In recent discussions about economic progress, a peculiar phenomena has caught the attention of many: the discrepancy between electricity consumption growth and overall economic growth in ChinaSince the onset of 2020, it has been noted that the annual growth rate of electricity consumption consistently exceeds that of the economyIn fact, during the first quarter of this year, there was a significant jump in total electricity consumption by 9.8% compared to the previous year, while the GDP growth stood at a comparatively modest 5.3%. This has raised poignant questions among the public, notably, "Where is all that extra electricity going?"

A closer examination reveals that this imbalance can largely be attributed to the structure of the economy—specifically the disparity in electricity consumption across different industry sectorsHistorically, China's secondary industry (manufacturing and heavy industry) demands significantly more electricity compared to the primary (agriculture, mining) and tertiary (services) sectors

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The production value of the secondary industry is much less than its electricity consumption would imply, resulting in a skewed relationship between electricity usage and economic growthInterestingly, when the growth rate of electricity consumption for the secondary industry approaches or surpasses its production value growth rate, typically, we see the total electricity consumption growth outpacing economic growth.

From the years 2020 to 2023, the surge in total electricity consumption has predominantly been driven by rapid growth in electricity usage within the secondary sector, with 22 out of 31 manufacturing industries showing increases in consumption exceeding their value-added growth ratesNotably, high energy-consuming sectors have played the biggest role in this trend, particularly in areas like equipment manufacturing, where increased consumption further influences the overall electricity consumption metrics

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Data from the State Grid Energy Research Institute highlights that sectors like heavy industry and manufacturing have seen annual electricity consumption growth rates that outstrip their value-added growth rates by considerable marginsFor instance, high-energy-consuming sectors, alongside consumer goods manufacturing, have been particularly impactful.

The narrative of escalating electricity consumption is further enhanced by rising electrification levels and the increasing frequency of extreme weather eventsDespite soaring coal and oil prices in recent years, the hikes in electricity prices in China have been relatively minor, encouraging many to rely more on electricity due to cost-effectivenessAdditionally, the government's 'dual carbon' policy aims to boost the transitional use of electricityThis has led to a marked increase in electrical equipment, rapid adoption of electric vehicles, and record-breaking electricity loads during peak summer periods, making the dramatic uptick in electricity consumption in the past few years less surprising.

To comprehend the disparity between electricity consumption and economic growth, it is essential to introduce a concept known as the electricity consumption elasticity coefficient

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This metric represents the ratio of the growth of electricity consumption relative to that of the economy at largeIts fluctuation is closely tied to the economic development stage and the industrial structure of a countryInternationally, when countries are in a phase of rapid industrialization and urbanization, they typically exhibit electricity consumption growth rates that exceed overall economic growth, resulting in an elasticity coefficient greater than oneConversely, as economies complete their industrialization, this coefficient tends to drop below one, indicating a saturation of electricity demand as economic development matures.

Over the long term, there appears to be a gradual decline in the electricity consumption elasticity coefficientHowever, short-term factors—such as economic cycles, technological advancements, industrial policy shifts, climate conditions, and levels of electrification—often cause this coefficient to fluctuate around the value of one

For example, during periods characterized by robust economic recovery and growth, electricity consumption tends to surge ahead of economic growthAlternatively, in economic downturns, this trend reverses, with electricity consumption growth lagging behind the economic trajectoryDuring transformation periods within the economy, particularly as structures change and evolve, electricity consumption growth can become decoupled from economic growth, resulting in erratic patterns.

Currently, it is evident that China's economic growth remains highly reliant on energy and electricity consumption, a factor that merits significant attentionOne of the foremost strategies should be to optimize the industrial structureCurrently, the industrial sector constitutes about 70% of electricity consumption, with the secondary industry being both a major driver of electricity demand and a significant source of carbon emissions

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It is crucial to curb the unchecked launch of high-energy and high-emission projects during the industrial adjustment phaseThis includes phasing out obsolete capacities in key industries and directing the restructuring of industries such as steel production and aluminum smelting towards more sustainable practices.

Simultaneously, there is an urgent need to enhance energy efficiency and carbon reduction methodsAlthough China has made strides in reducing total energy consumption levels, significant gaps remain when compared to advanced international standardsChina's energy consumption intensity is about 1.5 times higher than the global average, and two to three times that of developed nations, indicating considerable room for improvementFactors such as the COVID-19 pandemic have further delayed progress in reducing consumption intensity in certain areas, leading to pressing challenges in energy saving and carbon reduction efforts