China - Energy for rural development in China : an assessment based on a joint Chinese/ESMAP study in six counties

Energy Sector Management Assistance Programme China Energy for Rural Development in China: An Assessment Based on a Joint Chinese/ESMAP Study in Six Counties Report No. 183/96  JOINT UNDP / WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) is a special global technical assistance program run by the World Bank's Industry and Energy Department. ESMAP provides advice to governments on sustainable energy development. Established with the support of UNDP and 15 bilateral official donors in 1983, it focuses on policy and institutional reforms designed to promote increased private investment in energy and supply and end-use energy efficiency; natural gas development; and renewable, rural, and household energy. GOVERNANCE AND OPERATIONS ESMAP is governed by a Consultative Group (ESMAP CG), composed of representatives of the UNDP and World Bank, the governments and other institutions providing financial support, and the recipients of ESMAP's assistance. The ESMAP CG is chaired by the World Bank's Vice President, Finance and Private Sector Development, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme's strategic agenda, its work program, and other issues. ESMAP is staffed by a cadre of engineers, energy planners, and economists from the Industry and Energy Department of the World Bank. The Director of this Department is also the Manager of ESMAP, responsible for administering the Programme. FUNDING ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organization (OLADE), and public and private donors from countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United States. FURTHER INFORMATION An up-to-date listing of completed ESMAP projects is appended to this report. For further information or copies of completed ESMAP reports, contact: ESMAP c/o Industry and Energy Department The World Bank 1818 H Street, N.W. Washington, D.C. 20433 U.S.A.  ENERGY FOR RURAL DEVELOPMENT IN CHINA: AN ASSESSMENT BASED ON A JOINT CHINESE/ESMAP STUDY IN SIX COUNTIES July 1996   CONTENTS PREFACE ............................................................. vii ACKNOWLEDGMENTS ............................................................ viii ABBREVIATIONS AND ACRONYMS .............................................................x CURRENCY EQUIVALENTS, 1988 ............................................................. xi I. INTRODUCTION ..............................................................1 National Rural Energy Consumption ..............................................................2 Rural Energy Use in 1989 .............................................................2 Growth Trends, 1979-89 .............................................................2 Trends and Issues .............................................................4 Energy Demand and Rural Economic Growth .............................................................4 Increasing Oiientation to the Market .............................................................5 Environmental Degradation .............................................................6 Rural Energy Development Policies and Programs ............................................................. 7 Rural Electrification .............................................................9 H. INTEGRATED RURAL ENERGY PLANNING AND DEVELOPMENT ..................... 10 The Chinese Program ............................................................ 10 Scope ............................................................ 1 1 Results ............................................................ 13 Expansion ............................................................ 13 ESMAP Involvement ............................................................ 14 Initial Activities ............................................................ 14 Objectives and Scope of Training and Technical Assistance ................................................ 15 Results ............................................................ 15 III. RURAL ENERGY USE IN SIX COUNTIES ............................................................. 16 Research Methods and Training ............................................................ 16 Design of the Questionnaire ............................................................. 17 Sample Design ............................................................ 17 Survey Implementation and Analysis Training ............................................................ 18 Major Problems Encountered in Implementation ............................................................ 18 Survey Results ............................................................ 20 Patterns of Household Energy Use ............................................................. 21 Energy Use, Energy Availability, and Income ............................................................ 23 The Costs of Energy Production within the Counties ............................................................ 30 Summary of Trends ............................................................ 31 IV. ENERGY CONSUMPTION IN TOWN AND VILLAGE ENTERPRISES .................. 32 Overview of the Results of the Three-County Survey ........................................................... 32 Regional Variation ............................................................ 33 Energy Plices, Supply AlTangements, and Costs ............................................................ 34 Fuel Mix ............................................................ 35 Utilization of New Equipment ............................................................ 36 iii  Small-Enterprise Scale ..................................................... 36 Low Educational and Technical Levels ..................................................... 37 Conclusions ..................................................... 37 V. RECOMMENDATIONS ....................................................... 39 Integrated Rural Energy Planning and Development ....................................................... 