The economic viability of coal-based aromatics has withstood oil prices at $40 per barrel, indicating a promising outlook
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The economic viability of coal-based aromatics has withstood the test of $40 per barrel oil prices, indicating a promising outlook. Author/Source: China Chemical Industry News Date: 2016-07-13 Clicks: 23 “As for the economic viability of this project, which is of concern to many, calculations show that even at the current low oil prices, the HuaDian Yulin coal-based aromatics project can still achieve decent profits.” ”Wang Tong, deputy director of the Coal Chemicals Management Department at Huadian Coal Industry Group, said recently. Wang Tong said that when the international crude oil price was around $40 per barrel, the market price of xylene, the most important aromatic product, was 6,200 yuan per ton. Based on project investment, depreciation, coal prices, and water prices, as long as the ex-factory price of aromatics reaches 5,794 yuan per ton, the Huadian Yulin coal-to-aromatics project can achieve break-even. Recently, with the international oil price at 40 dollars per barrel, the ex-plant price of aromatics in the Yulin area can reach 5,960 yuan per ton; adding 240 yuan per ton for transportation costs, the price in the East China market comes to 6,200 yuan per ton. Based on these calculations, the annual profit of the Yulin project can exceed 100 million yuan. It is understood that China Tianchen Engineering Company previously conducted an economic assessment of coal-based aromatic hydrocarbon projects, concluding that when international oil prices reached 70 dollars per barrel, the corresponding price for p-xylene was 7,565 yuan per ton. At this point, the internal rate of return for the HuanDian Yulin project can reach 11% (pre-tax). According to forecasts by ICIS China, in the coming years, international crude oil prices will fluctuate between $50 and $90 per barrel. Correspondingly, the duty-paid import price of paraxylene is expected to range from 5,905 to 9,226 yuan per ton. In other words, over the next few years and for an even longer period, even if international oil prices remain at a low level of 50 dollars per barrel, the annual profit of the HuaDian Yulin project will still exceed 200 million yuan. This is still a prediction assuming that p-xylene is the final product. In fact, since the Huadian project has now been transformed into a fully integrated upstream-downstream industrial chain, there are fewer unsecured links and overall costs are lower; consequently, the product profit margin and project returns will be higher. Calculations conducted jointly by the Petroleum and Chemical Industry Planning Institute and China Tianchen Engineering Company also show that coal-based aromatics possess strong competitiveness and good profitability. The report shows that when the international crude oil price is 80 dollars per barrel, for the same million-ton-scale aromatic compound production facility, the comprehensive costs of producing aromatics from naphtha, from methanol, and from coal-based methanol are 7,822 yuan per ton, 7,921 yuan per ton, and 5,455 yuan per ton respectively. The cost advantage of coal-based methanol for producing aromatics is evident. “The competitiveness, profitability, and prospects of coal-based methanol for aromatic hydrocarbon production are very promising. ”Wei Fei, a professor at Tsinghua University and the leading expert in fluidized-bed methanol-to-aromatics technology, said. Wei Fei said that as two different development paths for the new type of deep coal processing industry, coal-based aromatics and coal-based olefins have rich downstream product chains and are widely used in various sectors of the national economy. At present, the prices of p-xylene, ethylene, and propylene are similar, giving them comparable competitiveness in the short term. However, in the long run, methanol-to-aromatics has more distinct characteristics and broader prospects. First, the shortage in the aromatic hydrocarbons market remains prominent. As coal-based olefins (including olefins produced from methanol and coal-based polypropylene) have already reached a certain scale, with many more projects set to come online in the future, coupled with the expansion of ethylene production using cheap imported ethane as a raw material and the increase in capacity for producing propylene through propane dehydrogenation, the supply-demand gap for ethylene in China will continue to narrow over the next few years. There is a risk of surplus in the propylene market, and all these factors will squeeze the profit margins of coal-based olefins projects. In contrast, due to factors such as a severe shortage of naphtha supply, the demonization of xylene-related projects which has made it difficult to implement many such projects or even led to their cancellation, China’s aromatic hydrocarbon production and capacity will see limited growth in the coming years. The supply-demand imbalance will remain significant, leaving a huge market opportunity for aromatic hydrocarbons produced from coal-based methanol. Secondly, raw material shortages present a rare opportunity for the development