Multi-perspective analysis of China's energy supply security

Energy 64 (2014) 541e550

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Energy journal homepage: www.elsevier.com/locate/energy

Multi-perspective analysis of China’s energy supply security Jiang-Bo Geng a, b, Qiang Ji b, * a b

School of Management, University of Science and Technology of China, Hefei 230026, China Center for Energy and Environmental Policy research, Institute of Policy and Management, Chinese Academy of Sciences, Beijing 100190, China

a r t i c l e i n f o

a b s t r a c t

Article history: Received 9 May 2013 Received in revised form 8 October 2013 Accepted 12 November 2013 Available online 9 December 2013

China’s energy supply security has faced many challenges such as the drastic change of the international energy environment and the domestic energy situation and so on. This paper constructs a multidimensional indicator system for the main risks deriving from four aspects to evaluate the situation of China’s energy supply security and analyze its evolution characteristics from 1994 to 2011. The results indicate that the situation of China’s energy supply security generally presented a downtrend during 1994e2008, as a result of increasing international energy market monopoly and high volatility of international crude oil prices. After 2008, the overall level of China’s energy supply security has improved to the level of 2003, which is attributed to the relatively stable international energy environment as well as the effective implementation of energy policies. Ó 2013 Elsevier Ltd. All rights reserved.

Keywords: Energy supply security Multi-dimensional indicator system Evolution characteristics

1. Introduction In recent years, the situation of China’s energy supply security has been worsening, facing a lot of challenges: (1) the balance between energy supply and demand in China has been broken, and this gap has been enlarged. The average annual growth rate of China’s energy production was 5.97%, while that of energy consumption was 6.32% during 1994e2011 [1]. (2) Although China’s energy self-sufficiency rate remains at a high level (exceeding 90%), the energy self-sufficiency rate of different sub-varieties differs greatly. In 2011, China’s dependence on foreign oil and natural gas reached 56.5% and 21.56%, respectively [2], and went on to maintain a sustainable growth trend. According to BP’s forecast, China’s dependence on foreign oil and natural gas will reach 80% and 42% by 2030, respectively [3]. (3) The volatility of international crude oil prices has a great impact on China’s economy. It has increased the production costs of the energy industries and imported inflationary pressures in China. (4) China is facing grim situation in addressing climate change with hard tasks [4]. China is right in the rapid process of industrialization and urbanization. Therefore, high demand for energy in China has increased carbon dioxide emissions constantly. In 2011, carbon dioxide emissions from fuel combustion in China have reached 8979.14 million tons which has become the largest emitter of greenhouse gases in the world [2]. These factors indicate that the security of energy supply in China has been facing pressures and challenges from all aspects. Under this situation, the * Corresponding author. Tel.: þ86 10 62542627. E-mail address: [email protected] (Q. Ji). 0360-5442/$ e see front matter Ó 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.energy.2013.11.036

evolution characteristics of China’s energy supply security have been changing over time which should be further analyzed by modelling a dynamic analytical framework based on a multidimensional indicator system. By this way, a quantitative evaluation and implications towards making effective energy policies and protecting the security of China’s energy supply can be identified and explored. The definition of energy security has been changed at different stages of economic development. Sovacool et al. [5] provided a synthesized, workable framework for analyzing national energy security policies and performance by drawing from research interviews, survey results, a focused workshop, and an extensive literature review. At present, the more comprehensive and authoritative definition of energy security is given by IEA [6]: Energy security, broadly defined, means adequate, affordable and reliable supplies of energy. According to China’s current energy supply situation and energy characteristics, the definition of China’s energy supply security in this paper is that the risk of energy supply should be reduced and reliable and adequate energy supply should be ensured within a reasonable price range. Previous researches on China’s energy supply security had focused on the different types of energy sources. Nolan [7] analyzed that Shenhua Group’s coal liquefaction technology had potentially strategic significance for China’s energy supply security. Zhao et al. [8] argued the coal chemical industry should be oriented to the development of high efficiency, safety, cleanliness, and optimum utilization in China. Zhang et al. [9] built a two-phase DEA-like model to evaluate China’s oil import security from a perspective of supply chain process. Downs [10] analyzed the issue of energy