39 Adjusting to the New Economic Environment of the 1990s ................................................. 39 Strengthening Training and Technical Assistance for Local Programs ................................. 40 International Support for Integrated Rural Energy Investment Packages .............................. 41 Energy Conservation in TVEs ....................................................... 41 The Structure and Scale of TVE Industries ....................................................... 41 Improving Energy Management ....................................................... 42 Improving Supply of Energy-Efficient Equipment ....................................................... 42 Improved Stoves ....................................................... 43 Focusing on the Customer ....................................................... 43 Areas for International Assistance ....................................................... 44 Energy Savings through Improvements in Pig Fodder Preparation ........................................... 44 Strengthening Coordination between Rural Energy and Agricultural Extension Offices ....................................................... 45 Fuelwood Supply ........... . 45 Cost-Effective Plantation Development ................................................. 46 Balancing Individual Incentives with Unified Planning ................................................. 46 Strengthening Extension Capabilities ................................................. 47 Natural Regeneration ................................................. 47 Fuelwood Forestry Research ................................................. 47 Rural Electrification ................................................. 47 Improving Power Planning Practices and Capabilities ................................................. 48 Enihancing Institutional Autonomy ................................................. 48 Reducing System Losses ................................................. 49 Coal Supply and Use ................................................. 49 Developing County-Level Coal Marketing Systems ................................................. 49 Improving Coal Utilization Technology ................................................. 50 Biogas ................................................. 50 Conclusions ................................................. 51 BIBLIOGRAPHY ................................................... 52 APPENDIXES Appendix A: China Energy Survey Instrument ................................................... 53 Appendix B: China Rural Energy Survey Tables ................................................... 86 TABLES Table 1.1: Chinese Rural Energy Consumption, 1979-89 ....................................................3 Table 1.2: Per Capita Income Levels and Energy Supplied through the State Plan in Three Chinese Counties, 1989 .................................................... 6 iv  Table 2.1: Changes in Energy Indicators since Initiation of Integrated Rural Energy Program in Kezuo County, 1985-90 .................................................................. 13 Table 3.1: Basic Indicators for Rural Households in Six Chinese Counties ................................ 20 Table 3.2: Rural Household Energy Consumption by Source in Six Counties ............................ 21 Table 3.3: Percentage of Primary Energy Use by County ............................................................ 22 Table 3.4: Attitude toward Shortage of Biomass Energy ............................................................ 23 Table 3.5: Rural Energy Consumption by Income Class and Source ........................................... 25 Table 3.6: Household Coal Consumption in Six Rural Counties by Three Indexes .................... 26 Table 3.7: Value of Coal Used in Kezuo County by Income and Distance from Mine, 1991 .................................................................. 27 Table 3.8: Retail Prices at Two Levels for Coal in the Six Pilot Counties ................................... 28 Table 3.9: Electricity Use and Income Class in Selected Counties .............................................. 30 Table 3.10: Comparative Production Costs for Household Fuels for Three Counties in China, 1989 .................................................................. 31 Table 4.1: Proportion of Industry Output Value and Industry Energy Consumption by Region .................................................................. 33 Table 4.2: Energy Intensity of Different Rural Industry Subsectors in Three Counties, 1989 .................................................................. 34 Table 4.3: Industrial Energy Prices, Costs, and In-Plan Allocations in Three Counties .............. 35 Table 4.4: Fuel Mix of Rural Industrial Energy Consumption in Three Counties, 1989 ............. 36 MAP Map 2.1: IBRD 27904: China Six County Energy Study ............................................................ 12 v  7 S r ;: 4 : : f  PREFACE The material used in this report was gained during two joint ESMAP/Chinese activities carried out between 1989 and 1992. The first study (China: County-Level Rural Energy Assessments) encompassed rural energy assessments in the counties of Hengnan (Hunan Province), Xiushui (Jiangxi Province), and Kezuo (Liaoning Province). The second exercise (China: Technical Assistance and Training in Integrated Rural Energy Planning) comprised technical assistance and training in the assessment approach jointly developed in the first study and the extension of this approach to the three additional counties of Jianyang (Sichuan Province), Changshu (Jiangsu Province), and Huantai (Shangdong Province). The approach tested in the activities has been disseminated through the government's Integrated Rural Energy Development Program, popularly known as the Hundred- Counties Program in the Eighth Five-Year Plan (1991-95). As a consequence, there has been renewed interest in the publication of this study. The reader should be cautioned that the information in this report is based on data collected up to seven years ago, and substantial changes have taken place in