Demand Side Management (DSM) continues to develop since its introduction in North American and European countries some 30 years ago. Promoted by governments, public electric-power corporations and energy service providers, DSM provides consumers a response to overcome a multitude of uncertainties in electric-power planning. The ultimate objective of DSM is to identify cost-effective resources and to reduce demand and energy consumption, thereby deferring investment in a new power plant. All these considerations are compatible with the challenges required to satisfy increasing environmental standards.

Some technical and economic measures such as load regulation and time of use (TOU) electricity tariffs have been in use for a long time. However, DSM takes advantage of innovative technology and price scenarios to change consumer loads, which offers benefits to the electric-power corporation, consumers and society. In essence, the new concept of DSM involves a “co-operative buddy” relationship between the electric utility and the consumer. Since the introduction of DSM in China in the early 1990s, the range of applications and benefits continues to increase.

DSM Applications in China

The three main areas in which DSM applications have proven effective are peak-load shifting, energy-consumption reduction and domestic coal-usage decrease.

  • Peak-load shifting refers to the use of tariffs that substantially increase the cost of energy at times of peak system demand, reduce the system peak and increase the “valley-load.” Industrial consumers now structure their manufacturing operations to minimize energy costs.

  • Energy-efficient apparatus combines new policies and energy-saving promotions to encourage utilities to install high-efficiency systems along with distribution transformers. Consumers are installing variable speed-drives for motors and pumps plus low-energy lamps.

  • Domestic coal. Local government policies now ban the use of coal boilers in urban areas, hence the use of electric and gas boilers and cookers continues to increase, a change with environmental benefits.

The effect of these changes in China is best illustrated by examining the results of the pilot projects used in cities and various industries.

Peak-Load Shifting Pilot Project

During the past 10 years, peak demand for the city of Beijing continued to increase at a rapid rate. For example, in 1992 the peak demand was 3.01 GW, and in 1996, it was 4.473 GW, resulting in an annual increase of 10.4% per annum. Conversely, during this period the valley load increased slowly, declining the annual system load factor from 86.81% to 82.31%. Because more than 90% of the generating units are coal fired, these changes created difficulties for the economic operation and load dispatching of the city's electric-power system. Therefore, Beijing introduced DSM to develop the valley load power market to improve the system load factor. Figure 1 shows typical summer and winter daily load curves for Beijing. Figure 2 shows the structure of the load curves in terms of customer class demands.

In 1996, an analysis of the composition of a typical winter's day load curve confirmed the industrial load consumption was 55% with demand at the morning and evening peaks being 51% and 50%, respectively. Further research confirmed that industrial consumers had a peak shifting potential of 100 MW. To realize this benefit, the following enterprising measures were introduced in Beijing:

  • Price differentials for energy and demand at times of system peak and valley load, such as the price at peak period, is 4.5 times higher than at valley for industrial and commercial consumers

  • Support and assistance for industrial enterprises to develop production plans to minimize operations at times of peak demand

  • Rebuilding and replacing equipment with high electrical losses, such as transformers and motors

  • Interruptible load protocols for industrial consumers

  • Promoting the installation of energy storage equipment, such as air conditioning, boilers and the use of energy-efficient apparatuses.
Table 1. Potential Jining electric-power market.
Year 2000 (MWh) 2005 (MWh) 2010 (MWh)
Electric Boilers 3720 19,000 23,000
Industrial Heating 3600 18,000 36,000
Agricultural Pumping 38,560 40,100 41,660
Domestic Consumers 31,080 79,640 155,100
Domestic Heating 27,100 58,530 72,580
TOTAL 104,060 215,270 328,340
Table 2. Projected coal consumption and waste gas emissions.
Year 2000 2005 2010
Replacement of Coal by Power (GWh) 312.2 645.8 985.0
Coal Reduction (tons) 8055 16662 25413
Reduction TSP Emission (tons) 2.553 5.282 8.056
Reduction SO2 Emission (tons) 644 1333 2033

The net effect of these measures was a reduction in the peak demand of 50 MW in 1997, an additional 50 MW in 1998 and the load factor improved because of the 150 GWh increase in consumption during the low or valley load period. The investment to produce the peak load shift was 12.05 million RMB (US$1.45 million) in 1997 and 5.67 million RMB (US$0.69 million) in 1998. However, the annual overall benefit based solely on the avoided cost of new generation capacity is estimated to be 24.8 million RMB (US$3 million).

The Impact of Electric Heating

In 1998, the raw coal consumption in Jining City in Shandong province was almost 8 million tons, with the majority used by domestic consumers for heating and hot water supplies. This unrestricted burning lead to a key environmental concern. The installation of electric hot-water boilers offered a solution, but in view of the higher operating costs of these units, the power utility considered DSM. Table 1 shows the impact on the Jining electric-power market; Table 2 shows the projected reduction in coal consumption and waste gas emissions.