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supply security in China and explained how to deal with the high dependence on foreign oil resources. Zhang [11] considered the strategic importance of the Strait of Malacca to China and pointed out that China had taken great efforts at both the demand and supply sides to cope with the perceived ‘‘Malacca dilemma’’ and enhance its energy security. Leung [12] argued that the transport industry would require the most energy demand in the future and its average energy efficiency need to be improved. Cao and Bluth [13] analyzed the key features of China’s energy policy which were related to energy supply security. Bambawale and Sovacool [14] analyzed China’s energy security situation from seven aspects using the questionnaires, and the results showed that fossil energy supply security was the most important aspect and environmental factors such as soil erosion, air pollution, and water pollution were the second most important aspects. Jiang et al. [15] suggested China should adopt low-carbon economy, develop new energy, establish related laws, management institutions and mechanisms and enhance the public awareness of energy saving. Zhang [16] argued that both China and the Western countries need to de-politicize China’s global quest for energy security. However, energy supply security has been considered as a complex issue threatened by multi-dimensional risks and obstacles, including domestic resources restriction, energy technological obstacles and international dependence risks and economic threats. Therefore, any single and partial analysis on one aspect can hardly reflect the integrated situation of energy supply security. In order to make a comprehensive analysis of China’s energy supply security, multiple aspects should be taken into account. Based on this consideration, a multi-dimensional indicator system of China’s energy supply security is constructed including domestic and external risks from four dimensions which provide a new perspective for energy supply security evaluation. By this way, the evolution characteristics of China’s energy supply security can be identified and corresponding policy implications can be proposed aiming at the main risks. The rest of the paper is organized as follows: Section 2 gives the analytical framework of energy supply security evaluation. Empirical results analysis and discussion are presented in Section 3. Finally, some conclusions and policy recommendation are drawn in Section 4. 2. Analytical framework of energy supply security evaluation

Table 1 Index system of China’s energy supply security. Evaluation dimension

Evaluation index

Symbol

Energy external availability

Energy export monopoly risk index Diversification index of energy import Economic vulnerability index Crude oil price volatility risk index Clean energy generation ratio Energy efficiency Reserve-to-consumption ratio

X1

The affordability of energy import Energy technologies and energy efficiency Energy resource reserves

2.1.1. The risk indicators of energy external availability The energy importing from other countries is obtained through trade. On the one hand, the risk of availability of imported energy is influenced by the degree of monopoly in the international energy market. On the other hand, the complexity and high risk of the sources of energy imports has brought uncertainties to the imported energy. This paper constructs the energy export monopoly risk index and the diversification index of energy imports to evaluate the risk of energy external availability.

X3 X4 X5 X6 X7

2.1.1.1. Energy export monopoly risk index. To analyze the availability risk of China’s imported energy associated with the degree of monopoly in the international energy market, this paper refers to Lefevre [17] and constructs the index of energy export monopoly risk (EMCRIexport). The index is constructed as follows:

EMCRIexport ¼

i Xh EMCexportf $Eimportf =Ef f

¼ EMCRIexportoil þ EMCRIexportgas

(1)

þ EMCRIexportcoal Where EMCRIexport represents the energy export monopoly risk index. The fact that the value of EMCRIexport is higher indicates that the risk that energy importing countries obtain energy from the international energy market is greater. EMCRIexport-oil, EMCRIexportgas, and EMCRIexport-coal represent the indexes of China’s crude oil, natural gas and coal export monopoly risk respectively. EMCexport-f represents the export concentration index for fuel f, Eimport-f indicates the amount of energy import for fuel f, and Ef indicates energy consumption for fuel f in China. Equation (1) reflects the degree of the dependence on the energy export market for energy importing countries. EMC (energy market concentration) uses the HHI (Herfindahle Hirschman Index) as the measurement. OPEC is considered as a whole because the countries in the OPEC organization coordinate with each other for policies on crude oil output [18]. The index of energy export market concentration (EMCexport) is constructed as follows:

2.1. Multi-dimensional indicator system According to the situation of China’s energy supply and demand, and considering the multiple risks that China’s energy security has faced, seven composite evaluation indexes are constructed from four risk dimensions: the risk of energy external availability, the affordability of energy import, the development of energy technologies and energy efficiency, and energy resource reserves as shown in Table 1. The multi-perspective analysis of China’s energy supply security and its evolution characteristics would help make better policy decisions and also provide a feasible way to track how policy decisions raise China’s energy supply security.