the rural economy of China during those years. The report was prepared for the Symposium on Rural Energy in China, Beijing, held on November 2, 1992, by the Energy Sector Management Assistance Programme (ESMAP) and the Ministry of Agriculture of the government of China. vii  ACKNOWLEDGMENTS This study was truly a joint effort between the government of China and the ESMAP program at the World Bank. A project as large as this one owes much to many people. Acknowledgments are particularly in order for the staff of the Ministry of Agriculture, State Planning Commission (SPC), Ministry of Forestry, Ministry of Water Resources, Qinghua University, Energy Research Institute of the SPC, and provincial and local governments and research institutes. The World Bank's Industry and Energy Department coordinated the international team effort. The following list acknowledges the contributions to the project made by those who participated in this joint Chinese/ESMAP project. Phase One Chinese Staff and Consultants Task Managers: Deng Keyun (Deputy Director, Energy & Environmental Protection Department, Ministry of Agriculture), Yang Yaoxian (Director, Resources Management Department, Ministry of Forestry) Local Consultants and Participants: Zhang Zhengmin, Li Junfeng, Chen Kunquan, Liu Zizhen, Wu Wenyuan, Chen Rongyao, Li Jingming, Wang Gehua, Bai Jimning Hengnan County Study Team, Hunan Province: Zhang Yushi, Yuan Mengbin, Li Qizhi, Yang Bangwei, Dai Yunxing, Dai Chengdong Xiushui County Study Team, Jiangxi Province: Fan Rengsheng, Liu Jun, Lu Zuoshan, Lu Guoqin, Jiang Jianwei Kezuo County Study Team, Liaoning Province: Jiao Qingyu, Gao Shijian, Liu Zouqing, Dong Wei, Lei Qidi ESMAP Staff and Consultants ESMAP/World Bank: Robert Taylor, Douglas Barnes, Noureddine Berrah, Kevin Fitzgerald, Paul Ryan Consultants: Ian Auldist, Louraine West, K. Krishna Prasad, Liu Qian viii  Phase Two Chinese Staff and Consultants Task Manager: Deng Keyun (Deputy Director, Energy & Environmental Protection Department, Ministry of Agriculture) Department of Energy and Environmental Protection, Ministry of Agriculture: Liang Baofen, Liu Hongpeng, Bai Jinming Energy Research Institutue of the State Planning Commission: Zhang Zhengmin, Li Junfeng, Meng Song Nuclear Energy Research Institute of Qinghua University: Gu Shuhua, Qiu Daxiong, He Jiankun, Shu Mingshan, Yu Haihua China Agriculture Engineering Design and Research Institute: Shi Deming, Wang Gehua, Chen Yanbin Jianyang County Study Team, Sichuan Province: Zhang Changli, Fan Chunran, Tao Zhongxi, Qu Feng, Jin Gongwang, Xie Zhengjie, Liu Yuxi, Lei Xingguo, Long Dayou, Zhang Manqing Chang Shu City Study Team, Jaingsu Province: Zhen Xiyuan, Wang Xiaohua, Zheng Yongxiang, Li Fuzhen, Tao Dongkui, Song Tao, Zhu Liaosheng, Huang Zhinan, Gong Zhen, Lu Hang Huantai County Study Team, Shandong Province: Gong Xiangxin, Yu Wenyan, Tian Leyuan, Jia Weizhong, Geng Diancai, Lu Zengan, Zhang Wei, Zhang Xiucheng, Li Kuifeng ESMAP Staff and Consultants ESMAP/World Bank: Robert Taylor, Ernesto Terrado, Douglas Barnes, Noureddine Berrah, Richard Spencer University of Pennsylvania: Robert Wirtshafter, Richard Hosier, Liu Qian, Zhang Zhihong, Wang Haijiang Consultants: William Ward, Kevin Fitzgerald ix  ABBREVIATIONS AND ACRONYMS TVE town and village enterprise tce tons of standard coal equivalent KgCE kilograms of coal equivalent SPC State Planning Commission tph tons per hour kWh kilowatt hour kW kilowatt km kilometer kV kilovolt LPG liquefied petroleum gas Mwh megawatt hour MW megawatt TWh terawatt hour mu 1/15 hectare x  CURRENCY EQUIVALENTS, 1988 US$1.00 = 3.7 yuan RMB 1.00 yuan RMB = US$0.27 1 yuan = 100 fen ENERGY CONVERSION FACTORS Tonnes of standard Item Kilocaloriesl coal equivalentl kilogram tonnes Standard coal equivalent 7,000 1.00 Electricity (thermal replacement value) 2,800/kWh 0.4/Mwh Kerosene 10,200 1.46 Biogas 5,500/m3 0.79 LPG 10,800 1.54 Charcoal 7,000 1.00 Dried dung 3,200 0.46 Leaves and grass 3,000 0.43 Fuelwood (air-dried) Hengnan and Xiushui 3,400 0.49 Kezuo 3,600 0.51 Crop by-products Hengnan and Xiushui 3,250 0.46 Kezuo 3,450 0.49 Coal for household use (average) Hengnan 3,800 0.54 Xiushui 4,200 0.60 Kezuo 4,600 0.66 Other coal variablea variablea a. Depending on source. xi   I. INTRODUCTION 1.1 Approximately 80 percent of China's population lives in rural areas, where they face a complex array of energy and resource problems. Evaluation and project planning efforts depend on adequate data on fuel use, and for many years the only data available for planning was at the macro level. Recognizing that successful, integrated planning depends not only on macro- level approaches but also on the concurrence and support of farmers, the Ministry of Agriculture and Forestry of China, in cooperation with ESMAP and the World Bank, has carried out a series of county-based general evaluations of rural energy. The purpose of these studies was to collect primary data and to provide training in appropriate techniques for an assessment of present energy consumption in rural China that can serve as a basis for the general evaluation of projects to improve the rural energy situation. 1.2 There is a pressing need for an evaluation of the status of China's rural energy configuration at the local level. Since the initiation of China's "Open Door" policy in 1978. both the rural economy and rural energy consumption have changed dramatically. One of the major indicators of this change is the significant increase in the amount of energy used for agricultural production, especially commercial energy, such as coal, oil products, and electricity. From 1979 to 1989, rural sector energy use increased threefold. In 1989, rural commercial energy consumption, which is the sum of commercial energy purchased for agricultural, industrial, and rural household end uses, reached 271 million metric tons of coal equivalent, about equal to the total biomass energy consumption in the same year. 1.3 In recent years, the real income of Chinese farmers has increased rapidly-annual per capita income rose from 191 yuan in 1980 to 630 yuan in 1990. In that time, many farmers moved from subsistence incomes to the middle-income ranks, and some even became wealthy. The rural economy itself is changing from a self-sufficient small-farm economy to one based on commerce. Between 1980 and 1990, there was a movement of more than 90 million rural laborers out of agriculture to town and village enterprises (TVEs) in the rural economy. Another 10 million people have moved to the towns and cities. The trend toward urbanization has not only increased the demand for energy, but has also increased the need for cleaner and more efficient sources. 