China is the second largest power producer in the world, behind the United States, with an installed capacity in 2002 of 355 850 MW. Most (74 percent) of this generating capacity comes from coal-based thermal production, while the rest is sourced from hydro (24 percent) and nuclear (2 percent) facilities. In 2002, the installed power capacity generated more than 1 600 TWh of electricity. Almost 82 percent of that was from coal-fired facilities. Hydro was the source of less than 17 percent of that electricity, while nuclear power accounted for a tiny 1.5 percent. During the past 20 years, China's generating capacity has been increasing at an average annual rate of 8 percent. Even assuming only a 6 percent growth rate, capacity is expected to exceed 500 kMW by 2008. That implies an annual average increase of about 25 kMW. Although this may appear to be a substantial amount (the equivalent of 1.4 times the capacity of the Three Gorges project per year), the increase in capacity growth is currently lagging demand growth. According to Shanxi Power Co., China's energy demands are increasing by about 40 kMW every year, fuelled by continued economic growth, rural electrification and the proliferation of energy-intensive industrial activities such as aluminum. A government forecast made in 2000 calling for average annual growth in power demands of 6 percent over the next five years quickly proved conservative. In the first six months of 2003, demand increased by 17 percent from a year earlier. According to the State Grid Corporation of China, power demand is expected to rise by 15 percent in 2005.
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