X2

EMCexport ¼

n X i¼1

S2if  10000

(2)

Where Sif is the percentage share of each supplier i in the international market for fuel f. EMCexport indicates the concentration index of the export market and reflects the monopoly degree of the energy export market. Its value ranges from 0 to 1. A higher EMCexport value implies high insecurity. 2.1.1.2. Diversification index of energy import. Diversification in energy import can reduce the risk of supply disruption. For energy importing countries, when the diversification degree of energy import is higher, the risk of energy import is lower. Herfindahle Hirschman index (HHI) is an indicator of the amount of competition which is widely applied in evaluation models to measure diversification [19]. This paper also uses the format of HHI to measure the diversity of energy supplies by summing the squared shares of all foreign suppliers in the total import volume of China. When some supplier constitutes a larger share of China’s energy import volumes, it may bring more potential risk for China’s energy imports. Therefore, the index constructed can better reflect the situations of

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China’s energy imports and measure the risks brought by oil exporters. The diversification index of energy import in this study is constructed as follows:

DIf ¼

X IMif Cf i

!2 $100

(3)

Where IMif represents the import amount for fuel f from the country i; Cf represents the total import amount for fuel f; and DIf represents the diversification index for fuel f. That the diversification index of energy import is smaller indicates the sources of China’s energy import are more dispersed and the risk of energy import is lower. 2.1.2. The affordability indicators of energy imports 2.1.2.1. The economic vulnerability index. In energy research, the vulnerability indicates the risks of being negatively affected by shocks from being dependent on energy import [20]. Due to the high dependence on imported crude oil for China, this paper mainly analyzes the economic vulnerability for crude oil import. The economic vulnerability of crude oil import is decomposed into four parts: crude oil prices, the dependence on foreign oil, the structure of energy consumption and energy intensity, and the main factors that have impact on the economic vulnerability of China’s crude oil import are examined. The economic vulnerability index of crude oil import used in this research is defined as follows.

EIEV ¼

Qoil import Qoil total Qenergy total Coil ¼ Poil $ $ $ GDP Qoil total Qenergy total GDP

efficiency can reflect the development level of the national energy technologies, and improvement of the energy efficiency can reduce energy consumption effectively. In this paper, energy efficiency is defined as GDP divided by energy consumption referring to Kaya and Yalcintas [24] and Inglesi-Lotz and Pouris [25]. This paper uses the clean energy generation ratio and energy efficiency to measure the dimension of energy technologies and efficiency as Eqs. (6) and (7), respectively.

NR ¼

NEL TEL

(6)

Ren ¼ GDP=EC

(7)

Where NR represents clean energy generation ratio; NEL represents the amount of clean energy generation; TEL represents the amount of total energy generation; Ren represents energy efficiency; and EC represents the fossil energy consumption. 2.1.4. The index of energy resource reserves Due to the low proportion of non-fossil energy in the energy consumption structure, fossil fuels still play a crucial role in China, and the domestic reserves of fossil energy resource reflect the national energy self-sufficiency ability. This paper uses the reserveto-consumption ratio representing the index of fossil energy resource reserves [26]. The reserve-to-consumption ratio means the ratio of domestic fossil energy reserve to current domestic energy consumption, which is constructed as Eq. (8) as follows.

(4) Res ¼

Where EIEV is the economic vulnerability index of crude oil import; Coil represents the cost of crude oil import; Qoil import, Qoil total, Qenergy total represent the amount of crude oil import, crude oil consumption, and the total energy consumption respectively; and Poil represents the international crude oil prices, using Brent spot price.

543

Roil þ Rcoal þ Rgas Econsumptiontotal

(8)

Where Roil, Rcoal, Rgas represent the proved reserves of crude oil, coal, and natural gas respectively, Econsumption-total indicates the consumption of fossil energy. Res represents the reserve-toconsumption ratio. 2.2. Composite indicator of China’s energy supply security

2.1.2.2. Crude oil price volatility risk index. The volatility of international crude oil prices has a great impact on China’s economy by increasing the cost of production, raising inflation and unemployment and depressing the value of financial and other assets. Therefore, the international crude oil price volatility risk index is considered and constructed as Eq. (5) according to Awerbuch and Sauter [21] and Park and Ratti [22].