1.4 Shortages of rural energy have frequently had serious consequences for agricultural production and farmers' livelihoods. Since the late 1970s, several government departments have been formulating and attempting to implement energy development plans to address this problem. Since 1983, the State Planning Commission (SPC) has developed a series of programs for rural energy development (for example, stoves that save firewood and coal, biogas digesters, firewood forestry, and minihydropower) and has incorporated them into a Plan for National Economic Development. By the end of 1989 these activities had resulted in significant improvements in the use of rural energy technology and project management. Policies that emphasize self-reliance and development have been shown to be most beneficial to the farmer. 1  Rural Energy in China 1.5 ia Over the past twenty years, great changes have taken place in the development of Chinese rural energy resources (rural energy is defined as all energy used in rural areas, as opposed to towns and cities). Rural energy development now touches more than one-hundred million farmers, and the efficient use of rural energy is vital to the sustainable development of the national economy. It is against this background that rural energy development must continue to promote strong linkages for the rural economy. The evolution of individual rural energy techniques and the application of commercial energy conservation technology can provide a productive environment for the naintainance of this progress.: Significant opportunities for extending the local innovations exist on the county level.. National Rural Energy Consumption Rural Energy Use in 1989 1.6 Including energy used by rural households, agricultural production, and TVEs, China's total rural energy consumption reached 549 million tons of coal equivalent (tce) in 1989, about 45 percent of the nation's total energy consumption (Table 1.1). Energy used in rural areas accounts for virtually all of the country's biomass energy use and 28 percent of its commercial energy use. If state-owned industries run by the county in rural areas are included in the rural figures-as is common in much of the analysis and planning work at local levels-"rural" or "local" energy consumption amounts to more than 60 percent of the nation's energy consumption and nearly 50 percent of total commercial energy use. 1.7 Rural households accounted for 63 percent of rural energy use in 1989, whereas TVEs represented 31 percent, and agricultural' production about 6 percent. At about 380 kilograms of coal equivalent (KgCE) per capita annually, household energy use levels are a little higher than those generally found in developing countries. In the northern parts of the country, heating requirements are substantial, and they may account for as much fuel use as that required for cooking. In the southem and central areas, cooking of pig feed in rural homes is a major use of energy, often accounting for a larger share, of energy use than preparation of family meals. Growth Trends, 1979-89 1.8 Rural energy consumption grew at an average annual rate of about 5.8 percent between 1979 and 1989-only slightly higher than the growth in total national energy consumption during the period. Growth patterns varied dramatically among sectors, however (see Table 1.1). Energy use by TVEs increased fivefold, growing from just 32 million tce in 1979 to 172 million tce in 1989. This rapid rise, in energy use by TVEs stemmed from an approximate tenfold growth in real output value during the period. In contrast, rural household consumption rose at a modest 2.9 percent annually, from 261 million tce in 1979 to about 348 million tce in 1989. Per capita consumption grew only slightly. The efficiency of household energy use, however, increased substantially with improvements in stove technology in the majority of rural homes. Per capita consumption of useful energy in rural homes is therefore believed to have increased substantially. 2  Introduction 1.9 The share of commercial energy in total rural energy consumption grew sharply over the 1980s, rising from 28 percent in 1979 to 49 percent in 1989. The major reason was the growth in TVEs, but the share of commercial energy use by rural households also increased somewhat, from just 14 percent in 1979 to 20 percent in 1989. Table 1.1: Chinese Rural Energy Consumption, 1979-89 (million tons of coal equivalent) 1979 1989 Fuel Ag YVEsa HH Total Ag 7VEs HH Total Biomass Fuelwood - - 103.8 103.8 - - 138.5 138.5 Straw and stalks - - 113.7 113.7 - - 136.1 136.1 Dried dung - - 6.3 6.3 - - 3.4 3.4 Subtotal - - 223.8 223.8 - - 278.0 278.0 Commercial Electricity b 6.9 6.6 3.1 16.6 6.4 27.2 5.2 38.8 Petroleum products 12.8 - 1.5 14.3 5.8 16.0 2.0 23.8 Coal - 25.6 32.6 58.2 17.7 128.4 62.3 208.4 Subtotal 19.7 32.2 37.2 89.1 29.9 171.6 69.5 271.0 TOTAL 19.7 32.2 261.0 312.9 29.9 171.6 347.5 549.0 - = Not available. Note: Ag = agriculture; HH = household. a. Data on biomass fuel use by TVEs are not available, but use in this sector is less than 10 percent of household biomass fuel use. b. Converted to tce using thermal replacement values. Source: Ministry of Agriculture. 