Energy supply-side structural reform and demand-side response, two focuses of energy transformation

Nie Guanghui
minutes 2018/11/28 11:03:26
China, energy, energy supply-side

Changes in China’s energy consumption and production, arising from energy supply-side reforms, are crucial components which will shape the structural adjustment of the country's energy field. These changes are also important for the medium and long-term development of energy in China. Additionally, from the point of view of energy resources and environmental protection, the changes in energy structure will entail reforms in means of energy production.

Organic energy is one of the new components of energy reforms but it is not a big contributor in overall energy supply. The passiveness of renewable energy demand side response is because on the one hand, it is restricted by the historical pattern of China’s energy production and consumption and on the other hand, the premise of positive response on the energy demand side is to provide higher customer satisfaction on the supply side. Therefore, the response from the energy demand side is stressed which is more focused on energy demand side management. Efficient energy management as well as clean and low carbon energy consumption are the important contents of energy demand side management.

It is a fact that renewable energy strikes a balance between supply and demand. For the formation of China’s energy supply-side structural adjustment, two supporting points, namely, top-level design and problem orientated approach require much attention.

In addition to the global energy pattern adjustment and national energy security strategy, the top-level changes need to be implemented from the perspective of the overall implementation of energy reforms. The top-level changes are more conducive to the administration of energy supply side structural adjustment. However, during the formation of new energy structural adjustment plan, there were many debates on whether to start from the energy supply side with a big plan and big action to re-allocate resources or to start from the energy demand side by utilizing market competition as a force to change the supply side structure. Similarly, the technical adjustment of the supply side also generated many controversies.

Problem-oriented approach, on the other hand, serves a better response to why it is necessary to employ energy supply-side reforms. The economic normality generated cost pressure on the energy demand side, while the factor of environment protection discourages using traditional sources of energy for production. Thus, the gap of demand and supply remains but the insufficient supply of energy and low-end consumption show a periodic overcapacity. The imbalance between the overcapacity and the high cost of energy consumption are some of the driving forces for restructuring energy supply side. Excessive capacity in energy sector can be reduced by regulating and restricting energy supply side by promoting industrial transformation and upgradation. However, from this point of view, excessive capacity short of market competitiveness in the energy activity is also one of the problems.

The renewable energy transition mainly focuses on energy production and consumption. From the macro view, it is the supply and demand side of energy. As for the energy supply side it is important that it should be diversified. Therefore, making a single source of energy diverse and making it compatible in the international market at the same time. Cleanliness, low-carbon and diversification are the main trends of global energy consumption. Nonetheless, the fact remains that the consumption of natural gas, non-fossil energy, oil and coal are likely to dominate the energy market for quite a long time. This is the status quo of the global energy layout and also a base for China's energy transformation, which determines the way and method of managing energy demand-side response and provides a way forward for developing a conservation-oriented consumption approach.

The transformation of energy structure based on top-level design and problem orientated method should take into account a user-centric approach. The adjustment of energy supply side still lies in the coordination and optimization of several factors including cross field integration between energy sector and other ones, but the ultimate purpose is to serve the energy demand side. For the management on the demand side response, it is more important to build a new energy consumption structure which is more suitable for the future economic growth and the improvement of human living environment through supply-side adjustment. As a matter of fact, it is opposite and unified between energy supply and demand as two sides complements each other.

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Nie Guanghui
Columnist and Writer