CIi ¼

Si  X  pffiffiffiffi2 Log Pi;dþ1 =Pi;d si $e$GDP

(5)

d¼1

where CIi is the crude oil price volatility risk index in the i year; e represents the elasticity of the Oil-GDP, defined as the percentage of the change of GDP relative to the change of the crude oil price, which is 7.3% according to Awerbuch and Sauter [21]; Pi,d represents the international crude oil prices in d year and i month, using the weekly Brent spot price; and si represents the number of crude oil trading week in i year. 2.1.3. Energy technologies and efficiency index Alternative energy technologies are considered to reflect the potential ability to improve the security of the energy supply in the future. The clean energy generation ratio reflects the characteristics of the energy consumption structure, and that the ratio is higher indicates that the dependence on fossil fuels is relatively reduced. Energy efficiency refers to using less energy to produce the same amount of services or useful output [23]. The level of energy

In order to analyze the overall evolution features of China’s energy supply security, the seven evaluation indexes are synthesized into one composite indicator. To facilitate aggregation of these indexes, the seven evaluation indexes should be expressed in the same units. All the indexes are normalized and preprocessed in a unidirectional direction, which is positive to reflect energy supply security. For the normalized indexes, the minimum value is set to 0 and the maximum to 1. Then, when the value is larger, the situation of energy supply security is better. The normalized index Ii related to Xi is evaluated as Eq. (9) as follows.

Ii ¼

8 maxðXi ÞXi > ; i ¼ 1; 2; 3; 4 < maxðXi ÞminðX iÞ > :

Xi minðXi Þ ; maxðXi ÞminðXi Þ

i ¼ 5; 6; 7

(9)

where the max (Xi) and min (Xi) represent the maximum and minimum values from 1994 to 2011 respectively. The detail about Xi is introduced in Table 1. Ii represents the value of the i index. Then, the composite indicator of China’s energy supply security is computed as a function of these normalized indexes. In this paper, the composite indicator of China’s energy supply security is derived as the root mean square of seven normalized indexes referring to Gnansounou [27]. It is defined as the Euclidian Distance (ED) to the worst case of energy supply security represented by the zero point. The advantage of this method is that it is mainly based on mass statistical data, which is more objective-value-oriented.

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3500

EMCexport-oil/coal/gas

3000

2500

2000

1500

1000

EMCexport-oil

EMCexport-coal

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0

1994

500

EMCexport-gas

Fig. 1. The index of energy export market concentration.1.

This data-driven approach can avoid evaluating the subjective opinion-dominated weighting systems which are usually obtained by expert judgments and make the results more intuitively. Therefore, the composite indicator of China’s energy supply security is constructed as Eq. (10) as follows. I0 represents the composite indicator for China’s energy supply security. A higher composite indicator indicates better situation of China’s energy supply security. Moreover, in order to differentiate the impact that the energy policies and the external risks have on the energy supply security, two partial indexes, S1 and S2, are constructed as Eq. (11) and Eq. (12), respectively. S1 represents the impact of external risks and S2 represents the impact of energy policies on energy supply security.

sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi P7 2 i ¼ 1 Ii I0 ¼ 7 sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi I12 þ I32 þ I42 þ I72 S1 ¼ 4 sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi I22 þ I52 þ I62 S2 ¼ 3

(10)

(11)

(12)

2.3. Data sources The data of world crude oil, coal, natural gas import and export is extracted from EIA. The data of China’s crude oil, coal, natural gas, and primary energy consumption is taken from BP [2]. The data of crude oil import sources from 1994 to 2011 in China is taken from the Yearbook of China’s Foreign Economic Relations and Trade 1995e2003 [28], the China Commerce Yearbook 2004e2007 [29], and the China Custom Statistical Yearbook 2008e2012 [30]. The data of natural gas import sources from 2006 to 2011 is taken from BP [2]. The data of the annual Brent crude oil spot prices is taken from BP [2]. The weekly data of the Brent crude oil spot prices is extracted from the EIA. The data of GDP (2005 PPP) is taken from the World Bank. The data of China’s carbon dioxide emissions, clean energy generating capacity, and total generating capacity is taken from EIA. The data of crude oil, coal and natural gas proved reserves over the years is taken from BP [2].