1.10 Although the share of biomass fuels in total rural energy consumption fell during the 1980s, the total amount of biomass fuel consumed in the country increased from an estimated 224 million tce in 1979 to some 278 million tce in 1989. Because China is such a large country, its total biomass fuel use is the highest in the world. Fuelwood and agricultural residues (straw and stalks) each account for almost half of total biomass use, with dried dung accounting for just 1 percent. In most areas, fuelwood is of low quality, consisting primarily of brush and small branches. Fuelwood use is estimated to have grown by about 33 percent over the 1980s, while use of straw and stalks is estimated to have grown by 20 percent. Total fuelwood use in 1989 is estimated at about 138.5 million tce, or about 242 million tonnes of wood. 3  Rural Energy in China Trends and Issues Energy Demand and Rural Economic Growth 1.11 China's rural areas have undergone tremendous change since the Open Door policy was initiated in 1978. The combination of strong growth in agricultural production, spurred by the implementation of the rural responsibility system, and the development of rural industry promoted commercialization and sustained rapid growth in the rural economy. Rural social output value grew at an average annual rate of 17.8 percent between 1978 and 1989- which is substantially higher than the growth in gross national social output value of 10.7 percent during the same period. The share of rural social output value in total national social output value increased from about 30 percent in 1978 to more than 40 percent in 1989. For China's rural population of 900 million, this growth brought an increase in average real per capita income from about 190 yuan in 1980 to about 630 yuan in 1990-a more than threefold increase. 1.12 In most areas the 1980s marked a major shift away from subsistence farming toward a more commercialized and industrialized rural economy. In 1989 agricultural production no longer dominated rural output and accounted for only 45 percent of total rural social output value. This represents a sharp contrast with the profile for 1979, when agriculture accounted for more than 70 percent of rural output. By 1990 more than 80 million rural laborers had shifted from work in agriculture to work in rural industry, transport, construction, and commerce or other services. 1.13 Regional variations in the extent of change in the rural economy are great. Agriculture now generally accounts for only 10 to 30 percent of rural output in the eastern and southern coastal areas, where change has been most dramatic. In the more western interior, structural change is typically less marked, and in some areas economic growth has been stagnant. The trend, however, is obvious: the patterns of change observed in coastal areas during the 1980s provide a vision of the transitions that may be expected in many other parts of the country during the 1990s, if perhaps in differing degrees. 1.14 Implications of Growing Commercial Energy Demands. Industrialization, commercialization, and rapid growth have caused the shifts in the structure of rural energy demand toward commercial fuels noted above. Based on the examples of some of China's coastal counties, the shift implies much more than a simple alteration in the fuels consumed; in effect, the nature of what is involved in "rural energy management" changes profoundly. Development and management of "rural energy" in China has traditionally focused on development of local resources-especially biomass or other renewable energy-to meet local demands, particularly in the household sector. Much of the emphasis in the past has been on local energy self-sufficiency. With changes in the structure of demand, however, management of local energy economies becomes more integrated with the wider energy economy, and undue emphasis on local self-sufficiency becomes not only inappropriate, but frequently impossible. Rapid rural growth not only puts pressure on the national energy supply system for electricity, coal, and oil, but it also carries major implications for local governments. Local economic prospects become increasingly tied to those for obtaining increased energy supplies from other areas. 4  Introduction 1.15 In China's current environment, energy management by local government largely means coping with severe shortages of most fuels, especially electiicity. The challenge is to integrate energy supply and demand management effectively into local economic programs. Local governments often pay insufficient attention to potential energy supply constraints and the measures they can adopt to deal with them (especially through demand management). Nevertheless, the prospects for strong economic growth in the future are often largely dependent on their handling of this issue. 1.16 Household Fuel Issues. Higher rural incomes have meant that rural households develop more sophisticated demands for energy services. Surveys conducted in this study did not indicate that increases in income led to increases in overall demand for useful energy for cooking, but such increases in income do tend to result in growth in demand for heating in northern China and for electricity for a variety of appliances. Another important change is that consumers are becoming more interested in securing higher-quality fuels and more efficient and convenient energy-using devices, which reduce indoor smoke and are less time-consuming to use. Willingness to pay for higher-quality energy service appears to be increasing, but consumer preferences are complicated. In some areas, consumers prefer to use coal briquettes, instead of straw or fuelwood, if they can afford them. In the relatively wealthy areas of southern Jiangsu Province, however, farmers still prefer to use straw for cooking, in part because of its relative speed and ease of ignition compared with briquettes. Increasing Orientation to the Market 1.17 Another aspect of the fundamental changes occurring in the economic system of China's rural areas is that local autonomy in investment decisions increased sharply during the 1980s. During the 1970s more than 80 percent of the funding for capital construction was provided to county governments from higher government levels. By the late 1980s most funding for investment was being arranged by local governments, and funds for capital construction investment provided by the state had been reduced to about 20 percent. In parallel, the role of state allocations of energy through the national economic plan fell sharply. During the 1970s supplies of electricity, coal, and petroleum products were generally allocated through the plan at low, fixed, in-plan prices. Supplies were allocated for agricultural production, local (for example, county-run) state-owned enterprises, and town residents. Rural households and the relatively undeveloped TVEs were generally outside the state-supply system. During the 1980s commercial energy demand among rural households, and especially TVEs, grew rapidly. With only occasional and minor exceptions, these supplies were provided at market prices, outside the in-plan supply system. In-plan energy supplies are still available for many town residents and county-run enterprises, but supplies at the margin generally must come through the market. 