weather and the lower temperature

- The power consumption in Central China increased by 9.1% year-on-year, ahead of other regions in China. In the first quarter, the power consumption in East, Central, West and Northeast China increased by 4.8%, 9.1%, 3.1% and 3.6% year-on-year respectively. 

The growth rate of the power consumption in Central China took the lead. In the first quarter, a total of 29 provinces in China achieved positive year-on-year growth, of which Tibet, Jiangxi, Anhui, Hubei and Hainan increased by more than 10%.

2. Power Supply

By the end of March 2022, the nation’s installed generating capacity reached 2.4TW, a year-on-year increase of 7.8%. In the first quarter, the power generation of power plants above designated size in China was 1,990TWh, a year-on-year increase of 3.1%. 

From the perspective of different types of investment, installed power generation capacity, growth rate of power generation and structural changes, the power industry continued the trend of green and low-carbon transformation.

- The power investment increased by 7.6% year-on-year, and the non-fossil energy power generation investment accounted for 85.9%. In the first quarter, the power investment of the surveyed key power enterprises was 143.6 billion yuan, a year-on-year increase of 7.6%. The investment in power generation was 81.4 billion yuan, a year-on-year increase of 2.5%, and the investment in non-fossil energy power generation accounted for 85.9%. The investment in power grid was 62.1 billion yuan, a year-on-year increase of 15.1%, of which the investment in AC projects increased by 8.5% year-on-year and the investment in DC projects increased by 57.8% year-on-year. Since the second quarter of last year, some UHV DC projects have been started, driving the high growth of investment.

- The proportion of non-fossil energy power generation installed capacity increased to 47.6%, and the proportion of coal-fired power generation installed capacity decreased to 46.1%. As of the end of March, the nation’s installed generating capacity was 2.4TW, a year-on-year increase of 7.8%. 

In terms of classification, the installed capacity of hydropower generation was 0.39TW and the thermal power generation 1.3TW, of which the coal-fired power generation was 1.11TW, accounting for 46.1% of the total installed power generation capacity. The installed capacity of the nuclear power generation was 54.43GW and grid connected wind power generation was 0.34TW, including 0.31TW onshore and 26.65GW offshore. 

The installed capacity of the grid connected solar power generation was 0.32TW, including centralized photovoltaic power generation of 0.2TW, distributed photovoltaic power generation of 0.12TW and solar thermal power generation of 0.57GW. 

The installed capacity of non-fossil energy power generation was 1.14TW, accounting for 47.6% of the total installed capacity, an increase of 2.7 percentage points year-on-year.

- The year-on-year growth rate of hydropower and solar power generation output exceeded 10%. In the first quarter, the power generation of power plants above designated size nationwide was 1,990.0 TWh, an increase of 3.1% year-on-year. Among them, the power generation of hydropower, nuclear power and thermal power of plants above designated size increased by 12.7%, 6.9% and 1.3% year-on-year respectively. 

Since this year, the good precipitation drove the rapid growth of hydropower generation. In the first quarter, the generation output of generated grid connected wind power and grid connected solar power increased by 5.7% and 21.7% year-on-year respectively. In the first quarter, the generation output of coal-fired power increased by 1.9% year-on-year, accounting for 62.8% of the total power generation output. The coal-fired power was still the main power source in China's power supply, and it was also the basic power source to ensure the safe and stable supply of power in China so for.

- The utilization hours of hydropower and nuclear power generation equipment increased by 36 hours and 30 hours year-on-year respectively. In the first quarter, the utilization hours of power generation equipment in China were 899 hours, a year-on-year decrease of 18 hours. Among them, the utilization hours of hydropower equipment was 636 hours, an increase of 36 hours year-on-year. 

The utilization hours of nuclear power was 1,847 hours, an increase of 30 hours year-on-year. The utilization hours of grid connected wind power was 555 hours, a year-on-year decrease of 65 hours. The utilization hours of grid connected solar power generation was 300 hours, unchanged from the same period last year. The utilization hours of thermal power was 1,115 hours, a year-on-year decrease of 2 hours, of which 1,169 hours of coal-fired power, a year-on-year increase of 7 hours and 576 hours of gas-fired electricity, a year-on-year decrease of 45 hours.