3. Empirical results analysis and discussion 3.1. Multi-dimensional analysis of China’s energy supply security This paper constructs seven evaluation indexes on China’s energy supply security from four dimensions and examines the evolution characteristics of China’s energy supply security from 1994 to 2011. 3.1.1. Analysis of energy external availability 3.1.1.1. The energy export monopoly risk index. The index of energy export market concentration from 1994 to 2011 is shown in Fig. 1.1 As can be seen, some conclusions are drawn as follows: (1) Since 1994, the index of world crude oil export market concentration has been significantly higher than the index of world natural gas and coal export market concentration, which indicates the degree of monopoly in crude oil export market is the highest, and the crude oil export countries are more concentrated. It is because the OPEC organization and Russia’s crude oil export accounted for 68.53% of the world’s crude oil export. (2) From the historical trend, the degree of monopoly in the crude oil export market presents the volatile characteristics, and it increased from 2002 to 2008, and the monopolization degree of natural gas exports continued to decline and natural gas exports are presented decentralized characteristics. However, the monopoly degree of the coal export market was rising, which indicates coal exports were mainly concentrated in a few countries (According to the statistics of EIA, the proportion that the export volume of 7 largest coal export countries in the world coal export market accounted for the world’s total coal export volume was 85.71% in 2010). The index of crude oil, coal and natural gas export monopoly risk during 1994e2011 is shown in Fig. 2. (1) Since 1994, the overall risk

1 Note: In Fig 1, since the data of exports of the world’s crude oil, natural gas and coal in 2010 and 2011 is not available, this paper set the data of 2010, 2011 based on the historical trends of market concentration index of crude oil, natural gas and coal. The change of market concentration index of crude oil and coal is relatively stable, so this paper uses the data of crude oil and coal export market concentration index in 2009 as the values in 2010 and 2011. The curve of export market concentration index of natural gas from 1994 to 2009 presents a downward trend, so the values of the natural gas market concentration index in 2010 and 2011 are obtained through recursive from the average growth rate from 2005 to 2009.

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545

200

3000

180 2500

140 2000 120 1500

100 80

1000

EMCRIexport-coal/gas

EMCRIexport-oil/EMCRI-total

160

60 40 500

EMCRIexport-coal

EMCRIexport-gas

EMCRIexport-oil

2011

2010

2009

2008

2007

2005

2006

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0

1994

20

0

EMCRIexport-total

Fig. 2. The index of crude oil, coal and natural gas export monopoly risk.

that China has obtained overseas crude oil is rising and this risk reached the highest point in the past three years. The main reason is that the degree of monopoly in the world crude oil market continues to be high, and China’s dependence on foreign oil is also increasing. At the same time, the level of difficulty that China obtains crude oil in the world crude oil market is far greater than the level of difficulty that China obtains coal and natural gas in the world market. (2) From 1994 to 2011, the external risks of China’s access to coal and natural gas in the world energy market are also increasing. For coal, it is mainly because that the monopoly of world coal export market has increased constantly in the last few years. Although the degree of decentralize in the world’s natural gas export market is increasingly high, the amount of China’s natural gas import has been growing in order to address the climate change and satisfy the increasing energy demand in recent years, as a result the risk is also rising. 3.1.1.2. Analysis of energy import diversification. The diversification index of China’s crude oil and liquefied natural gas import during 1994e2011 is shown in Fig. 3. (1) Since 1994, the diversification index of the crude oil import showed a downward trend, reflecting a decentralized strategy for the source of China’s crude oil import. In the past, China imported crude oil mainly from the Middle East and Africa, and in recent years, it began to increase the import amount of crude oil from Russia and South American countries. This not only increases the sources of China’s crude oil imports but also transfers the source of China’s crude oil import from high-risk areas to low-risk areas, which can effectively reduce the risk of China’s crude oil import. (2) The diversification index of LNG shows a downward trend since2006.2 It is mainly because China imported liquefied natural gas from Australia initially and, nowadays, it has imported liquefied natural gas from Turkmenistan, Indonesia, Malaysia, Qatar, Russia and other countries. The number of the sources of China’s liquefied natural gas import is increasing. Therefore, to meet the increasing demand for natural gas, China needs to build about 10 large LNG receiving terminals, and to

2

China began to import LNG in 2006.