of coal-based aromatics. It is an undeniable fact that in recent years, the trend toward lighter raw materials and improved gasoline quality has led to slow growth in international aromatics. In the future, as the scale of shale gas expands, the trend toward lighter feedstocks for refineries will become more pronounced, making it difficult to increase the production of pyrolyzed aromatics. The improvement in gasoline quality requires more reformed aromatics as blending components, which leads to a growing shortage of hydrocarbon feedstocks used as aromatics sources. As a result, the increase in aromatics production will fall far behind the growth in demand, driving up prices for aromatics products; this could create favorable conditions for coal-based methanol-to-aromatics projects that have an absolute cost advantage. Third, aromatics can be flexibly integrated with other products. Like ethylene, aromatic hydrocarbons are also very important basic chemical raw materials that can be used in various high-end fields. The coal-based methanol to aromatics project can be flexibly integrated by linking upstream and downstream processes, depending on the resources available to the owner or the market conditions in the location of the project; it is possible to produce mixed aromatics for use in conjunction with oil refining ； P-xylene can also be produced for separate sale ； It is also possible to produce p-xylene, and from there move on to products such as polyesters, high-end rubbers, and engineering plastics, thereby achieving a higher quality level and greater diversity in products. This helps to mitigate the risks associated with a single type of product, while simultaneously enhancing the profitability of the project and its competitiveness in the market. Fourth, from the perspective of atom economy, coal-based aromatics have clear advantages. When methanol is used as a raw material to produce aromatics, the hydrogen-to-carbon ratio of the mixed aromatics is 1.2–1.4. Theoretically, if all methanol is converted into aromatics, only 2.42 tons of methanol are required to produce 1 ton of p-xylene; meanwhile, large amounts of hydrogen and water are generated as by-products. If hydrogen recycling is considered to increase methanol production, 1 ton of p-xylene can be produced from 2.184 tons of methanol. Considering coal as the starting material, the hydrogen-to-carbon ratio of coal is approximately 0.6; for aromatics, it ranges from 1.2 to 1.4; and for olefins, it is about 2. It is obvious that aromatics have a hydrogen-to-carbon ratio more similar to that of coal; less hydrogen needs to be added during the process of producing aromatics from coal, and carbon dioxide emissions are significantly reduced. The entire process requires fewer raw materials and energy. When the prices of olefins and aromatics are the same or similar, coal-based aromatics offer better economic efficiency. “In the past two years, coal-to-olefins projects have demonstrated good profitability and strong risk resistance; it is believed that coal-to-aromatics projects will also bring substantial returns to investors in the future. ”Wei Fei said.
Judging from the title, one might think that the project has already started operation: Latest Progress on HuanDian Yulin’s Million-Ton Coal-Based Aromatics Project. Source: 2016-06-30 09:10:57. According to reports from June 28th, the preliminary work for HuanDian Yulin’s industrial demonstration project for producing aromatics from coal-based methanol is progressing smoothly; 10 specialized reports and 4 individual approvals have been granted. The core component of this project, namely the process for producing aromatics from methanol, has been developed jointly by HuanDian Coal Industry, Tsinghua University, and CNPC East China Design Institute. In addition, the selection process for the other 13 proprietary technologies required for the project has been completed, and the overall design of the project is currently in progress. The project approval report has been reviewed by the Shaanxi Provincial Development and Reform Commission, which has agreed to issue an approval decision after obtaining the supplementary environmental impact assessment document. The environmental impact assessment report for this project is being finalized, and it will be submitted to the Ministry of Environmental Protection for approval in the near future. The water resources assessment report has also been submitted for approval.
The report shows that when the international crude oil price is 80 dollars per barrel, for the same million-ton-scale aromatic compound production facility, the comprehensive costs of producing aromatics from naphtha, from methanol, and from coal-based methanol are 7,822 yuan per ton, 7,921 yuan per ton, and 5,455 yuan per ton respectively. The cost advantage of coal-based methanol for producing aromatics is evident. I don’t quite understand this passage. Why is there such a big difference in costs between aromatics produced from methanol and those produced from coal-based methanol? Where does the methanol used in the former method come from – isn’t it from coal? Needless to say, the methanol in the latter case comes from coal. Hope experts can answer.
