Tue, 24 Nov 2020

China Delays Decision on New Coal Plants

RFA
31 Oct 2020, 04:42 GMT+10

Despite mounting environmental pressure, China's leaders deferred a decision on stopping construction of new coal-fired power plants at a key Communist Party meeting this week, casting doubt on President Xi Jinping's climate goals.

Official statements issued at the close of the fifth plenary session of the 19th Central Committee made only general references to the troublesome problem that may challenge Xi's promise to reach a peak in carbon releases before 2030 with "net-zero" emissions before 2060.

"The plenary session proposed to promote green development and promote the harmonious coexistence of man and nature," said the official communique from the meeting.

"It is necessary to accelerate the promotion of green and low-carbon development continuously improve environmental quality, enhance the quality and stability of the ecosystem, and comprehensively improve resource utilization efficiency," it said.

The phrasing suggests that the central government may spend the next several months trying to persuade or force local authorities to cancel the controversial coal projects before the 14th Five-Year Plan for 2021-2025 is finalized in March.

China could keep building new coal-fired power plants for at least the next five years, a comprehensive energy study has found.

The recent estimate by the Paris-based International Energy Agency (IEA), based on stated policies, follows a barrage of reports from climate groups on the plans for new plants.

The projection from the IEA's 461-page annual World Energy Outlook report released on Oct. 13 may lend credence to arguments that China has been adding unneeded coal-power capacity to spur the economy and speed recovery from the pandemic slump.

The coal projects have been a key issue for the new five- year plan under consideration at the party plenum this week.

Zou Ji, head of Energy Foundation China, a grantmaking charitable organization involved in five-year planning research, argued that China should stop building and financing all new coal plants, affecting 300 gigawatts (GW) of capacity, Reuters reported this week.

Unless stated policies change, more coal plants will keep being built, the IEA said.

"China continues to build an average of 17 GW of new coal- fired plant(s) per year through to 2025, with many new projects in progress despite a current excess of power capacity, weakened electricity demand outlook and recognition of the imperative to reduce coal use to address climate change," the report said.

The pace of additions is expected to slow after 2025, but environmental advocates have warned that the new plants could keep operating for up to 40 years.

Projections

In statistical tables with the report, the IEA said China's coal-fired capacity would rise 7.7 percent between 2019 and 2025 while generation would grow 6.1 percent under the forecast's stated policies scenario.

Capacity would expand by a milder 1.4 percent between 2025 and 2030, although actual generation is expected to decline by 0.5 percent, the IEA said.

The stated policy projections contrast sharply with those under the agency's "sustainable development scenario," which could enable China to meet targets of the Paris Agreement on climate change.

To get on the sustainable path, China would have to reduce coal-fired capacity by only about 1 percent from 2019 until 2025, but the cut would climb to 10 percent in the five-year period to 2030.

From 2019 to 2030, coal-fired generation would have to fall by over 33 percent to meet the sustainable goal.

The IEA estimates may bolster the criticism of China's current coal plans, which promote employment and economic growth despite the low utilization and financial losses of existing plants.

In July, the Center for Global Sustainability at the University of Maryland School of Public Policy found that 57 coal plant projects with 76 GW of capacity were moving toward completion in the first five months of the year.

An additional 53 GW of new coal-fired capacity had recently received permits, the center said.

The projects are largely the result of a central government decision in 2014 to transfer approval authority for new power plants to provincial and local levels as a way to cut bureaucratic red tape.

The shift led to a flood of new projects and a rise in under-utilization of unneeded plants.

"This is all despite significant overcapacity in the sector, with more than half of coal-power firms already loss- making and with typical plants running at less than 50 percent of their capacity," the environmental group Carbon Brief said in March.

At the start of 2020, China had 180 GW of new coal-fired capacity in the planning stage, the IEA said in an earlier report.

"The case for building this planned new coal capacity ... needs to be carefully weighed against the implications for local air pollution and global climate goals," the agency said.

The IEA forecast suggests that China's stimulus policies may work against Xi's climate pledges for the next five years unless the government makes major changes.