- The trans-regional power transmission decreased by 0.7% year-on-year, and the trans-provincial power transmission increased by 0.5% year-on-year. In the first quarter, the nation’s overall trans-regional power transmission was 150.0TWh, a year-on-year decrease of 0.7%. Among which the Northwest region has transmitted 70.3TWh outward, a year-on-year decrease of 12.6%, accounting for 46.8% of the overall trans-regional power transmission. The nation’s trans-provincial power transmission reached 353.9TWh, an increase of 0.5% year-on-year. The outward power transmission of Yunnan, Sichuan and Fujian increased by 43.0%, 42.9% and 39.3% year-on-year respectively. 

- The market trading amount of electricity transactions increased by 87.5% year-on-year. In the first quarter, all the Power Exchange Centers in China completed total transactions of 1,411.9TWh of the market trading electricity, an increase of 87.5% year-on-year. 

In the first quarter, the total medium and long-term direct trading electricity transactions was 970.2TWh, an increase of 58.1% year-on-year. Among them, the total direct trading electricity transactions within the individual province was 942.7TWh, and the total direct trading (receiving) electricity transactions inter-provinces was 27.5TWh.

- The price of the thermal coal remained a high level and continued to rise, so a large number of coal-fired power generation enterprises kept suffering losses. In the first quarter, China imported 51.81 million tons of coal, a year-on-year decrease of 24.2%. The measures taken by the state to increase coal production and ensure coal supply have achieved good results. In the first quarter, the national raw coal output was 1.08 billion tons, a year-on-year increase of 10.3%. 

Since the beginning of this year, the overall price of the thermal coal continued to rise, resulting in an additional year-on-year increase of about 130 billion yuan in the procurement cost of the thermal coal for the coal-fired power generation enterprises in the first quarter. The fuel costs rose sharply, far higher than the increase of the feed-in tariff of the electricity sold by the coal-fired power generation enterprises. This has led to more than half of the coal-fired power generation enterprises under large power generation groups were still in a state of loss.

The continuous losses caused extremely tight cash flow of the coal-fired power generation enterprises, which increased the risk of safe and stable power supply. Since most of the heat supply prices are related to people's livelihood, it is difficult for heat prices to rise to ease the pressure from the increasing fuel costs, which also resulted in losses of a large number of CHP enterprises. 

3. Power Demand-Supply Situation

In the first quarter, the power enterprises went all out to ensure people's livelihood, to ensure power generation and heat supply, and the nation’s power supply and demand situation achieved an overall balance. In February, large-scale rain and snow weather occurred many times in many provinces and regions across the country, especially the continuous low-temperature rains and snow weather in South China, which drove the rapid rise of power load, in addition with the shutdown of wind power units due to blades icing in some provinces, the power supply in Jiangxi, Hunan, Sichuan, Chongqing, Shanghai and Guizhou was tight in some periods.

II. Power Supply and Demand Forecast in 2022

1. In 2022, the power consumption of the whole society would increase by 5%-6% year-on-year

According to the work report of the State Council in 2022, the government will coordinate the epidemic prevention and control, economic, social development and security, continue the "Six Stabilities" and "Six Guarantees" strategies, keep the nation’s economic operation within a reasonable range, maintain the overall social stability to welcome the successful Opening of the 20th CPC National Congress. The expected growth target of the nation’s GDP in 2022 has been set at about 5.5%, which will support to the growth of power consumption of the whole society in 2022.

Affected by the continued epidemic outbreak in China and abroad, the international situation, summer and winter temperatures and other factors, there will be some uncertainties in the growth of the power consumption. It is expected that the growth rate of the power consumption in April will be lower than that in March. With the gradual and effective control of the epidemic in many provinces and regions, the growth rate of the power consumption is expected to pick up in May and June. It is expected that the overall power consumption of the whole society will increase by 3.5% - 4.5% year-on-year in the first half of the year. 

In the second half of the year, under the circumstance that the impact of the epidemic on the economy and society may be further weakened, combined with the policy measures to stabilize the economic growth and the effect of different base (early high and later low) in 2021, it is expected that the growth rate of the electricity consumption in the whole society in the second half of the year will be higher than that in the first half of the year. In 2022, the overall power consumption is estimated to increase by 5% to 6% year-on-year.