1.18 In general, the faster the rural economic growth during the last five to six years (through a combination of TVE and county-run enterprise growth), the smaller the role of state- planned energy allocation, and the greater the role of out-of-plan/market energy supply. Table 1.2 provides an example of the shift to a market-oriented approach to energy. Given the limited experience with energy market environments in China, the development of sound central government policy support to enable efficient market development and the improvement of local 5  Rural Energy in China government energy sector management capabilities will be crucial challenges for rural and local energy development during the 1990s. Table 1.2: Per Capita Income Levels and Energy Supplied through the State Plan in Three Chinese Counties, 1989 County Jianyang Huantai Changshu Measure (Sichuan Province) (Shlandong Province) (Jiangsu Province) Per capita income level average above average high Share of in-plan coala 12.2 6.7 2.9 Share of in-plan electricitya 64.9 24.5 7.6 a. In percentage of total energy consumption. Source: County energy assessment reports. Environmental Degradation 1.19 Another major challenge for the 1990s is abatement of the severe environmental problems associated with current energy supply and use pattems in the countryside. Although pollution from the heavy and uncontrolled use of coal is also an important aspect of the problem, long-standing and unsolved problems associated with excessive exploitation of local biomass resources for household fuel remain among the most critical concerns. This is particularly true where environmentally unsound energy use is combined with other practices-such as overgrazing and excessive collection of low-quality shrubs, grass, and sod-that exacerbate problems of soil erosion, flooding, and river siltation. The many forest plantations that have been subject to illegal cutting by fuel collectors and rendered unproductive remain a common sight. Chinese agronomists are also concerned about the declines in soil fertility seen when straw and stalks are used for fuel instead of being plowed under to return their nutrients to the soil. The concerns are justified for locations where a combination of population pressure and unfavorable growing conditions for trees have resulted in local land degradation. 1.20 Substantial progress was achieved in developing programs to combat these problems during the 1980s. Nevertheless, environmental degradation from unsustainable biomass fuel use definitely is becoming worse instead of better in many of the more underdeveloped and resource-poor parts of China. 1.21 The roots of the problems of local biomass degradation lie in high population pressures on limited resources. Present rural energy programs to alleviate such problems involve efforts to improve the efficiency of biomass fuel production, the use of altemative fuels, or to increase the general efficiency of fuel use. Such programs, however, involve a combination of new labor or cash costs to farmers, changes in tradition, or a longer time frame than immediate needs will accomodate. Even if a given development program is highly economical from the nation's perspective, farmers may still feel that cutting hillside biomass is the easiest way to meet their immediate fuel needs, despite the pressure this puts on local resources. Experience in China 6  Introduction and elsewhere in the developing world has shown repeatedly that there are no single, simple solutions. The best hope lies with multipronged development efforts targeted at specific local conditions. Nevertheless, the complexity of such efforts continues to provide major challenges in training, organization, and institutional development, along with a focus on regions with the greatest biomass resource problems. Rural Energy Development Policies and Programs 1.22 Although large-scale programs for biogas and small-scale hydroelectric power development had been in operation earlier, realistic appraisals of the extent of the energy problems of the countryside began in 1980. During the early 1980s, efforts focused primarily on strengthening and improving individual development programs, such as the programs to develop biogas, small-scale hydropower, improved cookstoves, fuelwood plantations, and small-scale coal mines. In 1983 the first efforts were initiated to undertake integrated rural energy development programs at the county level. During the late 1980s, as the individual development programs continued to mature and show results, the integrated local development programs began to receive increased emphasis. 1.23 China's cuirent rural energy development policy emphasizes promotion of a series of technologies and improvements, with the mix for a given area determined by local conditions. The policy is to promote development according to local conditions, with multiple sources of energy supplementing each other, and to emphasize comprehensive utilization of resources and efficiency. Equal weight is assigned to the development of energy supply and energy conservation. 