How does China keep 1.4 billion people cool during extreme heat?

[00:00:01]How does China keep 1.4 billion people cool? This summer, the heat is testing cities worldwide. Well, in the northern hemisphere. In China, the challenge reached a new scale on July the 10th when the peak electricity load hit an all-time high of 1.5 billion kilowatt.

[00:00:23]That's higher than those of the United States, Japan, and Russia combined, according to statistics from the national grid. Yet, behind the big numbers lies a bigger story. How does a country with such a massive population ensure energy security as millions of households and businesses turn on their cooling systems? How do cities adapt and innovate to make extreme heat more manageable for residents and tourists?

[00:00:52]And with heat waves baking cities across the northern hemisphere, what can China's experience offer to other regions if any? Welcome to this special edition of the point with me and opinion show coming to you from Beijing. I'm pleased to be joined from Shaman, Southern China by Professor Ling B Chang, dean of the China Institute for Studies in Energy Policy at Shama University. Here in Beijing, Professor Jang Ha Ran, vice dean of the school of urban planning and design at Pika University. I'm from Shanghai by David Fishman, principal at the Lantau Group and Asia-Pacific Energy Economics and analytics consultancy and advisory firm.

[00:01:36]The warmest welcome to all of you gentlemen. I hope it is not too hot. My welcome. as a lot of people, especially in Europe, have been debating whether or not they use air conditioning. It seems that in China that's just a plain normal thing to do. And as I said, um China's record high of power load hit 1.5 billion kilowatt. That's on July the 10th. Um, Professor Lynn, help us put that into perspective.

[00:02:05]What exactly does that mean? How big is that in terms of power load?

[00:02:11]Well, it's obviously big. It's bigger than many countries combined together.

[00:02:16]As we mentioned earlier, China has the largest power electricity system right now. 3 kilowatt hour generated in globally one is in China. In about 10 years time, it's quite possible that 2 kilow hour one will be in China. And that's how big the electricity system in China is. But if you just look at the numbers is record high. It's going to be another record high next year for sure.

[00:02:42]Okay, there's no other way. If you look at compared to last year is really it did not increase that much. We last year is a I think 15.8. This year is 15.18.

[00:02:54]So it's increase obviously but not that much actually. And this really reflect the increase in uh utilization of the air conditions. That's the topic we're talking about today. But not necessarily also behind that you got electric vehicle you you got a deep industrialization which uh the the electricity demand will continue growth.

[00:03:20]Uh in fact last six years is about more than 6% annual growth and this year they are forecasting about between 5.5% to 6%. It's more likely to 6% uh toward 6%.

[00:03:36]So given all together that that the incremental is there and this refractive again increasing living standard another one is a is a is a deep industrialization and you want to say that it's extreme weather that's also there because every year it getting hotter so put all the all these factor together that I think you will continue to set record next year we can discuss again at this point and you're going to give you another number which is record high that's for sure 100% sure okay so the the the the number here is really not scaring us okay what is important is and by the way that uh air con is air conditioning is at about the 40 to 50% of the electricity consumption of residential >> uh basically the huge increase in electricity usage is because of industrialization about about EVs and also about air conditioning and uh and China produce a lot of electricity as well. You you were talking about onethird of the global total. Professor Jang, um the natural question a lot of people would ask is why is China able first of all to produce so much electricity and secondly um the consumption of electricity is so huge.

[00:05:05]Le let's focus on the production first.

[00:05:07]How is China able to generate so much electricity? Where does that all come from?

[00:05:14]>> Yes, actually uh China is kind of currently China total installed power capacity is now over 4 billions kilowatt. That's is more than two and a half times of peak demand of uh today's new uh data 1.5 billion kilowatt. and uh of course uh uh about uh 40% of the energy from now from the solar and the wind in in the a few decades China just developed this kind of renewable energy industry very quickly and uh 40% energy from the those kind of renewable energy sources.

[00:05:56]>> Yeah, this is the current kind of state.

[00:05:58]Yeah. So basically you're saying China has the capacity of producing 4 billion kilowatts of electricity but it's the usage comes to 1.5 billion and out of that 4 billion you are talking about 40% being green energy.

[00:06:15]>> Yes, exactly.

[00:06:16]>> Okay. Um David let me come to you. You have been in China quite some time. What is your observation? Um, we're talking about it as if, you know, you just go home and switch everything on. But, um, it's actually quite amazing, right, for a country of such a huge scale and such a large population when everybody switches on their air conditioning, everything in full throttle. Um, there is no power shortages, at least not on a large scale as we used to have a couple of years ago.

