By Jiang Xinmin, National Institute of Macroeconomics of the National Development and Reform Commission, Sun Dianyu, Beijing Sino TC Technology Co., Ltd.
For a long time, China has been overly dependent on fossil fuels, which has led to more and more problems, such as resource constraints, climate change and environmental pollution. With the nation’s economic development adapting to a new norm, it is necessary to deepen the reform of the energy system, to reduce the proportion of coal, oil and other traditional high carbon fossil fuels, to build a clean energy supply system of renewable energy, natural gas, nuclear power and other energy that complement each other, and to coordinate sustainable development of energy and the environment.
Natural gas is important in a strategy of complementary energy sources
In 2016, the National Development and Reform Commission (NDRC) and the State Energy Administration jointly issued the "implementation opinions on promoting the construction of multi energy complementary and integrated optimization demonstration projects". The new sources of energy, such as wind power and photovoltaic energy, have been developed rapidly, and an effective combination of complementary new and traditional energy sources has been realized.
The national plan of clean winter heating in northern China (2017 - 2021) issued by the state points out that speeding up the solution of coal pollution is an important measure to control the haze. Coal is being replaced by electricity and gas, which is effectively promoting cleaner air and warm interiors in winter in the northern area. By means of integrated energy supply facilities such as natural gas, heat and power cogeneration and distributed renewable energy, coal pollution can be greatly reduced, and a coordinated supply of multiple energy sources and comprehensive cascade utilization of energy can be realized.
The northern clean heating project based on natural gas has achieved initial success. Combined with geothermal and solar energy and other renewable energy sources, it will reduce the use of fossil fuels such as coal and oil to reduce carbon and save energy.
Problems of “coal to gas conversion” cannot be ignored
In recent years, a series of programmatic documents such as "opinions on accelerating the utilization of natural gas" and "several opinions on establishing a long-term mechanism for ensuring stable supply of natural gas" have been promulgated by the state. The documents relate to opening natural gas pipelines, price reform, cost supervision and examination, compliance and other aspects of monopoly, and show commitment to promoting rapid development of natural gas. Among them, the winter heating in the north, the industry and the civil "coal to gas conversion" will become growth points within the great development of natural gas.
In March 2017, the Ministry of Environmental Protection, the National Development and Reform Commission, the Ministry of Finance, the State Energy Bureau and six provinces and municipalities jointly issued the "air pollution prevention and control plan for Beijing, Tianjin, Hebei and surrounding areas in 2017", which lists the implementation plan of coal to gas conversion. With the promotion of coal to gas conversion and other strategies, the pull effect on the demand of natural gas is initially revealed, and this is the main reason that natural gas consumption in the domestic market turned hot.
1. Serious gas shortage in the north
Due to industrial production, gas power and chemical industry gas demand growth, coupled with the larger demand of coal to gas conversion, there are acute shortages of market supplies in the domestic natural gas market, especially since the winter of 2017. Due to the increasing demand for heating gas in the north, the phenomenon of "gas shortage" occurs frequently in the northern region.
2. Great rise in gas prices, and prices upside down
At present, the gas price for China's non residential consumers, which account for more than 80% of the total gas consumption, has been transformed to independent negotiation and pricing between suppliers and requisitioning parties. The National Development and Reform Commission stipulates that the price of provincial gate stations for non residential gas use can be adjusted in the range of "floating up to 20%, floating under the bottom". But because of the shortage, the price of natural gas has risen sharply.
The skyrocketing prices of LNG exposed the imbalance between supply and demand of natural gas. Winter heating and "coal to gas conversion" make natural gas demand grow rapidly. Natural gas supply is restricted by such factors as insufficient gas storage capacity and peak shaving and a lack of interconnections between pipelines.
Promoting stability and rapid development with reform
At present, infrastructure construction and market operation mechanisms of natural gas are not perfect in China. The dependence of the natural gas supply on foreign sources is more than 30%. In order to promote the steady and rapid development of natural gas, we must constantly deepen reform and coordinate complementary development with clean non fossil energy.
1. Drawing on foreign experience & reforming China's natural gas market
After years of development, the United States, the EU and other countries have formed a mature natural gas market and promoted the optimal allocation of natural gas resources. China should learn from the experience of European and American countries, further promote the marketization reform of natural gas in China, give full play to the role of various natural gas market trading platforms, and better optimize the allocation of resources. We should expand the price control of natural gas, encourage more social entities to participate in the construction and operation of natural gas extraction, import, pipelines, gas storage and other facilities, and reduce costs through competition, so as to form a price mechanism truly determined by the market.
2. Increase production in China & make full use of foreign resources
Domestic gas producers should increase investment, strengthen conventional and unconventional investigation and evaluation of natural gas resources, and focus on strengthening geological exploration of the main oil and gas bearing basins. The production of conventional and unconventional natural gas must be greatly enhanced. In order to meet the rapid growth of China's natural gas demand, it is necessary to increase domestic natural gas production, and in the meanwhile, increase the import of natural gas from abroad. The international trade in natural gas is characterized by long-term agreements, which account for more than 80%. Therefore, we must actively negotiate with gas exporting countries for long-term supply agreement and get stable foreign economic sources of natural gas.
3. Speeding up construction of gas storage facilities & improving peak storage capacity
The load demand of the natural gas market is changing, especially in the northern region. In particular, the load peak is higher in the winter heating season in the northern region. It is necessary to build a supporting storage facility for peak shaving or emergency support functions. The construction of gas storage facilities should be based on the national natural gas pipeline network layout. The main pipe network and urban pipeline networks should be equipped with underground gas storage or gas storage facilities in the form of LNG stations according to local conditions, to provide adequate capacity of urban gas for regulating emergency peaks. At the same time, a unified national gas storage and peak regulation service market should be set up as soon as possible.
4. Complementarity of multiple energy sources to promote coordinated development of natural gas & other sources
In recent years, in some Chinese regions, represented by the "Three North" area, there has been a large-scale phenomenon of abandoning the wind and abandoning light in the large-scale wind power and photovoltaic power generation centers, which is not conducive to the development of China's renewable energy industry and the implementation of the national strategic goal of improving the proportion of clean energy sources. We should energetically promote natural gas power generation, and the strategy of complementary energy sources, such as coordinated operation of natural gas power, wind power, photovoltaic power, hydropower and other forms, is a realistic solution to the bottleneck of renewable energy development. We should vigorously promote the coordinated development of a variety of clean energy, and centralized and distributed energy resources. According to different resource conditions and energy users, we can achieve cascade utilization and complementary advantages of energy in many ways, which can not only ease the tension of supply and demand for natural gas, but also greatly promote the large-scale application and high proportion of renewable energy.
