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UPDATED: July 31, 2014 NO. 27 JULY 3, 2014
Fuel for a Revolution
The world's largest energy producer and consumer is considering some big changes
By Zhou Xiaoyan

"Opening up the energy sector in itself is not sufficient. A reform on the pricing mechanism is needed to make the sector more lucrative so that it is more attractive for private investment," Lin said.

Lin singled out electricity price as the factor that is most heavily controlled by the government.

"The electricity grid is completely monopolized by SOEs. It will be a complicated reform and represents a tall order."

A good start point for the reform would be tying the price of electricity to the price of coal, as the latter is now mostly determined by the market, Lin suggested.

Wang Zhen, Deputy Director of the Academy of Chinese Energy Strategy with the China University of Petroleum, said a structural revolution would lead revolutions in other areas.

"An institutional revolution would constitute a milestone and will have huge impact. We used to treat energy products as public products with great strategic significance instead of commodities," Wang said.

The country should treat them as commodities and establish an effective market system to push forward other "revolutions" including a consumption revolution, a supply revolution and a technology revolution, he commented.

Tapping nuclear energy

After the Fukushima nuclear disaster in March 2011, China immediately commenced safety inspections at all existing nuclear plants and stalled approval on proposed new plants.

It was not until October 2012 that plans for nuclear power safety and long-term development of nuclear power were passed, with approval being granted for a few projects in coastal areas before 2015, and none in inland regions.

Top leaders' recent high-profile stance on the issue signals that turning to nuclear power is perhaps an inevitable trend in China. Nuclear power will be used by the country to combat smog, optimize energy structure and even lift its slowing economy.

By 2015, China aims to reduce energy consumption per unit of GDP by 16 percent from the 2010 level. The indicator dropped 9.03 percent from 2011 to 2013, only 54 percent of the overall target, according to the National Development and Reform Commission.

The need to conserve energy, reduce emissions and steer away from reliance on coal has never been more apparent or pressing.

"In reality, the development of nuclear power is all about replacing coal," said Liu Qiang, an energy expert with the Chinese Academy of Social Sciences. Considering the economic realities, nuclear power is unlikely to face much opposition, Liu said.

Coal still accounts for the bulk of China's energy consumption. At the end of 2013, nuclear power only accounted for 2.11 percent of China's total. The installed nuclear power capacity represented only 1.19 percent of total power generation capacity, according to data from the China Nuclear Energy Association.

"China's nuclear power sector still has a long way to go before reaching the global average," said Ye Qizhen of the Chinese Academy of Engineering.

A proportion of 10 percent of nuclear power would be an ideal figure for China, Ye said.

He Jiankun, Director of the Low Carbon Economy Lab at Tsinghua University, said new energy technologies will become a major growth driver in the future.

"Developed countries are trying to expand businesses in developing countries, with their technological advantages in the new energy sector. The nuclear energy industry is highly scientific and technological in nature and requires both long research and development periods and hefty investment," he said.

"Only a few major powers in the world are capable of mastering the industrialization of nuclear energy. China should fight for competitive edge in that regard," said He.

Email us at: zhouxiaoyan@bjreview.com

Chinese President Xi Jinping's Proposals on Energy Revolution:

- Changing energy consumption habits to rein in irrational energy use and control the country's total energy consumption;

- Diversifying energy supply to establish a system that encompasses cleaner use of coal and non-coal fuel, including oil, gas, nuclear energy, new energy and renewable resources;

- Innovating energy technologies to forge the industry into a new powerhouse to fuel economic growth. Green and low-carbon energy sourcing are targets of the technology revolution;

- Overhauling the energy system to realize faster development. Energy products should be viewed as commodities. A fully competitive market should be established to let the market decide energy prices. Government supervision on the energy sector should be based on the laws.

- Engaging in all-round international cooperation to ensure China's energy security. International resources should be fully tapped in the energy production and consumption revolutions.

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