[00:06:52]>> Yeah, that's right. It's um it's truly a it's a marvelous giant machine that works because all of the small pieces of the machine are also working, right? Uh if you look at China just as a single large country with a single large power grid, it's almost too large to even really comprehend. when you break it down into a thousand individual cities, dozens of provinces, dozens of local level grids turning into provincial grids turning into regional grids, and then it doesn't, you know, it's still incredible. Uh but then at least it's a little bit more understandable, right?

[00:07:28]Every every province in China is the size of a European country, and we have 30 of them, more than 30 of them all stuck together. So 30, you know, medium to largesized European countries, all with their own individual grid systems connecting to each other, trading power to each other, serving their local needs. And then you build up your entire system from small pieces to larger pieces and larger pieces and all the way along the way. uh the people at State Grid or the provincial grid companies and the power exchanges and the generators and the retailers. Everybody that's involved in making this whole system work is constantly asking questions and receiving information.

[00:08:09]What do I think is going to be the power load in the next 15 minutes? Okay, let's get some more electricity prepared for that. What do I think is going to happen tomorrow? Is there going to be a storm?

[00:08:18]Is there going to be a heat wave? What if hydropower doesn't perform that well this month? every single individual question is being answered with a plan and a generator and a retailer and a power company is responding to make sure the system uses all those little pieces of information and slowly builds up into one big functional system. It's it's really uh quite remarkable.

[00:08:40]>> Um let me stay with David a little bit more. Um of course Shanghai is one of the most important cities. So everything would be done to make sure that not you know no power blackout will happen in Shanghai under whatsoever circumstances unless it is extreme extreme circumstances. But what about the other areas more underdeveloped regions in China? Do you also notice a relatively guaranteed stable flow of electricity in you know high seasons such as summer?

[00:09:15]>> Yeah. So during your max uh stress periods on the grid, right, we're talking about the middle of summer.

[00:09:22]Typically, that's that's the the peak moment. Under normal weather conditions, under normal seasonal conditions, we should not expect any real stress on the Chinese grid, there is generally more than adequate reserves on the generation and capacity side relative to the the load, even the peak load on the hottest summer day. Where sometimes you might run into a little bit of stress is during extreme weather events. So if you have extreme heat combined with a drought that affects hydropower then maybe the southwest grid where there's a lot of hydropower starts to get under a little bit of stress or a few years ago we had extreme heat combined with uh some stress in the coal market which made it difficult for coal supplies to be delivered to coal fired power plants.

[00:10:09]So anywhere that was relying a lot on coal could get under some stress. So we see under normal circumstances when the grid is functioning normal, even an extreme heat event like today in Shanghai is really not a problem. You need several things to be happening to stress all at once. And even then, people like you and me, we might not even notice it because we are residential power consumers and the national policy is always to preserve electricity access to residential power customers first. If there's any load shedding that happens, it will be for the industrial sector and it will start on a voluntary basis somewhere in in the industrial sector, never for us in the residential side.

[00:10:46]>> Professor Lynn, let me come back to you.

[00:10:48]So, help us understand how China is able to generate so much electricity uh for instance, how much does that come from coal? How much does that and just now professor Jang talked about 40% come from green energy? help us understand a little bit better better what is China's energy policy and uh when it comes to extreme usage in summer um how does the system work?

[00:11:14]What about the I think the coast still the main source of the electricity in China wind and solar probably 22 23% the other nuclear and hydro are quite stable so the dynamic right now is renewables and the reach 40% is quite rankable but rest of it basically is co-ire problem the sub natural gas problem so the still man is a co- basis at this moment but I I I try to answer the why we not worried about the the air conditioning is that the sector consumption in China is pretty small about 14 to 15% about 15% of this more sometime go to 16 sometime go come back to to 15%. So that if they say that if all our consumption actually focus on industrial sector and if something happens all we have to lose close one big factory everybody has electricity it's because the residents are so small and that's quite different from United States residential sector is more than 40%. So if there's no electricity, there's no electricity. You cannot close anything to compensate for that. But in China, I never expect a a problem or huge problem. There may be some temporary problem, short period problem, but I never expect a huge shortage for the gas sector. In other words, for air. Okay. So everybody is quite safe uh for the summertime. Yeah.

[00:12:46]What about the layout of China's electricity grid or production electricity plants? Just now David were talking about you know thousands of cities and you know regional grid and then all connected into the national grid. People have been talking about this um high-speed rail for power which is the ultra high voltage power grid which seems to play an extremely important role. Professor Jang, what can you tell us about that and how important is that technology in terms of distribution of electricity and uh guaranteeing that electricity is uh ample where they're used the most?