According to the algorithm in the article, the price difference should lie in methanol; is all imported methanol produced from natural gas? Foreign natural gas costs? Is it much cheaper than in China? In China, the cost of producing methanol from natural gas is generally around 1800 (with a natural gas price of 1.2), while the cost for producing methanol from coal is 1100 (with a coal price of 300). Is that the reason?
In fact, coal-to-aromatics (MTA) and coal-to-gasoline (MTG) are similar; in both cases, methanol is converted into aromatic compounds through the action of molecular sieve catalysts, it’s just that they have different names. I remember reading a report that compared Tsinghua’s FMTA with the MTA (MTG) developed by the Coal Chemistry Institute’s Saiding Lab; it discussed the aromatic selectivity of FMTA (or was it the yield?) ) is 33% (BTX>27), while that of MTA is greater than 31% (BTX>24.8%); one uses a fluidized bed and the other a fixed bed.
Listening to their nonsense – if gasoline is at 80, how could coal still be at its current price? It ultimately depends on the boss to decide which products are suitable; everyone is rushing into olefins, but how many companies are involved in aromatics? The article even included the market price of p-xylene as a reference for aromatic hydrocarbon prices. How many steps are required to go from mixed aromatics to p-xylene? What is the yield? How much energy is consumed in recycling? They either know or they just don’t say it! These talks about working with petrochemical companies for a tri-combination project are really laughable. This is an expert!
Forty years of effort to create a breakthrough: Uncovering how the “milestone” in the petrochemical industry was achieved – the PX technology. 2015-8-14 In China’s petrochemical sector, there is a technology that reflects the level of the country’s equipment manufacturing industry; it is the set of aromatic compounds production technologies developed over forty years by Chinese scientists and engineers, technologies that possess independent intellectual property rights. This technology has recently caught the interest of an international oil company, and it is set to go global, becoming a highly sought-after asset in the context of overseas expansion and the Belt and Road Initiative. Forty years of hard work to create a masterpiece. Aromatic hydrocarbons, including toluene and p-xylene (PX), are important basic chemical raw materials. Every aspect of our daily lives (clothing, food, shelter, and transportation) relies on its contributions; for example, the clothes we wear, the cars we drive, the packaging for food, medicines, and beverages, as well as various plastics we use – all are related to aromatic hydrocarbons. Wu Wei, deputy chief engineer at the Sinopec Research Institute of Petroleum and Chemical Technology, told a reporter from China Science News that the basic raw materials for the petroleum and chemical industry fall into two main categories: olefins and aromatics. There are a great variety of aromatic derivative products; among the more than 8 million known organic compounds, aromatic compounds account for about 30%. The complete aromatic hydrocarbon technology is a highly complex and technology-intensive advanced technology; it serves as a hallmark technology representing the level of development in the **petrochemical industry. Previously, only two foreign companies worldwide possessed the complete technology for aromatics, creating a de facto monopoly on this technology market. According to Wu Wei, aromatic hydrocarbon production technologies have high technical barriers due to their high level of system integration and the difficulty involved in their development; furthermore, the costs associated with technology licensing, as well as specialized adsorbents and catalysts, are extremely high. In 1975, China’s investment in the technology for a PX plant with an annual capacity of 27,000 tons amounted to several million dollars; in 2007, the technical costs alone for a PX plant with an annual capacity of 600,000 tons were in the tens of millions of dollars. Kong Dejin, deputy chief engineer at the Shanghai Research Institute of Petrochemical Technology under Sinopec, explained that in order to master the core technologies related to aromatics, several generations of professionals from the petrochemical industry, universities, and research institutes have worked tirelessly for over 40 years since the 1970s. Thanks to their efforts, China has become the third country after the United States and France to possess a complete set of technologies for producing aromatics. China holds intellectual property rights to all technologies involved in this project, and has over 100 domestically and internationally authorized patents. Six academicians, including Min Enze, gave high praise to this project, stating that the successful development of the aromatic hydrocarbons technology package represents a \"milestone\" in petrochemical technology. This project has achieved numerous significant innovations and breakthroughs in areas such as processes, engineering equipment, control methods and systems, as well as adsorption and catalytic materials. It is at an international level overall and holds great value for promotion and application. Conquering the next fortress: Hong Dingyi, an executive director of the Chinese Chemical Society, believes that the success of transferring highly complex, capital-intensive, and risky technologies such as aromatic hydrocarbon production technologies from the laboratory to industrial-scale facilities in China is largely due to strategic support at the highest levels, close integration among industry, academia, and research institutions, as well as the advantages of highly integrated collaboration in research, design, construction, and production within China’s petrochemical sector. Since the 1970s, institutions such as the Sinopec Research Institute of Petrochemical Science and the Shanghai Petrochemical Research Institute have successively developed production technologies for aromatic units, including aromatic extraction, xylene isomerization, toluene disproportionation, and alkylation. However, the PX adsorption separation technology has yet to be overcome, remaining a stronghold in aromatic hydrocarbon technology. Due to this shortcoming, our country is forced to import millions of tons of PX products each year, costing nearly 10 billion dollars in foreign exchange. Wu Wei told reporters that in order to break the monopoly of foreign adsorption and separation technologies, Sinopec began researching PX adsorption and separation technologies in the early 1990s. It developed the domestically produced adsorbent RAX-2000A, which was tested on an industrial scale at the Qilu branch in 2004; all its performance metrics met or exceeded those of imported adsorbents, and its price was one-third lower than that of imported ones at the time. In 2009, in order to break the monopoly held by foreign companies over the PX adsorption and separation process technology, Sinopec established a leading group for tackling key technologies related to aromatic hydrocarbon production, with Vice President Dai Houliang as its head. This group initiated efforts to overcome the final hurdle in the development of aromatic hydrocarbon production technologies—namely, the PX adsorption and separation technology—so as to complete the entire technological chain. Every possible effort was to be made to conquer this “tough challenge”. In the same year, PX adsorption separation technology was included in Sinopec’s “Ten Key Projects” initiative, marking the official start of efforts to develop independent PX adsorption separation processes. In 2011, Sinopec utilized its independently developed PX adsorption separation technology to build the first industrial plant with an annual capacity of 30,000 tons at Yangzi Petrochemical, employing the newly developed RAX-3000 domestic adsorbent to verify the reliability of this proprietary PX adsorption separation technology. Since then, Sinopec has successfully overcome the last hurdle in its independent aromatic hydrocarbon production technology—the adsorption separation technology—and acquired the complete set of technologies for aromatic hydrocarbon production. Relying on its independently developed aromatic compound technology, Sinopec built another large-scale aromatic compound complex at Hainan Refining & Chemical Complex with an annual PX production capacity of 600,000 tons. It was successfully commissioned on December 27, 2013, after a single successful start-up. The three leaps of innovation. Hong Dingyi told reporters that over the past 40-plus years, China’s aromatic hydrocarbon technology has gone through three stages: following others, keeping pace with them, and finally taking the lead in innovation. PX technology is the core component of the aromatic hydrocarbons technology package. Taking the development of adsorption separation processes as an example, Wu Wei explained that PX separation technology makes use of a simulated moving bed adsorption separation process. This process integrates adsorbents, specialized equipment, relevant processes, and dedicated control systems, resulting in a complex overall system and great technical challenges in its development. PX products require a high level of purity, with a minimum of 99.7%; the simulated moving bed technology is characterized by complex process pipeline systems, which need to circulate different materials such as raw materials and products with significantly varying compositions on a cyclic basis. Residues of these materials in the pipelines can cause contamination of the products. Even trace amounts of residual other materials can affect the purity and yield of the product. To overcome technical challenges as quickly as possible, researchers gave up their holidays and weekend rest time, working