Oil and Gas 360 Publishers Note: This is an interesting Op-Ed article that brings the economic power of coal – cheap. With the economic crisis facing China, you may in fact see a regression to more electricity produced by coal. Which is not good for the world’s pollution issues. The use of coal will help reduce the imports on oil and natural gas, and considering some of the economic backlash facing china, the free market may cause China to use more coal.
Environmental advocates are raising alarms about China’s plans to build more coal-fired power plants as the government pursues economic recovery.
Late last month, the British-based website Carbon Brief (carbonbrief.org) issued a report on the risk that China’s government will approve a wave of new coal power projects to spur the economy, despite evidence that most existing plants run at a loss now.
Activists have argued for the past several years that China’s coal-fired fleet, heavily underutilized and burdened with overcapacity, will be unable to compete with renewable energy sources like solar and wind as the costs of development and generation come down.
That point has already passed, the advocates say. Yet, the influential coal-power industry lobby continues to press for more plants.
The industry pressure comes at a critical time as the government prepares its 14th Five-Year Plan to start in 2021 with the likely objective of restoring pre-pandemic levels of economic growth.
“The focus on stimulating the economy with major investment and a recent shift of emphasis toward energy security appear to cast aside concerns about overcapacity and financial viability,” said the Carbon Brief report.
“Whether or not there is high-level political support for the idea, important industry players are making a push for significantly increased limits on coal-fired capacity,” the report said.
The China Electricity Council, the industry’s main lobbying group, argues that coal-fired capacity will reach 1,300 gigawatts (GW) by 2030, a nearly 24-percent increase over present levels and a 200-GW rise over the limits in the current five-year plan.
That new capacity would swell to well over 300 GW with the retirement of older existing plants, the report estimates.
The targets could translate into hundreds of new coal-fired projects, despite the fact that existing plants typically operate at less than 50 percent of capacity with more than half running at a loss.
se is made by Carbon Tracker, an independent financial think tank, which released its latest in a series of reports last month warning that coal power developers worldwide stand to lose over U.S. $600 billion (4.2 trillion yuan) due to cuts in the cost of renewables.
Coal’s days are numbered
Despite the industry push, the days of coal power predominance are numbered because the climate goal of limiting global warming to 1.5 degrees Centigrade will require an 80-percent decline in coal use for generation, Carbon Tracker said.
Efforts to meet the target will lead to early retirements of hundreds of plants and abandonment of incomplete projects, turning investments into stranded assets, unable to pay a return.
The stranded assets in China are estimated at U.S. $158 billion (1.1 trillion yuan). The Carbon Tracker report calculates that 71 percent of the country’s 982 GW of coal-fired capacity will cost more to run than building and operating renewable projects.
The negative numbers have not deterred the industry from recommending more plants.
Last June, the China Electric Power Planning and Engineering Institute urged 16 provinces to increase capacity to avoid future shortages, the Carbon Brief said. Last year, 21 of China’s 31 provincial-level governments were given a green light for new projects.
Last month, four more provinces were approved with 34 GW of capacity in progress, the group said.
“More such plants have been approved in March 2020 than all of last year,” the Business Times Singapore said.
A survey last month by China Economic Weekly found that the 25 provinces had announced investment plans for a range of projects totaling 49.6 trillion yuan (U.S. $7 trillion). Projects planned for this year were estimated at 7.6 trillion yuan (U.S. $1 trillion), the South China Morning Post said.
While the anti-coal advocates have made many of the same points in their reports before, the issues have increased in urgency because of pending decisions on economic stimulus and the coming five-year plan.
Earlier this month, the National Energy Administration (NEA) invited public comment on a series of planned reforms that will open access to onshore and offshore oil and gas exploration and development to “certain qualified market entities,” the China Daily Hong Kong edition said.
The removal of restrictions is part of a draft energy law that will “prioritize development of renewables as mid- and long-term energy solutions,” ICIS News reported.
According to the NEA draft plan, the government will “encourage the prioritized utilization of renewable energy … and push forward the replacement of fossil fuels with non-fossil fuels.”
The NEA plan for the oil and gas market follows a Jan. 9 announcement on opening the sector to domestic and foreign investors for exploration and development starting May 1.
At the time, the announcement by the Ministry of Natural Resources was billed as a “major reform” and a concession to Washington days before the signing of the “Phase 1” deal with the United States to avert an escalation of tariffs.
One selling point for China is that new domestic production would lessen reliance on imports. China’s dependence on foreign oil now exceeds 72 percent.
But the reform has drawn little response from international oil companies (IOCs).
“I think the upstream opening will attract little interest from IOCs,” Michael Meidan, director of the China Energy Program at the Oxford Institute for Energy Studies, told RFA in January.
Factors, including China’s difficult geology and depleted resources, make the opportunities unappealing to IOCs, but some private Chinese investors could find them more attractive if they expect to advance in the domestic market by putting themselves in the government’s good graces, Meidan said.
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Import dependence advantage
While the oil and gas offerings may not excite the market, the promoters of coal-fired power have sought to turn the import dependence issue to their advantage, Carbon Brief said.
The activists cited remarks by Premier Li Keqiang at a meeting last October that focused on energy security.
According to a report by the official Xinhua news agency, Li spoke first of the need “to make scientific coal explorations plans” before addressing domestic oil and gas exploration and renewable energy.
“Some have interpreted Chinese Premier Li Keqiang’s remarks … as a signal of support for coal-power expansion,” the Carbon Brief said.
“This was widely interpreted as a retreat to coal in the face of energy security concerns, following the trade war with the U.S. However, China’s energy security fears mainly relate to oil and, to a lesser degree, gas,” the group said.
Mikkal Herberg, energy security research director for the Seattle-based National Bureau of Asian Research, said the competing pressures are typical of those surrounding any major policy change in China.
“It’s not surprising that the power and coal lobby would see an opportunity to promote their interests as part of the coronavirus recovery process,” he said.
“It’s also not surprising that they would mobilize the energy security argument even though there are only marginal energy security interests involved,” he said.
China’s leaders are likely to seek some middle ground between the competing interests, Herberg said.
“The stimulus effect of building more coal power is mainly in the building phase, then the oversupply gets dealt with,” he said.
“So, I would expect more coal power to be planned and permitted than … the environmentalists want but less than the coal/power lobby wants,” Herberg said.
Last year, coal accounted for 57.7 percent of China’s energy consumption, down 1.5 percentage points from 2018, while “clean energy,” including natural gas, hydropower, nuclear, wind and solar increased 1.3 points to 23.4 percent, the National Bureau of Statistics (NBS) said.
Renewables alone including hydro, wind and solar supplied 13 percent of China’s consumption, ICIS said, citing official data. The government has targeted a 15-percent share for renewables by the end of 2020.
Coal-fired plants provided 66 percent of China’s electricity output last year, down from a high of 81 percent in 2007, Carbon Brief said.