import LNG at the level of more than 20 bcm (billion cubic metre) per year by 2020 [31]. 3.1.2. The affordability analysis for energy imports 3.1.2.1. The analysis of economic vulnerability for energy import. In order to differentiate the influence of each factor on the economic vulnerability index for China’s crude oil import, all factors in Eq. (4) are normalized by using year 1994 as a base year. The changes of these factors and the economic vulnerability index of crude oil import from 1994 to 2011 are shown in Fig. 4. During 1994e2011, the fluctuation characteristics of the risk level that China’s crude oil import has impact on GDP is consistent with the fluctuation characteristics of the international crude oil prices. The dependence on foreign crude oil is increasing year by year, but the structure of energy consumption is basically stable and energy intensity is declining. Therefore, the economic vulnerability of China’s crude oil import mainly comes from the rise of the international crude oil prices and the rise of China’s dependence on foreign crude oil. 3.1.2.2. The crude oil price volatility. The increases of international crude oil prices produce significant macroeconomic losses in China. The impact of crude oil price volatility on China’s GDP from 1994 to 2011 is shown in Fig. 5. During 1994e2011, the larger loss that was caused by the international crude oil price volatility happened in 1998e2001 and 2008e2009. During the other periods, the economic loss caused by crude oil price volatility was relatively little. It was mainly because the Asian financial crisis in 1998 and the global financial crisis caused by the U.S. subprime mortgage crisis in 2008 led to the volatility of international crude oil prices, resulting in relatively large GDP losses, especially during 2008e2009. With the international crude oil prices declining and the volatility being relatively stable after 2009, the risk of the economic loss that was caused by the international crude oil price volatility has declined a lot. 3.1.3. Development of energy technologies and efficiency The improvement of the clean energy generation ratio can not only be on behalf of the advancement of new energy and renewable

DI-oil

2011

2010

2009

2008

2007

0

2006

0

2005

20

2004

5

2003

40

2002

10

2001

60

2000

15

1999

80

1998

20

1997

100

1996

25

1995

120

1994

30

Gas

J.-B. Geng, Q. Ji / Energy 64 (2014) 541e550

Oil

546

DI-gas

Fig. 3. The diversification index of China’s crude oil and liquefied natural gas import.

energy technology, but also reflect the change of energy consumption structure; meanwhile, the improvement of the energy efficiency directly reflects the development of energy technologies and can effectively reduce the energy demand and guarantee energy supply security. Clean energy generation in this paper mainly refers to the large-scale hydropower, nuclear power, wind power, and photovoltaic power generation. The clean energy generation ratio and energy efficiency in China from 1994 to 2011 are shown in Fig. 6. The clean energy generation ratio is about 20%, which is lower when compared to developed countries (In 2011, France: 91.74%, Canada: 78.45%, Germany: 39.94%, the United States: 32.00%, Italy: 30.25%, the United Kingdom: 29.77%, Japan: 25.81%).3 The large-scale hydropower is the main energy source in clean energy generation and its proportion has been the largest. China had planned 13 large hydropower bases [15], and the large-scale hydropower generation ratio may be improved further. The proportion of nuclear power and renewable energy generation is relatively small and they have been increased only in recent years [32,33]. In addition, energy efficiency in China is on the rise and the upward trend is more obvious, especially after 2005. This shows that China’s energy consumption structure and industrial structure continue to be improved, energy technology has been improved, and the improvement of energy efficiency can ensure the energy supply security effectively. 3.1.4. Energy resource reserves trend The reserve-to-consumption ratio is a useful index for the foreseeable future, particularly considering issues of resource shortages. The reserve-to-consumption ratio from 1994 to 2011 is shown in Fig. 7. The reserve-to-consumption ratio presents a downward trend. The proved fossil energy reserves at the end of 2011 were only sufficient to meet 33 years of the currently energy needs, which indicates that the situation of fossil energy shortage is becoming increasingly severe. In the future, the reserve-toconsumption ratio will be further weakened. In the situation that the potential for domestic supply is not sufficiency and the energy demand will continue to rise, the dependence on foreign oil and natural gas will rise further.

3

The data is taken from EIA.