2. By the end of 2022, the installed capacity of non-fossil energy power generation is expected to reach 50% of the total installed capacity for the first time

Driven by the rapid development of the clean energy, the newly installed generated capacity will reach a record high in 2022. It is estimated that the newly installed capacity of the power generation in the nation will be about 0.23TW in the whole year, including about 0.18TW of non-fossil energy power generation. 

It is expected that by the end of 2022, the nation’s installed capacity of power generation will reach 2.6 TW, a year-on-year increase of about 9%. The installed capacity of the coal-fired power generation will be about 1.14TW. The total installed capacity of non-fossil energy power generation will reach about 1.3TW, accounting for 50% of the total installed capacity of power generation for the first time. The installed capacity of hydropower generation will be 0.41TW, grid connected wind power generation 0.38TW, grid connected solar power generation 0.4TW, nuclear power generation 55.57GW and biomass power generation about 45.00GW.

3. The overall power supply and demand in China would be balanced, while the power supply in some regions is tight during the summer and winter peak period

Affected by the global epidemic situation, economy, fuel supply, climate situations, continuous loss of the coal-fired power generation enterprises, there will be great uncertainty to the power supply and demand this year. It is estimated that the nation’s power supply and demand could achieve an overall balance in 2022, while the power supply in some regions would be tight during the summer and winter peak period.

During the summer peak period, the nation’s power supply and demand would be generally balanced, while the power supply might be tight during the peak hours. Among them, the power supply and demand in Northeast and Northwest regions in China would be basically balanced. The power supply in South, East, Central and North China would be tight during the peak hours.

During the winter peak period, the nation’s power supply and demand would be generally balanced, while the power supply might be tight during the peak hours. Among them, the power supply and demand in North China and Northeast China would be basically balanced. During the peak hours, the power supply in South, East, Central and West China might be tight.

III.Suggestions and Advisories

1. Strengthen monitoring and early warning to ensure the stable supply of primary energy

At present, the geopolitical conflict further tightened the international supply of coal, oil and gas, which makes it more difficult for China to increase the import. The domestic downstream coal inventory is relatively low, and the price of the thermal coal maintains a high level. During the summer peak period, there will be potential risks of the supply of coal-fired and gas-fired electricity. In terms of the domestic coal supply, thermal coal price, medium and long-term purchasing contract of the thermal coal as well as its production and transportation, the following suggestions have been made:

- Strengthen the government’s macro-control and continue to increase the coal supply. Increase the capacity of the coal production to implement the goal of adding 300 million tons of coal this year proposed by the executive meeting of the State Council for the advance preparation in case the rapid recovery of power consumption demand after the epidemic.

Supervise and urge coal mines to resume production, and notify the coal mines and areas that have not reached the targeted production capacity. Take the proper measures to ensure the coal mine supply and flexible production, give priority to coal mines with advanced production capacity to increase its production capacity tentatively, and improve the emergency backup production capacity of coal mines as soon as possible.

- Strengthen the policy implementation to ensure the effective operation of the thermal coal price mechanism. Urge the main coal producing areas to strictly implement the thermal coal price mechanism and follow the guidance price of the spot price window, thus to release a strong signal of stabilizing the market price of the thermal coal. 

Accelerate the signing and performance of the medium and long-term purchasing contract of the thermal coal as soon as possible and strengthen the supervision. Urge the responsible enterprises that fail to meet the requirements to make rectification, and do everything possible to reduce the price of the thermal coal to a reasonable range.

- Increase the connection between the production and transportation department and speed up the summer storage of the thermal coal. Strengthen the connection and cooperation between production, transportation and demand, give priority to coal and power enterprises in provinces with hard gap when balancing the transportation capacity. Supervise and urge all local governments to take responsibility and make efforts to ensure the stable power supply during the summer peak period.

