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RvrptnrlNa. 121117-( HA China InvestmentStrategies for China's Coal Public Disclosure Authorized CIndElectricity Delivery System Match i1, 1995 f r.um iisl wt ( )I r. itionis I )ivisin n ( 1ii.ni.I1f(I Mtv)fig(li.i I )D paln.1llf II I I .s1 i\si. .ir(il i'.uiji R'gr(l di OIliCl ( I (mioi ri Rt-tsii Ii ( enter SF I'L1. inning (01 11nhI%s1(31n I p Re;ubI(lil (o China Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank Public Disclosure Authorized Currency Equivalents Currency Unit = Yuan (Y) = 100 fen Exchange Rate 1980 1990 1992 1993 1994 US$1 = Y 1.5 US5i = Y 4.7 US$1 = Y 5.5 US$1 = Y 5.8 US$1 = Y 8.7 Fiscal Year January - December Weights and Measures dwt = deadweight ton kV = kilovolt g gram kw = kilowatt km = kilometer MW = megawatt GW gigawatt (101 kw) (1(r kw) std ton = standard ton kwh = kilowatt hour (5,500 kcal per kg) kcal = kilocalorie tkm = ton-kilometer kg = kilogram TWh = terawatt-hour (I 9 kwh) Abbreviations AC - Alternating Current CIECC - China International Engineering Consulting Corporation COSCO - China Ocean Shipping Company CTS - Coal Transport Study DC - direct current El - Economic Institute ERC - Economic Research Center ER[ - Energy Research Institute FYP - five-year plan GDP - gross domesti; product GIS - Geographic Information System GNP - gross national product ICIT - Institute for Comprehensive Transportation MOC - Ministry of Communications MOCL - Ministry of Coal MOEP - Ministry of Electric Power MOR - Ministry of Railways NIC - National Investment Company PCBC - People's Construction Bank of China SDBC - State Development Bank of China SPC - State Planning Commission TSP - total suspended particulates UNDP - United Nations Development Programme Five-Year Plans 5FYP = 1976-80 6FYP = 1981-85 7FYP = 1986-90 8FYP = 1991-95 9FYP = 1996-2000 IOFYP = 2001-2005 i China Investment Strategies for China's Coal and Electricity Delivery System iii China Investment Strategies for China's Coal and Electricity Delivery System TABLE OF CONTENTS Page No. CONTRIBUTIONS ...................................... ix EXECUTIVE SUMMARY .................................. xi Background ...................................... xi The Analysis Method ................................ xiii Main Conclusions and Recommendatiors by Sector .... ........ xiv Region-by-Region Summanry ........................... xix Past and Future Policy lmplications .... .................. xx 1. DEMAND AND SHORTAGES OF COAL AND ELECTRICy ... ... I Progress in Transport and Energy Development .............. I Coal and Electricity Shortages .......................... I Intensity of Energy and Transport Use .................... 2 Investment in Transport and Energy ...................... 2 Trends in Coal and Electricity Demand .................... 3 Coal and Electricity Demand Assumptions for this Study ... ..... 4 2. OVERVIEW OF THE COAL-ELECTrICITY SUPPLY CHAN: PROBLEMS AND OPPORTUNITES ..................... 7 Coal Production ................................... 7 Coal Benericiation .................................. 8 Coal Allocation and Pricing ............................ 8 Coal Transport .................................... 9 Coal Consumption and Conservation ...................... 11 Coal for Electricity ................................. 11 Environmental hnpact of Coal .......................... 13 3. PLANNING AND INVESTNENT FOR CHINA'S TRANSPORT AND ENERGY SECToRS ................................ 15 The Planing System ................................ 15 The Financing System ... ............................ 15 Problems in the Planning and Financing System .... .......... 16 The Changing Role of the State Planning Commission and its Analytical Needs .......................... 17 The CTS Network Optimization Model ............. ....... 18 iv Table of Contents 4. ANALYSIS OF INVEsTMENT STRATEGIES .................. 21 Overview ................. ....... .... 2....21 Prospects for Energy Shortages ......................... 22 Transporttion Sector Policy ImpUlations .................. 22 Nontransport Sector Policy Implications .................... 29 5. REGiONAL ANALYSIS ................................ 39 Northeast China ................................... 39 Central China ..................................... 39 Eastern China ..................................... 40 Southeastern Coastal China ............................ 40 Southwest Energy Base ............................... 40 Northwest China ............................ 41 6. PAST ANm FuTuRE POLICY LMPLICATIONS................ 43 Policy Recommendations and Impacts of this Study .... ........ 43 Implications for the World Bank ........................ 45 Policy Issues to Be Addressed in the Future ................. 