1.24 China's SPC has the primary responsibility for overall rural energy development planning in the central government and for coordination of the programs pursued under individual ministries. The Ministry of Energy is responsible for commercial energy production and management of the energy industries. The Ministry of Water Resources oversees the development and utilization of small-scale hydropower. The Ministry of Forestry handles the development of fuelwood plantations. The Ministry of Agriculture is generally responsible for the development and utilization of noncommercial energy resources and for energy conservation in rural households, TVEs, and agricultural production. Responsibilities at the provincial and county levels are generally divided along similar lines. 1.25 China's program to foster integrated rural energy development at local levels is described in chapter 2-the ESMAP technical assistance and training project was implemented in support of that program. The status of several of China's major individual programs is briefly reviewed below. 1.26 Biogas. China's large-scale efforts to promote family-size biogas digesters among rural households are well known. By the end of 1989, 4.76 million family-size units were in use. Development during the mid- and late 1980s emphasized achievement of stable, more effective gains, as opposed to the proliferation of as many units as possible. Technical levels and management have improved greatly since the 1970s, as have technical assistance and consumer service capabilities. 7  Rural Energy in China 1.27 Medium- and large-scale biogas projects have been developed rapidly in recent years. More than 50,000 households now use biogas generated in centralized facilities. Another area of increased emphasis is the development of biogas as part of integrated farm/fishery/animal-raising schemes. Particularly in suburban areas, biogas generation has been developed as the linchpin of multipurpose schemes, usually involving cultivation of seedlings, mushrooms, or fruit; raising of chickens and pigs; and development of fisheries or other sideline enterprises. 1.28 Inmproved Stoves and Kang. The Chinese government began a major program to promote improved rural cookstoves and improved kang (heated beds) in 1981. Whereas traditional Chinese stoves typically have efficiencies of 10 to 15 percent or less and emit large amounts of smoke indoors, most of the improved models have efficiencies of better than 20 percent and substantially reduce indoor pollution through the use of grates and chimneys. In the early years of the program, emphasis was placed on simple retrofitted improvements on site. More recently, however, greater emphasis has been placed on the development of stoves with manufactured components, which allow improved quality control. 1.29 By the end of 1989, about 114 million improved stoves had been adopted in the Chinese countryside, so that more than half of the rural households had some kind of improved stove. Of these, about 10 million are stoves with manufactured components. Chinese analysts estimate that average cooking efficiencies increased from about 12 percent in 1979 to 16.6 percent in 1989 as a result of the program. Particular attention has been focused oln 735 designated counties (of a total of about 2,200), which receive a small amount of special government support for stove development. Participating counties are required to popularize new stoves with field-tested efficiencies of over 20 percent in at least 90 percent of rural homes. By the end of 1989, 491 participating counties had passed examinations organized by the central government and had received certification as successful demonstration counties in improved stove development. 1.30 Fuelwood Development. About 3.8 million hectares of new fuelwood plantations were created during the 1980s. Fuelwood plantations have been included as part of forestry development plans at various government levels, and substantial progress has been achieved in the selection of species, cultivation of seedlings, and development of suitable plantation and management regimes for a wide variety of conditions. 1.31 Most of the nation's fuelwood, however, continues to be collected as by-products from forests that primarily serve other productive or protective purposes. This will remain so for the foreseeable future. Overall, the important goal is to improve plantation design and forest management so that local fuelwood needs can be met without damage to the forest resources. In this context, a critical recent development is the renewed effort to strengthen the forestry extension services at local levels. In addition, reforms have been implemented concerning land utilization rights and the management and distribution of benefits from collectively owned forestlands under a variety of new forestry responsibility systems. The programs have involved both planting on hillsides by farmers through the Ziliushan program and by means of community based plantations organized through local governments. 8  Introduction Rural Electrification 1.32 Including the usage of county-run, state-owned industries, total rural electricity consumption reached 192 TWh in 1989, representing about 30 percent of the nation's total electricity consumption. TVEs accounted for approximately 35 percent of rural electricity use, and rural households about 14 percent; the remaining 51 percent is accounted for by industry and commerce, agriculture, and domestic use in townis and cities. Almost 80 percent of China's rural households have electrical connections, one of the highest percentages of all developing countries. 1.33 About 800 of China's 2,200 counties rely primarily on small-scale hydroelectric power generation to meet the bulk of electricity demand. Small hydroelectric plant capacity totaled 12,329 megawatts (MW) by the end of 1989, which yielded about 35 TWh of electricity. Plant utilization averaged 2,851 hours annually-a substantial increase compared with the 1,900- hour average of 1979. Begining in 1987 special focus was given to expanding and improving rural power systems based on local hydroelectric resources in 100 pilot counties. This program proved so successful that it was expanded in 1991 to include an additional 200 counties. 