[00:13:31]>> Yes. Uh uh actually current China electricity network technologies is very advanced. Uh before that maybe we can talk about the forecasting uh technology because uh why uh during the current event why the the great is also very simple is based on the very advanced air rate forecasting technology. uh great operators work with wiser services to predict how the days h how hot it will be and how much power each city will need and then we talk about the the network the grid network uh the dispatching well China also have a very powerful dispatching capacity every M like a second or the control center balance different power sources like crow hydro wind solar and the storage and also we have the national power market. China now trade electricity across the province on the large scale for power flow from where it cheap and abundant like the the west China to where it needed most like in east China.

[00:14:44]And finally I want to talk about the the demand side the big factories and shift the product away from the peak hours. uh there is a new tool like we call the virtual power bands can uh generally uh adjust thousands of changers and air conditionings at once in total we have those kind of technologies and to to make our power supply uh stable. Yeah.

[00:15:12]>> Yeah. It seems to again as as David just said the thousands of small machines in this big one machine. Um David let me come back to you again. help us understand um this high ultra high voltage transmission system. How important is that in terms of guaranteeing our electricity use freedom if I can put it this way?

[00:15:36]>> Yeah, sure. So, uh for a province like Shanghai or even other coastal provinces like Jang Su, Julian, we are uh limited by a few things. We're limited by land of course, right? Land is definitely more scarce. So that means it's more difficult to find places to build power plants. Uh and also generally if you want to have for example green electricity our green resources might not be so good for a variety of reasons.

[00:16:03]It makes sense for uh for certain regions especially coastal regions to want to be able to bring in electricity from far away long distances. Now the challenge with bringing electricity long distances is that you have line losses.

[00:16:16]you lose electricity uh when you try to transmit it long distances. One way to uh prevent that is to crank up the voltage, right? For very high voltage transmission, you can send it very very long distances without losing a lot of electricity. Uh and that has been China's approach to getting power from the north, the southwest, the northwest uh to the load centers in the east and in the south. And China has had to be really pioneering in a lot of the technologies being used here. Uh because China's got a very unique application for it. There are not so many countries that have China's very unique economic and geographic distribution where you've got your best resources on one side of the country and all your load on the other side of the country and also your your country is very physically large.

[00:17:04]So you have to find a way to connect those dots. And so China has been forced uh successfully uh to innovate in certain ways when it comes to ultra high voltage technology to say we can connect a generation point in western China that has a solar farm and a wind farm and a coal uh power plant and a storage facility and we're going to have that line sending electricity from we'll say Shing Jang all the way to East Coast constantly and it will be as if that east coast province has a generating resource right there, although it's not actually right there. It's 2,000 km away. It's uh it's it's a remarkable solution to what is a true geographic challenge that is just caused by China's layout.

[00:17:51]>> So, David, um to help people understand why China is able to first of all produce so much electricity, secondly distribute that electricity according to where the needs are and guaranteeing the stable supply of it. Um do you think we have pretty much given people all they need to know or do you think there are other uh important contexts that people need to take in so that they can fully appreciate you know the whole picture and the reasons behind it.

[00:18:20]>> Uh well another thing that was mentioned here was I think one of uh one of the other professors mentioned the national unified power grid. Right. I started out by mentioning every single province is essentially settling and resolving its own power needs locally and if they need extra they they buy some from other provinces or across grid regions right that's the basic way we can look at it but when you have a very mature power system you we would like to be able to imagine that every point in the power system if I'm in Shanghai or if I'm in Nanjing or if I'm in Hjo I could look at a power generator anywhere else in the system anywhere else in the country and say, "What would it cost to get electricity from there to here?" And that the physical grid and the market infrastructure both allow this to happen. If you want it to happen, that the market is actually receiving price signals from everywhere in the country and turning them into price signals for buyers everywhere in the country. China is in the process of building this national unified power market. when it is complete, it will be by far undoubtedly the largest unified national power market anywhere in the world. Uh the largest ones in the world, maybe say Western Europe, for example, will be something like 15th or 16th of the size of what China will eventually build when it has finished connecting its national unified power market. again a tremendous uh engineering challenge physically and then a commercial challenge uh from a market perspective but it's it's fascinating and it's very important to to watch.

[00:19:52]>> Professor Lynn, how is it possible? What makes it possible that China is able to build this you know such a complex system and yet all in a kind of coordinated and functional operation. Uh what makes that possible?

[00:20:08]>> It's because of stay on power grid.