3.2. Comprehensive analysis of China’s energy supply security After the detailed analysis of the various dimensions of China’s energy supply security, the evolution characteristics of China’s energy supply security from 1994 to 2011 is given using spider diagrams showed in Fig. 8. The following conclusions can be drawn: (1) In 1994, the risk of China’s crude oil, natural gas and coal import is relatively small, the economic loss caused by the international crude oil price volatility is small, the domestic energy reserve is relatively abundant, and the clean energy generation ratio is high, but energy efficiency is relatively low. (2) In 2000, the risk of China’s crude oil, natural gas and coal import is rising, the diversification degree of crude oil import is increasing and energy efficiency is increasing. (3) In 2005, in order to guarantee the petroleum supply security, China actively implements the diversification policies of energy import sources to further improve the diversification degree of crude oil import. However, due to the increase of the degree of monopoly in the international energy market, the risk of China’s crude oil, natural gas and coal import has been rising. (4) In 2011, the impact that the international energy market had on China’s crude oil, natural gas and coal imports increased, which made the risk of China’s energy import increase. At the same time, the international crude oil price has been rising since 2003. As a result, the risk of economic loss that the international crude oil price volatility brought on the economy increased. It is worth noting that China’s energy efficiency is increasingly rising and the clean energy generation ratio is further improved due to the effective implementation of the policies of “Eleventh Five-Year Plan” emission reduction. A comprehensive analysis of the overall trend of China’s energy supply security from 1994 to 2011 is given using Composite Index. Composite Index for China’s energy supply security is shown in Fig. 9. As can be seen from the figure, the overall situation of China’s energy supply security was towards an unsafe direction from 1994 to 2008, mainly due to the rise of the dependence on foreign crude oil, the declining ability of domestic energy reserves to meet the current energy consumption, and the rise of international crude oil prices. From 2009 to 2011, the overall situation of China’s energy supply security tends to be improved to reach the level of safety in 2003. The main reason is

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547

30

Normalised Value

25

20

15

10

Oil Dependence

Oil ratio

Energy Intensity

Oil Price

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0

1994

5

Oil EIEV

Fig. 4. The economic vulnerability for China’s crude oil import.

that the effective implementation of China’s energy saving policies and increasing energy R&D investment made China’s energy efficiency substantially increase. When we compare S1 with S2, it is clear that these two partial indexes have opposite trends. The changes of S1 are similar to the Composite Index I0, which verifies that most threats of China’s energy supply security are attributed to external risks, while the increasing S2 indicates that feasible energy policies can mitigate the risk level of energy supply security. We can conclude that the effective energy policies related to energy supply security play a greatly important role in improving the safety level of energy supply security.

seven indexes in detail based on mass statistic data. Some meaningful conclusions are drawn as follows. (1) The overall situation of China’s energy supply security was towards an unsafe direction from 1994 to 2008 and has been getting better since 2009. This is mainly because the monopoly in the world’s energy export market increased constantly and the international crude oil prices have been rising during 1994e2008. After 2008, although the dependence on foreign oil has been rising in China, the international energy prices have been relatively stable and the energy saving policies and the diversification policies of energy import sources have been implemented effectively in China. The situation of China’s energy supply security in 2011 has been improved to the level of safety in 2003. However, the overall situation of China’s energy supply security is still

4. Conclusions and policy recommendation The evolution features of China’s energy supply security from 1994 to 2011 were analyzed, mainly from four dimensions and

4.50E+08

6.00E-05

4.00E+08 5.00E-05

3.00E+08 2.50E+08

3.00E-05 2.00E+08 1.50E+08

2.00E-05

1.00E+08 1.00E-05 5.00E+07 0.00E+00

CI

CI/GDP

Fig. 5. The index of risk of crude oil price volatility.

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0.00E+00

CI/GDP

4.00E-05

1994

CI (US.dollars-2005ppp)

3.50E+08

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0.25

5000 4500

0.2

4000

3500 0.15

2500 0.1

GDP/EC

NR

3000

2000

1500 0.05

1000 500

0

Nuclear and Total Non-Hydroelectric Renewables

Hydroelectric

2011

2010

2009

2008

2007

2006

2005

2004

2003

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Fig. 6. The clean energy generation ratio and energy efficiency.

Fig. 7. The reserve-to-consumption ratio.

1 X1 0.8 0.6 0.4 0.2 0

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Fig. 8. The evolution characteristics of China’s energy supply security.