9  II. INTEGRATED RURAL ENERGY PLANNING AND DEVELOPMENT 2.1 During the 1980s China developed a successful program to promote integrated rural energy development at the county governmelnt level. The ongoing effort involved a comprehensive assessment of county energy supply, demand, and associated issues and the development and implementation of a priority action plan. Although the integrated plan concept is popular in a number of other developing countries, China's success sets its program apart. 2.2 The joint ESMAP/Chinese program, Training and Technical Assistance in Integrated Rural Energy Planning, was prepared and completed to support the wider Chinese Integrated Rural Energy Development Pilot County Program. This chapter surveys the Chinese effort and summarizes the scope, outputs, and results of the ESMAP activity. The Chinese Program 2.3 As in most countries, the major individual rural energy development programs in China (for example, biogas, small hydropower, or fuelwood development programs) are organized and administered vertically. Technical assistance, planninig support, and some funding support are provided for local efforts through the various levels of government hierarchy. To achieve solutions to the multifaceted rural energy problems, however, horizontal linkage and integration at local levels are also required. Priorities among a wide variety of development options need to be set at local levels, particularly for rural energy development. Local conditions vary dramatically, and both the broad direction and the specifics of development efforts must be defined accordingly. China's Integrated Rural Energy Development Pilot County Program was designed to meet these needs. 2.4 One of the main reasons for integrated local energy planning is to meld energy development and demand management with broader local economic planning. Linkages with local macroeconomic prospects and plans are critical to the design of energy programs that will accomodate evolving demand patterns and cross-sector concerns. Where land degradation caused by use of biomass fuels is a major issue, for example, a rural energy development package needs to be part of a broader review of trends in other sectors. These sectors include erosion control and watershed management, forestry and agroforestiy development, animal husbandry development (including practices in pig raising and food preparation, as well as pasture and fodder development), and household food and fuel consumption. In more developed areas, industrial development schemes and programs to secure energy supplies or improve energy efficiency must be closely integrated. Failure to incorporate consideration of such macroeconomic linkages can cause wasteful development of industrial capacity or hold back local macroeconomic growth. 2.5 Another reason for integrated local energy planning is to select the best mix of programs for local conditions from the wide range of options promoted at the national or regional levels. Although the basic technical energy development options are similar in most counties, the costs and benefits of the options vary tremendously. The relative attractiveness of the options for addressing rural household fuel and associated environmental problems (such as 10  Integrated Rural Energy Planning and Development improvement in the efficiencies of stoves and kangs; development of fuelwood supply; and measures to reduce fuel use for fodder preparation, biogas development, or enhanced supply of coal briquettes) is fairly site-specific. Experience has shown that strategies for energy development vary considerably. The rigid application of a single program design can be highly problematic, and it can lead to waste, as well as "solutions" that are inappropriate for local conditions. 2.6 The proper coordination among the initiatives involved in a rural energy development package at the local level leads to the most effective results. In the county-level programs pursued to date, effective leadership and coordination through the chief planning and economic management departments of county governments have been crucial to success in the implementation of the multipronged efforts required to make real progress. Scope 2.7 China's Integrated Rural Energy Development Pilot County Program began in 1983. Coordinated by the SPC and the State Economic Commission, the program was a joint effort of the Ministries of Agriculture, Forestry, and Water Resources. Six counties were initially selected for study and project implementation (see Map 2.1: IBRD 27904). Twelve more were added during the mid-1980s, bringing the total to eighteen. By 1992 integrated development programs had been under implementation for at least five years in most of these counties. 2.8 In the design of the initial plans for the integrated programs, the guiding objective was to alleviate local energy problems-such as shortages or high cost-and to promote economic development and environmental improvement. The planning process included the following steps: 1. Survey and analysis of current energy situation 2. Assessment of energy resource 3. Classification of zones according to energy utilization or resource characteristics 4. Preparation of energy demand forecasts 5. Comparative evaluation of prospective development options (projects) 6. Preparation of balanced scenarios of future energy supply and demand 7. Decision analysis and establishment of implementation airangements. 2.9 The county level has proved the most effective implementation unit for both planning and project implementation. With populations generally between 300,000 and 1 million persons, and a substantial natural resource stock and economic scale, counties are large enough to make programs meaningful, but small enough to minimize many variations in local conditions. At the same time, the county is the basic unit of government administration. 11  Rural Energy in China MAP 2.1: CHINA SIX COUNTY ENERGY STUDY IBRD27904 N Jl MONGOLIA . g -~/\/,"> <\g ~ ) > twKezuo zDPR. KORE NE' NMONGO1 " ( KOREA -9 4~~~~~~~~~~~~REP OF \ < ) "< <3 '000 .;00fff >gX t00 ;;HEfE KOREA N k r;lf-x4L~>~r / Snn Huant:i tS~~~~~~; , "' rX; QiNGHAJ SHAANXIJ i (N'.,> "7 JIANGSLJ r~"''.~ {X" K; t ANHUl ,, N HA HI Jionyang HL)Bf SICHLIAN