tirelessly around the clock on experiments. They developed a simulated moving bed technology with independent intellectual property rights, resolved the control issues related to the adsorption program control system (MCS), and innovatively devised a pipeline flushing process for the adsorption chamber bed that differs from similar international technologies. Additionally, they designed special components tailored to meet the process requirements, thereby completely overcoming all technical hurdles in the PX adsorption and separation process. Furthermore, during the research and development process, scientists also focused on emphasizing the concepts of greenness and low carbon emissions. Compared with similar domestic units, Hainan Refining and Chemical’s PX plant consumes 25% less energy per ton of PX produced, which allows it to save hundreds of millions of yuan annually in terms of energy reduction. In addition, researchers were the first to utilize the low-temperature heat energy at the top of the recovery tower for power generation. This move enabled the integrated facility to generate more electricity than it consumes, marking a historic breakthrough whereby the facility shifted from being a net electricity consumer to a net electricity supplier. It can now supply 65,000 kWh of electricity per day. As a result, the PX unit at Hainan Refining & Chemical has become a new global benchmark for aromatic compound production units thanks to its low energy consumption. Understand one’s own foundation. Currently, the global annual consumption of aromatics for industrial use is around 120 million tons. There are more than 130 aromatics production plants, located in developed countries and regions such as the United States, Western Europe, Japan, and South Korea. PX is an aromatic hydrocarbon that is widely used and representative of production technologies; it has a extensive downstream industrial chain and serves as a vital foundation for the petrochemical industry. Wu Wei told reporters that with the continuous development of China’s economy and the growing needs of its people, China’s consumption of PX has increased rapidly, with an average annual growth rate of over 20% in the past 15 years. To date, our country has become the world’s largest consumer of PX, but it has long suffered from a shortage of domestic supply and has relied on imports. In 2014, approximately 10 million tons were imported, accounting for about half of total consumption, of which 75% came from developed countries such as the United States, Japan, and South Korea. While domestic citizens protest against the development of the PX industry, the United States, Japan, and South Korea are all building new PX plants for the Chinese market. In response to public concerns regarding PX, Lu Dapeng, the spokesperson for Sinopec, believes that it is necessary to present facts and reasons from a scientific perspective, as well as to analyze the root causes of the issue from a political standpoint, so that the public understands that the aromatics industry, which is crucial to the country’s economy and people’s livelihoods, must remain under Chinese control and not be subject to external influence. Furthermore, in response to the societal panic stemming from the demonization of PX, and to ensure green and safe production, Hainan Refining & Chemical has made \"zero pollution, zero leaks, zero emissions, and intrinsic safety\" key objectives from the outset of the project’s construction, striving to achieve \"no emissions in the air, no leaks on the surface, and no seepage underground.\" To ensure the intrinsic safety of its facilities, Hainan Refining has invested over 20% in safety and environmental protection. The SO2 content in the flue gas is as low as 20 mg/Nm3, which is well below the standards for Category 1 emissions and represents an advanced level on a global scale. Additionally, the emission of carbon dioxide, a greenhouse gas, is reduced by 12,000 tons per year, exceeding even the international advanced standards. Furthermore, in the raw material purification unit, catalytic reactions have been innovatively used in place of physical adsorption, thereby significantly extending the catalyst’s lifespan and reducing solid waste emissions by 98%. In Hong Dingyi’s view, thanks to the complete intellectual property rights, advanced standards, and a commitment to continuous improvement associated with China’s aromatic hydrocarbons technology, \"we can promote our aromatic hydrocarbons technology worldwide, just as we have promoted China’s high-speed rail technology.\" ”As China’s own aromatic hydrocarbon technologies make their way onto the global stage and enable it to gain control over pricing, this is of great significance for promoting the rapid development of related manufacturing industries and downstream sectors, as well as for improving the quality and efficiency of China’s economic development and accelerating structural transformation.