The success of this DSM project is attributable to the financial support provided by the utility to encourage consumers to change from the traditional utilization of prime fuel. The support included:

  • Minimizing the cost for consumers to change to electrical equipment

  • Giving consumers allowances and benefits to increase the usage of electricity.

Industrial Applications of DSM

Table 3. Shanghai's potential DSM resource.
Year Annual Energy Saving
Capacity for Peak-Load Shifting
Deferred Generating Capacity
2000 2.0 663 800
2010 6.1 2030 2450
Table 4. DSM project summary.
Electricity Saving (TWh) 130.4
Peak-Load Shifting (GW) 3.8
Peak-Load Reduction (GW) 36.5
Coal Saving (million tons) 58.6
SO2 Emission Reduction (million tons) 1.33

Shengli Oil Field is a large electric-power consumer that also has generating facilities that transmit and distribute power to the local utility network. This plant had many problems: high production costs, low-efficiency end-user equipment, high system losses and a load demand characteristic with a huge difference between the maximum and minimum values. These problems were addressed by a comprehensive DSM study in 1995 followed by implementation of several new technologies and management measures. The combined effect of the changes made a significant impact on the oil field's demand, energy consumption and distribution system losses.

Between 1997 and 1998, the decrease in energy consumption was 0.235 TWh, a cost saving of 73.14 million RMB (US$8.84 million), plus a 0.026 GW decrease in maximum demand, worth 117 billion RMB (US$14.15 billion) in deferred investment in generation capacity. Similar reductions were recorded in 1999. Significant savings have been made in the electricity consumption per unit of liquid oil produced, and the distribution system electrical losses between 1996 and 1999 were reduced from 7.4% to 6.8%.

China National Petroleum Corp. (CNPC) vigorously promoted the applications of DSM from 1996 to 1998 by strategically adopting the Integrated Resources Planning (IRP) methods and DSM technologies according to the following principles:

  • Implementing a plan for each oil field adapted to suit local experience and conditions.

  • Creating policies based on “easy steps first, more difficult changes later” and “small investment, rapid effect.” This implies a priority program of peak load shifting and reduction in system electrical losses. This is followed by consideration of the losses in the manufacturing process.

  • Maintaining existing assets to optimize performance together with controlling the selection of and investment in new technology, thereby guaranteeing the benefits from DSM.

By adopting these principles by 1998, CNPC reduced the annual increase in peak demand from 7% to 1% and the annual increase in consumption from 8% to 3.75%. The direct savings and social benefits arising from deferred construction in new capacity resulting from this project are estimated at 2.97 billion RMB (US$3.6 billion).

DSM Planning in Shanghai

Shanghai is the largest industrial and commercial city in China, and the structure of demand and consumption characteristics have been studied to identify the savings associated with DSM. Cost-benefit evaluations based on the use of a range of energy-efficient domestic, industrial and commercial equipment have identified the city's potential DSM resource (Table 3).

DSM can reduce the coal consumption and, based on the figures included in Table 3, the annual reduction in CO2 and SO2 pollution by the year 2010 could be 1.5 million tons and 10,000 tons respectively.

DSM in China

In the past 10 years, collaborations between electric power corporations, government, scientific research establishments and consumer support have led to an increase in the number of major DSM applications. Table 4 includes a summary of the progress made and benefits achieved.

In addition, DSM has already produced economic benefits for electricity utilities and for consumers and equally important, environmental pollution has been reduced by replacing coal with clean energy gas. The projects in Shenzhen, Henan, Guangdong, Zhejiang and Tianjing provinces have demonstrated that China possesses all the basic conditions to put DSM into practice.

Long term, the country's severe energy shortage and inefficient use of energy will restrict sustainable development, thus, several measures are required to encourage wide-scale application of DSM, namely:

  • Creation of a social fund to support DSM applications and projects.

  • Reformation of the industry's demand and energy tariffs, and revenue and financial systems to provide a favorable market economy environment for DSM. Also, special policies for loans, revenue and promotion to support DSM implementation.

  • Support of government activities in technology and education training to encourage end-users to apply advanced energy efficient technologies.

  • Establishment of energy-efficiency legislation.

Dr. Zhaoguang Hu, professor and chief economist at State Power Economic Research Center of China, now undertakes consulting work for the State Power Corp. (formerly the Ministry of Electric Power). Hu is experienced in power-system planning, energy conservation and demand side management (DSM). His expert contributions to the industry have resulted in several awards from the State Council and Ministry of Electric Power. Hu was responsible for the Application of DSM project in Beijing that resulted in significant benefits for the Beijing Power Supply Co. As a consultant, he worked with the USA's Resource Management Associates of Madison Inc. (RMA) on “Strengthening Power Sector Demand-Side Management” for Guangdong and Zhejing provinces.