46 The Role of Intersectoral Modeling in the Market Economy ... .... 47 Action Plan for FIuture Use of the Coal Transport Study ... ...... 48 NOTES. .............................................. 48 ANWEE I Organization of the Coal Transport Study 2 Figures on Transport and Energy Annex 2 Flgures 2.1 Total Commercial Energy Flow in China 2.2 Investment in Transportation Relative to GNP and Traffic 2.3 Investment Structure of the Energy Sector, by Type of Energy 2.4 Coal Consumotion and Production Trends 2.5 Raw Coal Production, by Type of Administration, 1965-89 2.6 Maior Interregional Coal Flows, 1989-90 2.7 'InvestmentStructure of the Transportation Sector, by Mode 2.8 Investment Structure of the Electricity Sector 3 Background on Transport and Energy: Assorted Tables 3.1 China: Freight Traffic by Mode 3.2 International Trends in Commercial Energy Intensity 3.3 Internatonal Comparison of Reliance on Coal 3.4 Ilternz tonal Comparison of Transport Investment as a Percentage of GNP 3.5 Coal Supply and Demand Balance Sheet 3.6 Comparison of Coal Reserves-Soviet Union, United States, and China 3.7 Coal Production by Type of Coal, 1987 and 1991 3.8 Sulfur Content of Chinese Coal Reserves 3.9 Coal Output and Reserves, by Region, 1989 3.10 Interregional Coal Flows: 1980 and 1990 Table of Contents v 3.11 Steam Coal Washing 3.12 Plan vs. Market Prices for Steam Coal, 1989 3.13 E-volution of Coal Prices on the Free Market, 198690 3.14 Increases in Plan Coal Prices 3.15 Coal Traffic by Railway and Waterway 3.16 Indicators of Railway Asset Utilization: A Comparison between China, the Soviet Union, the United States, India, and Brazil 3.17 Combined Rail-Water Routes from Shanxi to East China 3.18 Share of Electricity in Total and Industrial Final Net Consumption of Energy in Selected Countries 3.19 Estimated Annual Emissions from Coal Use, by Sector 3.20 Ambient Concentrations in Major Chinese and Foreign Cities 3.21 Ambient Air Quality Standards 4 Planning and Investment for Coal, Transport, and Electricity Annex 4 Figures 4.1 Administrative Control System for Energy and Transportation 4.2 Planning System for Energy and Transportation S The CIS Analysis System Annex S Table 6 Figures and Maps on the CTS Analysis System Annex 6 Figures 6.1 Generalized Network Diagram of the Coal-Electricity Delivery System in the Optimization Model 6.2 The CTS Coal Transportation Network with Mine Nodes 6.3 The CTS Coal Transportation Network with Demand Nodes 6.4 The CTS Electricity Transmission Network 6.5 CTS Data Flow 7 Description of 1993 Scenario Assumptions Annex 7 Tables 7.1 Comparison of Potential Capacity Increases: CTS Model versus Experts' Estimates 8 CTS Base Case (9 Percent GNP Growth): Calibration and Selected Results Annex 8 Tables 8.1 Comparison of Case 93-2 Outputs with Base Case Targets 8.2 National Totals of Coal Production 8.3 Regional Subtotals of Coal Production 8.4 Regional Breakdown of Coal Washing 8.5 Regional Coal Balance 86 Coal Transportation Q-D Table, in 2000 8.7 Electricity Transmission O-D Table 8.8 Power Plant Capacity 8.9 Ash and Sulfur Content of Delivered Coal, by Province 9 Sumnmaryof Results for All 1993 Scenarios 9.1 Sunuary Solution Results 9.2 Coal Production Sector Results 9.3 Electricity Production Sector Solution Results 9.4 Electricity Transmission Solution Results 9.5 Transportation Sector Solution Results 9.6 EnviromnmentSector 10 Figures and Maps on Results of the Analysis vi Table of Contents Annex 10 Figures and Maps (Figures for Medium Demand are from Case 93-2; Figures for High Demand are from Case 93-9) 10.1 Coal Shortages, 2000, Medium Demand 10.2 Electricity Shortages, 2000, Medium Demand 10.3 Coal Shortages, 2000, High Demand 10.4 Electricity Shortages, 2000, High Demand 10.5 Rail Bottlenecks, 2000, Medium Demand 10.6 Rail Bottlenecks, 2000, Hign Demand 10.7 New Transport Projects Built 10.8 Port Bottlenecks, 2000, Medium Demand 10.9 Port Bottlenecks, 2000, High Demand 10.10 Rail Coal Flow Map, 2000, Medium Demand 10.11 Optimal Interregional Coal Flows, 2000, Medium Demand 10.12 Optimal Coal Allocation by Heat Content, from Coal Base in the Year 2000 (6 percent GNP growth, Case 92-1) 10.13 Steam Coal Washing by Province, 2000, Medium Demand 10.14 Electricity Flow Map, 2000, Medium Demand 10.15 Electricity Flow Map, 2000, High Demand 10.16 Sulfur in Delivered Coal by Province, 1995-2005, Medium Demand 10.17 Ash in Delivered Coal by Province, 1995-2005, Medium Demand 10.18 Multiobjective Tradeoff Curve for Cost and Pollution 11 Description of 1992 Scenario Assumptions 12 Summary of Results for All 1992 Scenarios Annex 12 Tables 12.1 Summary Solution Results 12.2 Coal Production Sector Results 12.3 Electricity Production Sector Solution Results 12.4 Electricity Transmission Solution Results 12.5 Environment Sector 13 Shortage