This post was last edited by slowstar on 2016-7-15 at 14:48. Third in the world, on par with high-speed trains – why is Sinopec’s aromatics technology so advanced? April 29, 2016: At the beginning of 2016, Sinopec, together with the China State Railway Group for its project on \"Development and Application of High-Efficiency and Environmentally Friendly Aromatic Hydrocarbon Technologies\", won the **Special Prize for Scientific and Technological Progress for 2015\". This was the second time that Sinopec had received this highest award for scientific and technological progress (editor’s note: the first time was for the project on \"Safe and Efficient Development Technologies and Industrial Application for Extra-Large, Ultra-Deep, and High-Sulfur Gas Fields\" in 2013). Aromatic hydrocarbons are a fundamental component of the chemical industry, and they are widely used in three major synthetic materials as well as in fields such as pharmaceuticals, national defense, pesticides, and building materials. Xylenes (editor’s note: its other name is PX, and it has been stigmatized in China) are one of the most widely used aromatic hydrocarbons, and they are closely related to people’s lives. China’s self-sufficiency rate for xylene is only 50%; one important reason for this is that the technology used in aromatic hydrocarbon production has long relied on imports, resulting in high costs and limiting the development of this industry. Aromatic hydrocarbon production technology is a complex systems engineering project that includes processes such as raw material purification and distillation, aromatic isomerization and conversion, as well as adsorption separation; it features a high degree of system integration and presents significant development challenges. Previously, only two renowned companies in the United States and France possessed this technology, resulting in very high technical barriers. Dai Houliang, the lead researcher of this project and senior vice president of Sinopec, said, “Developing independent aromatic hydrocarbon technology is the dream of several generations of petrochemical industry professionals, as well as the result of the joint efforts of thousands of people who have worked on this project.” Our technology helps solve people’s problems with clothing, which is crucial for addressing the conflict over land between grain cultivation and cotton production in our country. ”Sinopec’s success in developing this technology has made our country the third in the world to master it. Through innovations in principles and methods such as physical chemistry, catalytic materials, intelligent control, and process engineering, Sinopec’s advanced and environmentally friendly aromatic hydrocarbon technology has reached international leadership levels. It has achieved particularly significant technical breakthroughs as well as economic and social benefits, representing a milestone in the pursuit of Chinese innovation. By applying aromatic technology, the chemical fibers produced from p-xylene each year can replace cotton grown on approximately 230 million mu of land. Developing aromatic hydrocarbon projects is necessary for economic development and people’s livelihoods, and it is crucial to the nation’s economy and well-being. Today, about 65% of textile raw materials and 80% of beverage packaging bottles are derived from p-xylene. The cotton fields saved through the application of aromatic hydrocarbon technology can be used for growing crops, making an important contribution to effectively resolving the conflict over land between grain and cotton cultivation and to maintaining the 1.8 billion mu threshold for arable land. After more than 40 years of persistent effort and unremitting dedication, Sinopec has successfully developed a set of efficient and environmentally friendly aromatic hydrocarbon technologies with complete independent intellectual property rights. These technologies significantly improve the efficiency of product separation and the utilization of aromatic hydrocarbon resources, while also reducing energy consumption and waste emissions. Five innovations have been achieved: the first is the development of a new green process for raw material purification. Replacing physical adsorption with chemical reactions led to a principle-based innovation, extending the lifespan of the refined products by 40 to 60 times and reducing solid waste emissions by 98%. Second, new molecular sieve materials for the efficient conversion and separation of aromatics were developed for the first time. The conversion capacity of heavy aromatics increases by 70%–80%, the resource utilization rate improves by 5%, and the adsorption separation efficiency rises by 10%. Third, integrated innovation control methods are used to achieve intelligent control. It enables rapid regulation of large flow rate changes over short periods of time, significantly reducing pressure fluctuations in the adsorption tower, thereby ensuring the long-term intrinsic safety and efficient, precise operation of the system. Fourth, a new process for deep energy integration in aromatic compound combined plants was developed for the first time. The operation of this device represents a historic breakthrough, shifting from requiring external power supply to generating power for external use, with the overall energy consumption per unit of product reduced by 28%. Fifth, innovative design methods and manufacturing processes have been developed, enabling the creation of key equipment in China. An innovatively designed and constructed world’s largest single-chamber aromatic heating furnace and multi-overflow plate aromatic distillation tower were developed; patented equipment with a new type of adsorption tower grid was created, resulting in a significant improvement in the uniformity of fluid mixing and distribution. It is reported that Sinopec’s advanced, environmentally friendly aromatic hydrocarbon technology has earned more than 40 domestic and international patent approvals, resulting in a complete set of independent intellectual property rights. One monograph has been published, and the technology has won one China Invention Patent Gold Award, as well as one special prize and two first prizes for scientific and technological progress at the provincial and ministerial levels. Self-developed sets of technical process packages, engineering design, and management software have enabled our country to become not only a provider of proprietary technologies but also an EPC contractor for engineering projects, yielding significant social benefits: firstly, energy and material consumption has been markedly reduced, achieving high efficiency and environmental protection. Second, it drives the development of the chemical and process manufacturing industries. Third is to ensure the supply of textile raw materials, the integrity of the industrial chain, and the stability of the economic structure. Note: This article is reprinted from China Reform News
Covering one’s ears to avoid hearing the bells – this is my view on what is currently known as the coal chemical industry. I didn’t use any vulgar language this time; what are you going to do to me, the moderator?
