Analysis Of The Parameters Influencing The Chinese Energy Sector With A Focus On Coal As The Main Energy Source

China’s primary energy consumption is not only the biggest but also one of the fastest growing in the world. Nevertheless China’s electricity sector had huge problems to satisfy the energy demand in2011. This paper will investigate the underlying factors and problems concerning the Chinese energy sector turning special attention to coal mining being the main source for China’s energy.According to British Petrol Statistical Review of World Energy2011world primary energy consumption grew by5.6%in2010which is the largest increase since1973. Chinese energy consumption grew by11.2%in2011, and by surpassing the US China’s share of global energy consumption is now the world’s largest with a20.3%share of world primary energy consumption. Chinese energy and environmental developments, policies, and trends are of world significance both because of their large direct impacts and because of their demonstration effect on the rest of the developing world. Because of the immense relevance of China’s energy sector to the world, this paper will examine its characteristics, development and problems from the perspective of both demand and supply.On the demand side, it will focus on the industrial and the urban residential sector accounting respectively for about58%and25%of primary energy consumption. In the industrial sector the outcome of the structural change is examined in terms of the energy intensity. It could be observed that the declining of the energy intensity since1978had mostly historical reasons and is hardly expected to continue in the long run.The burden on the energy sector caused by household consumption is increasing due to several reasons. First of all the number of high energy consuming appliances in China’s cities has increased dramatically in the last30years, as the disposal income of Chinese urban workers increased rapidly. Not only the rural-urban migration and the trend to smaller household size reinforce this development but also political programs for the developing of the western provinces. Nearly half of the coal worldwide was mined in China as coal accounts for approximately74%of China’s primary energy consumption. Therefore while investigating the supply side the focus lays on coal including two aspects:on the one hand coal being a source for heating and cooking and on the other hand being used in power plants as a source for generation of electricity.This concentration on coal mining is a result of the resources available and simply because it is the easiest energy source to win. At the same time neither the coal resources nor the industrial centers in China are equally distributed over the country. While the coal is predominantly in the north, the industrial centers having the biggest demand on coal are mostly situated in the eastern and southern coastal regions, creating a huge burden on Chinese transportation system. The market for energy has still much characteristic of a planned economy and prices are fixed and externalities, such as environmental damage and loss of human life are not being taken into account. Additionally laws or regulations concerning these problems are missing or hardly enforced, partly because of the structure of the Chinese coal mining industry, which is highly dispersed and the share of small-scale mining is very high due to both historical and economical reasons.The electricity generating sector is highly controlled by the government due to political reasons. To satisfy the fast growing demand is a difficult task in a highly dynamic economy like the Chinese, especially because power plants need huge investments and long planning ahead. China’s electricity sector is only in parts successful, brownouts and blackouts are a common phenomena in the coastal areas and are threatening the economic growth. The main reason is the absence of a flexible pricing system, the electricity prices are fixed on a low level due to political reasons. Therefore incentives to save energy on the consumers’ side and produce or invest more, including the development of alternatives, on the suppliers’ side are missing. Further outcome is that electrical companies are in fact facing huge losses which leads to lacking of funds for both investment and maintenance. All in all the field of Chinese energy is a highly complex influenced by geographical, political and economical factors. Nevertheless it is very important to understand the underlying processes and ideas in order to search for further solutions.