[00:20:11]uh if we compare to United States that you every state has their policy has their grip and it's very difficult for them to get together but China there's only two power group and they both stay on so they can coordinate whatever in the way that state government wants and that's why we can be a unified power uh electricity market and also grip the Chinese grip is the largest most effective intensive all parameters the best in the world you cannot really compare with Chinese power grid I don't care any country it's just simply cannot compare and uh to answer the I let me give give you one one minute to answer the obser high wattage obser high voltage actually is try to connect a part of the power from west to to east and also try to to to uh sometime to provide extra electricity to to certain the state of which needs electricity but in fact ultra high voltage is not the one to guarantee the what all we have right now it's only about roughly six to 7% of the of the of the China's electricity total it pays more coming through ultra high voltage in fact it's the coari power system is about 1,300 g of coari power system which distributed everywhere in China really that is really measure that China has electricity How does >> which state grid can >> yeah well two questions two questions one one when people think about state grid or stateown enterprise or huge companies they think about monopoly for instance that uh you know probably put the users or other companies in a disadvantaged situation how does China regulate that first of all or why is that not a problem in China and secondly with this all of these uh coal fire power plants what about pollution problem. Professor Lynn, very quickly and then we go to Professor Jang on this.

[00:22:14]>> Okay. Uh to answer your first question, the if you where the group is a natural monopoly, it's a natural monopoly. No matter what is a monopoly, okay? It doesn't matter how you define it. The point is that how government uh the how to uh supervise it to determine the price. monopoly the power of monopoly to set a price but the state grip and south China grip they don't set a price so therefore we don't have problem of that monopoly which is the impact of monopoly so that's your uh that's the first question I'll leave a question to others >> okay thank you um professor John >> in terms of uh pollution yeah how big is is that a big problem >> yeah exactly pollution is a uh is a very big problem and especially for For example like a rural area currently uh caused by the pollution the disease rate raised a lot especially for example like five or 10 years ago like her uh rural areas the people suffer air pollution a lot but currently with the uh kind of renewable energy increase the I I think the pollution problem save a lot >> and also I just go back to uh Lin professor Lyn's uh answer maybe uh there is a very kind of natural mar for example like about the the heat uh event to the heat or around the no and early afternoon exactly when everyone turn on the air conditioner actually when the uh is also actually when the sun is strong is so the solar power and cooling demand raise together it is a kind of metro match in this case during the noon and the early afternoon Maybe the electricity price drop down and the people like use more energy, green energy because the price is cheaper, right? Yes. In this case, uh but uh I assume uh you can imagine maybe the the sun and wind is not stable. In this case, we need some kind of a partners for renewables. For example, like uh hydrop power or energy storage act like kind of the batteries. they can save energy and release it in the evening. In this case, we also has a gas plan play a kind of flexible role and wrapping up and down to the fueling.

[00:24:42]Okay. Yes. This is a kind of a kind of comp complex system and uh to control the the the demand on the supply and control the price. Yes.

[00:24:53]>> Okay. We keep talking about price. So before we go, we have to talk about the price. David, how cheap is the electricity here in China? I mean it is very cheap for me. Even if I use a lot of uh air conditioning, it is still well uh well uh affordable. Um how would you compare the electricity price in China versus in other major cities in uh big countries, let's say, very briefly, please?

[00:25:18]>> Sure. Well, it's important to remember that we uh as residential power customers enjoy uh regulated stable low tariffs uh and we are also cross-subsidized by other segments of the economy. So we never have to worry about our livelihoods being affected by an inability to pay for electricity during heating or cooling events. Right.

[00:25:38]But then let's take a look at >> you mean Americans or or >> we as in uh residential users in China.

[00:25:45]>> Okay. Okay.

[00:25:46]>> Of which I am of course.

[00:25:48]>> Uh so residential users in China. Uh we we would never have to worry as about saying oh I can't afford to pay to cool my home in the summer. Right. that that's a red line uh at the national level. uh let's talk about commercial and industrial power which is certainly more marketetized and it's not guaranteed to be at a certain rate right it's more exposed to market forces even then China still has among the lowest power rates uh among the world certainly in the developed or OECD countries plus upper middle inome countries China has among the lowest electricity prices in the world and that is uh a reflection of a bunch of good things that work towards that uh low fuel costs of uh coal is a relatively inexpensive uh fuel and then we're replacing it with lowcost renewables. That's good. Uh cost of capital is lower. Uh target profit margins are lower. Electricity is viewed as something that is a fundamental input for industrial productivity and economic competitiveness and livelihoods and not so much something that utility companies need to be really profitable about.

[00:26:54]>> Well, we have to leave it there. um time ran out but I I hope we have given people a a big picture of the electricity grid and the usage especially in extreme heat such as the one we're experiencing now. Thank you so much to my guests. Professor Lim Bang, Dean of China Institute for Studies and Energy Policy at Shaman University, Professor Jang Ha Raman, vice dean of the school of urban planning and design at Pika University. and David Fishman, principal at the Lant Group, an consultancy and advisory company in energy economics and analytics. Thank you so much for your insights.

[00:27:36]And with that, we come to the end of this special edition of The Point with me, Lucian. As always, you can follow me on Facebook, X, and YouTube using the handle Lucian in Beijing. On behalf of the whole team, thank you for watching.

[00:27:47]You've got the point.