Voice | Zhou Dadi: Energy consumption is declining, and the problem of recklessness is severe... It’s too late for China if it doesn’t pursue energy transformation as soon as possible! Original, 2016-07-15, Zhou Dadi, China Energy News. China’s energy sector has passed its period of rapid growth; consumption increased by 8% annually from 2002 to 2012. The growth rate of energy consumption dropped to 2.2% in 2014, and further to 0.9% in 2015. “During the 13th Five-Year Plan period, China’s energy development will enter a phase of transformation; growth in energy consumption will continue to be slow, and the main challenge in ensuring energy supply will shift to regular overcapacity. Adjusting the energy structure, accelerating green and low-carbon development, improving the efficiency of the energy system, and pursuing economic efficiency will be the main goals for future development. By Zhou Dadi, Researcher at the Energy Research Institute of the National Development and Reform Commission, Executive Vice President of the China Energy Society. Energy consumption is entering a downward trend; specifically, coal consumption is likely to have passed its peak and is now on a decline. In 2014 and 2015, the total coal consumption declined consecutively. Judging from the decline in coal transportation volumes, the actual drop in coal consumption was greater than the figures published by the statistics bureau. From January to April this year, the country’s coal production amounted to 1.01 billion tons, a 6.8% decline on a year-on-year basis; 620 million tons of coal were transported by rail, representing a 10.4% drop, with even sharper declines on the Daqin Railway line, where the decrease was 20%. According to customs statistics, from January to April, a total of 67.25 million tons of coal were imported, a decrease of 2.5% compared to the previous period, while 3.3 million tons were exported, representing a growth of 161.4%. The decline in electricity growth also exceeded expectations significantly. In 2015, electricity consumption increased by only 0.5%. Electricity consumption in the secondary industry, which accounts for about 70% of total electricity use, declined significantly, especially in industries that rely on energy-intensive raw materials; in fact, there was even a substantial negative growth in such areas. Electricity consumption in heavy industry, which accounts for 58.8% of the total consumption, declined by 1.8%. There are issues such as blindness; the level of blindness in power sector development remains high. By the end of 2015, the total installed power generation capacity across the country was 1,508.28 million kilowatts, representing a year-on-year increase of 10.5%. Of this, the installed capacity for thermal power is 990.21 million kilowatts. Throughout 2015, 14,332 kilowatts of new power generation capacity were added, of which 7,164 kilowatts came from thermal power plants, **which was higher than expected. The operating hours of power generation equipment with a capacity of over 6,000 kilowatts across the country decreased by 349 hours. The average operating hours for thermal power generation equipment nationwide were 4,329 hours, a decrease of 410 hours compared to the previous year; this decline was greater than that seen in the same period in 2014. In fact, there was no supply shortage even without building any new thermal power projects for 3 years. However, in the first quarter of this year, electricity generation capacity continued to expand on an inertial basis, with 28.15 million kilowatts of new generating capacity added, the highest figure for the same period in previous years. To this end, the **Energy Bureau has ordered the suspension of construction, postponement of construction, and cancellation of approval for a number of thermal power project proposals. The development of high-quality energy sources is constrained by excess capacity in coal and coal-fired power generation, leading to widespread phenomena of wasted water, wind, and solar energy. The growth rate of natural gas development has declined significantly; supply is sufficient but market expansion is difficult ； Nuclear power in some areas is also under market pressure due to an excess of generating capacity. However, the key issue with discarding wind, water, and solar energy is not a technical one. The excessive capacity of thermal power plants, and the competition for generation time, are the fundamental reasons ； The division of local interests, with priority given to protecting local power generation, is also an important reason ； Environmental externalities are not adequately reflected in the feed-in tariff, resulting in a clear phenomenon of inferior goods displacing superior ones ； The principle of giving priority to non-fossil fuel power sources in grid access is unclear, it conflicts with other interest-related principles, and the power grid lacks the motivation to act accordingly ； Furthermore, there are also no incentives and mechanisms on the user side to promote the