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J.-B. Geng, Q. Ji / Energy 64 (2014) 541e550 1.2

I0

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Fig. 9. Composite Index for China’s energy supply security.

not optimistic, which is subject to many external and internal risk factors. The improvement of energy supply security in China is still facing many challenges. (2) China’s energy external risk has continued to increase from 1994 to 2011. There are several reasons, outlined as follows. The difficulties and challenges that China faces in obtaining energy sources through the international trade are increasing. The economic vulnerability for crude oil import has been rising and the risk from rising energy prices and increasing dependence on foreign oil is being transferred into the economic costs so that China needs to pay more to meet the increasing energy demand. At the same time, China’s foreign trade strategies have began to play an increasing important role in resisting these external risks and the diversification degree of China’s crude oil and liquefied natural gas import sources has being improved. (3) Although the pressure on domestic energy supply is increasing, energy technologies and energy efficiency have improved greatly. The ability of domestic energy reserves to meet current energy consumption has declined, obviously. Energy supply potential for different varieties is different. Especially reserves of petroleum and natural gas resources are low and the pressure of its energy self-sufficiency will increase in the future. However, with the optimization of China’s energy consumption structure and industrial structure and the implementation of energy conservation policies, the clean energy generation ratio and energy efficiency have been improved. Especially after 2005, energy efficiency has been rising quickly, which is closely related to increased energy R&D investment and enhanced energy technology. At present, the world energy situation is getting grim and China’s energy supply pressure is also growing. Aiming at the situation of energy supply security as well as the main risk, corresponding policy implications are proposed from three aspects, which are the guaranteed capacity of domestic energy resources, the international energy acquisition capacity and the international energy cooperation. (1) More concrete energy policies should be proposed to safeguard China’s domestic energy supply. Sequential energy policies related to improving energy use efficiency and optimizing energy consumption structure stand in the breach. Firstly, China should continue to strengthen the policies of “Twelfth Five-Year Plan” emission reduction to increase energy efficiency in different sectors, especially for the transport sector and the industry sector. Secondly, China

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should promote energy price reform effectively and formulate respond pricing mechanism that can reflect energy source scarcity so that the adjustment of energy consumption structure can be realized. At the same time, the clean energy generation ratio should be increased further. China should improve the power grid and other infrastructures, develop rational policies of new energy electricity use, increase the investment of research and development of new energy to accelerate the exploration of new energy and the development of technological breakthroughs. Finally, China should improve strategic energy reserves, emergency response capability and alternative energy capacity to maintain stable domestic energy supply. (2) Pertinent measures to obtain external energy continually and reduce risk should also be optimized. Firstly, China should improve the degree of import diversification and optimize the imported structure to obtain overseas oil and natural gas. Specifically, China should transfer the import sources from the high-risk regions to the politically stable regions with rich energy resources. In addition, with the increase of imported natural gas, China should promote the construction of LNG regasification terminals to receive more natural gas by ship from other exporting countries. Secondly, China should construct a dynamic system of energy supply security and reduce the risk of energy external availability by exploring and holding the overseas energy resources. The national oil and gas companies are encouraged to expand their overseas investment activities, and cooperate with those exporting countries which have a high degree of openness, friendly investment environment, and less investment barriers as the long-term strategic objectives. Finally, China should create opportunities to develop a natural gas trading hub for Asia and develop a time-bargain center for crude oil in order to reduce the risk of uncertain imported energy prices. (3) Accelerate international energy cooperation and safeguard China’s energy security from the perspective of the world. China may join different alliances with other countries in different frameworks to strengthen international energy cooperation in order to stabilize international energy prices and reduce the serious loss on China’s economy. At the same time, China should strength the cooperation on diversified aspects of energy resources, such as the development of new energy and renewable energy technologies, the exploitation of the unconventional natural gas, the development of technologies increasing energy efficiency, smart grid and smart community technology, the exploration technologies of deep-sea oil and gas, and so on. In conclusion, by cooperating with other energy importers and exporters, China can strengthen the integration of energy market and energy infrastructures to improve the systematic energy supply security within the world. Acknowledgements Supports from the National Natural Science Foundation of China under Grant No. 70825001, No. 71203210 and No. 71133005 are acknowledged. The authors appreciate the weekly seminars at CEEP in CAS, from where the earlier draft of the paper got improved. References [1] National Bureau of Statistics of China. China statistical yearbook 2012. Beijing: China Statistics Press; 2012. [2] British Petroleum Company (BP). Statistical review of world energy 2007w2012. London; 2007; 2012.

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