2. Strengthen the unified dispatching and give full play to the advantages of large power grid in resource allocation

In recent years, the impact of the rapid growth of the tertiary industry and residential load has continuously increased the power consumption peak and valley difference, and the maximum daily peak valley difference in some areas is about 50%. Meanwhile, the growth of the installed capacity of conventional power supply slows down, in addition to the high fuel price for power generation, and the effective output of the power unit decreases, which brings great pressure on the power balance. For improving the regulation capacity of the system, safe operation of the system and orderly power consumption, it is suggested that:

- Promote the construction of the emergency standby and peak shaving power supply to improve the flexibility of the system operation. Accelerate the construction of emergency standby and peak shaving power generation sources in new energy concentrated areas and areas with high proportion of uninterrupted users, and arrange the construction layout scientifically and reasonably. Issue the timing plan for technical transformation of thermal power units to promote the "Three Transformation Linkage". 

Further strengthen the construction of the pumped storage, clean energy storage and other flexible power sources. Strengthen the unified dispatching of network and source side energy storage facilities, improve the flexibility and regulation capacity of the system. Accelerate the construction progress the key supporting power sources to ensure their operation on schedule for the reliable power supply during the peak summer period.

- Strengthen the operation and maintenance of the power equipment, release the peak capacity of transmission channel and conventional power generation sources. Strengthen the inspection and patrol of trans-provincial, regional transmission channels, hub and converter stations to eliminate defects in time. 

Strengthen the management of unscheduled shutdown and output obstruction of units, optimize the planned maintenance arrangement, and ensure that all kinds of generator units can operate well during the peak of power consumption. Optimize the start-up and standby, cross regional support, surplus and shortage adjustment between regional power grids, make every effort to ensure the balance of power supply and demand during the peak power consumption period.

- Excavate power demand-side adjustment capabilities and strengthen the management of orderly power consumption. Innovate power demand response means, tap high-quality adjustable load resources, expand the scale of power demand side participation in the market and supply guarantee operation. 

Optimize the power consumption management and controlling scheme to minimize the impact on residents and economic development. In accordance with the principles of ensuring the civil usage, stability and key points, consider all kinds of extreme situations, establish and improve the hierarchical and orderly power emergency management mechanism. Strengthen relevant publicity and policy interpretation.

3. Accelerate the building up of the unified national power market system and promote the construction and operation of the New Type Power System

In recent years, the trans-provincial and trans-regional power transmission has played an increasingly important role in supporting the peak power consumption period. With further adjustment of the power supply structure, its importance will become more prominent. 

The construction of a national unified power market and giving full play to the advantages of large power grid are key measures to improve the power security and supply capacity and will accelerate the transformation of the power system. For the construction of the unified power market, the formation of the market-oriented electricity price, better reflection of the cost changes on terminal electricity price and the participation of new energy in the market, it is suggested that:

- Speed up the construction of the national power market system. Gradually improve the functions of the unified power market system, improve the market trading mechanism, accelerate the establishment and improvement of the spot market, auxiliary service market and capacity market, and give reasonable compensation to the flexible power supply sources that provides peak shaving, frequency modulation, standby and other auxiliary services.

- Accelerate the formation of a market-oriented electricity price mechanism and reasonably reflect the upstream costs changes along the industrial chain. Form a market system and electricity price mechanism to promote the construction of the New Type Power System, to better reflect the increased system operation cost caused by large-scale consumption of new energy. 

Implement the requirements of related government departments, adjust the coal electricity price in place as soon as possible, and alleviate the power supply risk caused by the rising fuel cost. Promote high energy consuming enterprises to enter the market, and not capping the electricity transaction price. Further clarify the price formation mechanism of cross provincial and regional power transmission transactions, and the floating mechanism of transmission price shall be implemented according to the benchmark price of coal-fired power generation in the landing province.

- Gradually establish a price mechanism for clean energy to participate in power market competition. Promote the construction of a market trading mechanism more suitable for the physical characteristics of new energy development, shorten the trading cycle, and increase the trading frequency. Promote all kinds of priority power generation entities and consumer sides to jointly participate in the spot market, establish a reasonable cost conduction and relief mechanism. Coordinate the relationship among green certificate market, green electricity market and carbon market, correctly price the green value of clean energy. 

On the basis of self-inspection of subsidies for clean energy generation, accelerate the settlement of arrears of clean energy subsidies. The deferred income tax, value-added tax and additional tax policies shall be implemented for the electricity charges of clean energy that have not received subsidies, so as to alleviate the situation of "Debt for Tax" of clean energy enterprises and effectively reduce the financial pressure on the operation and development of clean energy enterprises.