consumption of green and low-carbon electricity. The randomness in energy investment has also raised China’s energy consumption costs. Excessive investment by energy companies, a significant decline in the return on such investments, and many ineffective investments made by choosing high-carbon technology pathways despite market conditions have placed a heavy debt burden on most energy companies. Currently, the electricity industry as a whole has a debt ratio of over 82%; many newly built coal-fired power projects fail to meet their original financial targets. The cost savings resulting from a half-drop in coal prices are largely offset by the investments made in the electricity industry, which means that many investments made in the coal industry during periods of high coal prices and high profits can no longer be recouped. In the oil and refining industry as well, a large amount of investment fails to yield the expected returns. Restrictions on internet access significantly reduce the returns on investment in renewable energy, hindering cost reductions. The non-technical increase in the investment costs for nuclear and hydroelectric power is also a major reason for the significant rise in power generation costs, leading to a slowdown in energy growth. “Energy growth during the 13th Five-Year Plan period may fall short of expectations. China’s economic development is entering a phase of deep transformation and adjustment, with overcapacity in general manufacturing industries being a widespread issue. “The total energy growth during the 13th Five-Year Plan period is likely to be lower than expected. Based on projections regarding the development of end-use industries and energy demands across various sectors, total energy consumption in 2020 is likely to be below 4.8 billion tons of standard coal (possibly ranging between 4.5 and 4.7 billion tons). The high-energy-consuming industries, which account for 50% of total energy consumption, have reached their peak or are entering a phase of declining production, and this is the main reason why energy growth rates remain low at present and in the coming period. At the same time, the premature expansion of production capacity in the real estate sector has exhausted future construction space; building sizes have reached their peak, and the actual demand for energy consumption in residential and service sectors has been curbed. The decline in the volume of commodity shipments has led to a significant drop in transportation growth, with declines observed in certain areas. Various indications suggest that the total energy consumption of the secondary industry may reach its peak during the 13th Five-Year Plan period. “During the 13th Five-Year Plan period, structural adjustments on the supply side represented an important shift in economic policy direction, aimed at improving the quality of consumption and fostering demand for green and low-carbon consumption. Furthermore, environmental protection and the need to address climate change will shape the direction of future energy development. There is growing consensus worldwide on addressing climate change. The shift from fossil fuels to non-fossil fuels has become the main direction for future energy development. The world needs to restrict and reduce the consumption of coal and oil as soon as possible, and achieve a shift to non-fossil energy sources within this century. Recently, with increased policy support, renewable resources such as photovoltaic and wind power have seen rapid development in China. The share of renewables in the total primary energy supply is constantly rising, and the global energy sector is moving toward a lower-carbon or even carbon-free future. Therefore, if China’s energy development does not undergo a transformation as soon as possible, it will surely be left behind by the global trend. Under these circumstances, it is necessary to comprehensively strengthen and advance the energy consumption revolution, as well as promote structural adjustments on the supply side in the energy sector. Adhere to giving priority to the development of non-coal energy sources, and actively promote the use of non-fossil energy and natural gas as alternatives to coal. Adjustments to the power supply structure should also take into account giving priority to the development of non-coal power sources. To prevent the tendency to develop high-carbon technologies as a way to utilize coal in situations of overcapacity in coal production, it is necessary to strictly control the development of coal chemical projects such as coal-to-gas and coal-to-oil processes, in order to internalize the negative external environmental impacts. In addition, a moderately stringent carbon emission quota and trading system should be established, the framework for collecting environmental taxes (including carbon taxes) should be accelerated, and a market signal system conducive to structural adjustment should be put in place. (This article is compiled based on his speech at the recently held Energy Forum.)