Mekong Utility Watch

Great Expectations

Beijing Review
November 28, 2008

Big things are expected of China’s new energy regulator as the country faces a power pinch and calls for a shift toward renewable sources.

On August 8, as millions of Chinese families sat around television sets in brightly lit rooms to watch the opening of the Olympic Games, a government body was launched with the aim of shaping the country’s energy industry and keeping the power on.

 

At the official launch ceremony of the National Energy Bureau (NEB), Zhang Ping, Minister of the National Development and Reform Commission (NDRC) said its creation was a landmark. He added that the most important mission of the NEB, the government regulator of the energy industry, is to ensure adequate energy supply and energy security.

Zhang Guobao, Vice Minister of the NDRC and Director of the NEB, said setting up the NEB was an important part of the restructuring of the State Council and was aimed at strengthening the centralized administration of the energy industry, coping with increasingly serious international and domestic energy issues and ensuring the steady and sound development of the national economy.

The NEB has a staff of 112 people in nine departments, including the general office and other departments dealing with policy and law, development and planning, energy efficiency and science and technology.

Step by step

Energy has been a bottleneck in the development of China’s national economy. Many industry insiders have said that if China wants sustainable development, a strong energy agency is absolutely necessary.

During the government institutional reform in 2003, widely proposed ideas to create a national energy commission, a body that would oversee the national energy industry, were abandoned and instead the Energy Bureau, with a staff of 30 people, was set up. The bureau was put under control of the then newly established NDRC.

Establishing a strategic oil reserve system is necessary to ensure China’s oil security. As early as 1993, insiders in the industry were calling for a strategic oil reserve system, but they did not see it in place until a decade later. In 2007, China’s first strategic oil reserve facility started to be filled.

In 2005, China set up a national energy leading group headed by Premier Wen Jiabao. The group’s executive agency, the Office of the National Energy Leading Group (ONELG) was a vice ministerial level executing agency consisting of 24 members, mostly at the level of provincial governors. Ma Kai, Secretary General of the State Council, chaired the agency. The ONELG is higher in administrative rank than the Energy Bureau.

Since its inception, the ONELG has remained low-key. Three years or so after its birth, it promoted the promulgation of the Mid- and Long-term Program of Renewable Energy Development, participated in amending the Mid- and Long-term Program of Energy Development, and initiated the drafting of China’s first Energy Law. The office has pushed ahead energy saving and achieved good results.

The founding of the ONELG signifies that China was beginning to focus on energy issues and had adjusted its energy strategy.

During the new round of the State Council reshuffle, a super-ministry system was introduced and the call for an energy ministry and centralized management of the energy industry grew louder. This eventually led to the birth of the NEB.

Powerful or toothless

Whether the NEB is the energy overseer that was widely called for is controversial.

Some analysts suspect the NEB to be merely a figurehead. They were somewhat disappointed that the NEB has not been given as much decision-making power as previously expected. The most crucial energy pricing power is still in the hands of the NDRC.

Oil price adjustments were previously made by the Price Department of the NDRC, subject to approval by the State Council. Now the NEB can propose energy price adjustments, to be approved by the NDRC, and in some cases, the State Council as well. Some analysts argue that creating the NEB achieved little more than adding one more procedure to the decision-making process.

Some experts hold that the current administrative framework is far from what is needed to cope with the current energy situation that China is confronted with. Professor Xiao Guoxing, an energy law expert from the Law School of East China University of Science and Technology, believes China needs a strong energy ministry to manage its energy issues.

Other analysts believe that the NEB has already been given considerable pricing power, given that the NDRC is required to consult it before adjusting energy prices. Previously, the NDRC alone could adjust prices.

The NEB does possess some real power. For instance, its International Cooperation Department can initiate international cooperation on energy, including negotiations with foreign energy departments and the International Energy Agency; coordinate energy development overseas; and evaluate and approve significant international investment in coal, oil, natural gas, electricity and natural uranium.

Future mission

Recently, coal shortages put a strain on power supplies in some parts of China as well as people’s nerves. All types of coal are in short supply. Even in the most coal-rich province of Shanxi, power plants are starved of coal. Although coalmines in the province have been operating at full capacity, they still cannot meet the growing appetite for coal.

China has become the second largest producer and consumer of energy, Zhang said, and in light of this situation, the NEB will launch policies and programs to spur the development of renewable energy. In the long term, the NEB will adjust the country’s energy development strategy, conduct research and enact energy laws and policies, allocate key energy projects, enhance international cooperation and promote the balanced and sound development of the national economy.

In addition to boosting coal supplies, balancing energy supplies and encouraging the use of renewable energy, the NEB is urging the public to conserve energy. It will push for the use of energy-saving light bulbs, including giving free light bulbs to needy families.

 

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