China in Transition

Rethinking Energy Security

Chi Hung KWAN
Consulting Fellow, RIETI

(Published on the April 5, 2011 edition of the Allatanys Newspaper Guide)

Countries worldwide have been trying to increase their energy supply and achieve energy security through such means as nuclear power generation and the development of domestic and overseas oilfields. However, due to the risks that have been revealed by the nuclear crisis at the Fukushima No. 1 Nuclear Power Plant and political uncertainty in the oil-rich Middle East, governments worldwide are being forced to completely revamp their energy strategies. In light of the current situation, here we propose a new approach to energy security for China, which has now become the world's biggest consumer of energy.

The collapsed myth of nuclear safety

China has high hopes for nuclear power generation and views it as a means to secure a sustainable energy system, protect the environment, and develop clean energy. Currently, 13 nuclear reactors are operating in China, with capacity of 10,800,000 kilowatts, accounting for only about 1% of total electrical power plant capacity. However, the "Medium- and Long-Term Nuclear Power Generation Plan" announced in October 2007 set a target of increasing nuclear power plant capacity to 40,000,000 kilowatts by 2020, a target that was raised to 86,000,000 kilowatts in the National Energy Conference held in January 2011. To achieve this goal, the 12th Five-Year Plan (2011 through 2015) has called for the construction of nuclear power plants to generate 40,000,000 kilowatts of electricity.

However, the risks associated with nuclear power are high. If a serious accident occurs, not only will economic activities be severely affected, but the environment will also be contaminated, jeopardizing the lives and health of vast numbers of people. Following the accident at the Fukushima No. 1 Nuclear Power Plant, a March 16 meeting in China of the Standing Committee of the State Council, chaired by Premier Wen Jiabao, decided to suspend the approval of construction plans for new nuclear power plants, to ensure that all possible measures are being taken to avoid such an accident (according to reports by the New China News Agency on March 17). China has also raised the possibility that it may reconsider the nuclear power generation plan included in the 12th Five-Year Plan, as well as the medium- and long-term target which has just been revised upward. In addition, the guiding principle for nuclear power generation has been changed from "actively develop" to "place top priority on safety" (reported by New China News Agency on March 18).

Highly risky energy development overseas

To strengthen its energy security, China has been focusing on securing energy sources centering on overseas oil through direct investment, in addition to promoting nuclear power generation. As many of these investments are carried out in unstable developing countries, China faces a high country risk. In fact, in Libya, where a civil war has been raging since February 2011, some of the oil facilities of China National Petroleum Corporation (CNPC) were attacked, and Chinese expatriates were forced to return home. There is concern that if the civil war intensifies, CNPC will incur heavier losses. As China does not have significant global military deployment capabilities, it can neither protect its interests associated with overseas investments, nor reliably bring resources back home. Given these risks, overseas direct investment in areas such as oil will not necessarily strengthen China's energy security.

It is true that there was a time when emerging powers had no choice but to expand their territories through military conquest in order to secure resources such as oil. Today, in a globalized world, resources can be procured readily so long as a country is not isolated from the international community through economic sanction or blockade. In this environment, maintaining good relations with other countries, rather than strengthening military power, is the key to maintaining a stable supply of energy.

Conservation as the largest source of energy

To ease the energy shortage, demand must be reduced if increasing supply is difficult. For that purpose, the 12th Five-Year Plan sets a target of reducing energy consumption per unit of GDP by 16% by 2015.

Not only the government but enterprises have also come to recognize the need to conserve energy, as pointed out by Fu Chengyu, who heads the giant oil company China National Offshore Oil Corp. (CNOOC): "China is not lacking in energy. What is lacking are strategies to use conventional energy more effectively and cleanly and systems and policies to encourage energy saving. Energy efficiency is very low in China, and this has been causing a waste of energy resources and serious environmental pollution. Energy consumption per unit of GDP in China is three times, four times, and five times higher than it is in the United States, the European Union, and Japan, respectively. Looking at the situation in China from that perspective, it is not that China lacks energy. For China, saving is the largest source of energy." (Comment made at the China Development Forum hosted by the Development Research Center of the State Council of on March 19, 2011 in Beijing).

This is a compelling argument. Now that the safety myth of nuclear power has collapsed and uncertainty is increasing in the Middle East, it is becoming increasingly important to put the priority on reducing energy demand, rather than increasing energy supply.

The original text in Japanese was posted on April 8, 2011

April 8, 2011