Last week, a group of China's leading climate experts issued a report urging limits on coal power during the coming plan period.

"China should strictly control coal consumption and the expansion of coal-fired power capacity in the next five years, aiming to cap carbon emission from coal sectors by 2025 and even realize negative growth," said He Jiankun, deputy director of the National Expert Committee on Climate Change, Reuters reported.

"The development of coal power will need (to) be restricted," said special climate change adviser Xie Zhenhua in a commentary for the official English language China Daily.

Xie said no coal-related projects will be listed in this year's Green Bond Endorsed Project Catalogue, barring access to financing from the international Climate Bonds Initiative.

But Xie stopped short of saying that no new coal plants would be built.

"Adding large amounts of renewable capacity is probably feasible, (but) phasing out the fossil fuels is harder, of course," said Michal Meidan, director of the China Energy Program at the Oxford Institute for Energy Studies (OIES).

The task will be tougher because 40 GW of planned new coal-fired projects this year have already been approved, "many of them driven by local governments looking to boost job creation and economic activity," Meidan said.

In the latest International Monetary Fund forecast, China's economy is projected to grow 1.9 percent this year, up from a previous estimate of 1 percent in June. If recovery continues without another wave of COVID-19 cases, growth could reach 8.2 percent in 2021, the IMF said in its World Economic Outlook.

Coal-fueled recovery

But unless major policy changes take effect quickly, China's recovery will be fueled largely by coal.

"There are few large-scale 'green' projects, and since China's energy demand is still expected to continue growing, with coal still seen as the most reliable baseload supply source for power currently, local officials continue to pursue these projects," Meidan said.

Earlier this week, OIES released an analysis of China's recovery plans, based on official statements, slogans and government goals in the first nine months of this year.

"Environmental protection and climate change mitigation are not among these priorities," said the paper by Philip Andrews-Speed of the National University of Singapore's Energy Studies Institute, and Sufang Zhang and Chao Wang at the North China Electric Power University's School of Economic Management.

One problem cited by the experts is the need to maintain grid stability on ultra-high voltage (UHV) transmission lines that were built to bring renewable energy from remote areas to demand centers.

"As a result, more thermal capacity will have to be built to support existing and planned UHV lines. Yet there is already an overcapacity of thermal power," they said.

Under the IEA's stated policy scenario, the share of coal in China's total primary energy demand would decline from 61 percent in 2019 to 52 percent in 2030. In the tougher sustainable development scenario, coal's share in 2030 would have to fall to 43 percent.

According to the IEA, China is the only major economy expected to see higher electricity demand this year than in 2019. China's net growth of new coal-fired plants is also an exception to trends in the rest of the world.

"In advanced economies, the use of coal-fired power is on track to fall by an unprecedented 20 percent in 2020," the IEA said.

The effects of COVID-19, the falling costs of gas and renewables, and environmental pressures have all played a part in the reduced global role for coal. Worldwide demand for electricity from all sources is expected to drop by 2 percent this year before increasing by nearly 3 percent in 2021.

Competitive fuels and environmental pressures will continue to cut into coal-fired generation in advanced economies under the stated policies scenario, the IEA said.

In the United States, for example, the lowest natural gas prices in decades have made it "extremely difficult" to invest in upgrading coal plants. Coal-fired capacity is projected to fall 60 percent from 2019 levels in the next decade, plunging 80 percent by 2040, the report said.

The low profitability of China's coal plants is likely to worsen if new capacity is added, turning projects into stranded assets, unable to justify investment or pay for themselves.

The result may be that fewer of the approved projects will actually come on line, Meidan said.

But China's continuing motivations for coal consumption may make future reductions less certain, despite profitability problems and Xi's climate goals.

After years of rising reliance on imported oil, China's government has grown sensitive to energy security risks.

"Concerns about energy security lend further support to domestic energy sources, so coal remains the clear go-to," Meidan said.

Copyright © 1998-2018, RFA. Published with the permission of Radio Free Asia, 2025 M St. NW, Suite 300, Washington DC 20036

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