Yet some of its provinces are literally doubling down. Planning documents from small, sleepy Jiangxi reveal a push by that one region to build 22.6 gigawatts (GW) of new coal plants by 2025, raising its capacity twofold. Jiangxi would in theory become the world’s fifth biggest coal power.
Data from the Institute for Energy Economics and Financial Analysis show that the EU’s coal use so far this year has fallen 23 per cent, thanks to wind power and a surge in carbon prices to €25 as Brussels drains excess contracts. This has driven a switch to gas with half the CO2 footprint. Coal use has dropped 13.9 per cent in the US. China is completely out of line.
“It does not look good, and it isn’t good,” says Adair Turner, president of the Energy Transitions Commission.
It does not look good, and it isn’t good.
Lord Adair Turner, Energy Transitions Commission chairman
“Two or three years ago they began to get a grip on this and told the provinces to stop building coal plants, but the global situation has changed. They face a tariff war that is slowing the economy so they are responding in the way they know with more concrete and more infrastructure,” Lord Turner said.
National security has intruded. “There are those saying we can’t switch over to (LNG) gas because the Americans may cut us off. The tariff war is universally seen by the Chinese as an attempt to keep their country down,” he said.
On the face of it, the facts in China are grim. The Global Energy Monitor says satellite images and analysis of Chinese documents show that frozen expansion plans are being reactivated. Half of the new coal plants approved during a wild permitting spree before 2016 are now being built or in the pipeline. This adds 148GW of new coal capacity, equal to the EU’s entire fleet.
The signals from Beijing hint at a massive rise beyond the current 1,027GW capacity under the next Five Year Plan. The state-owned Electric Power Planning Institute wants a 1,400GW cap in 2035.
The Energy Monitor said this is going catastrophically in the wrong direction. China would have to cut capacity to 600GW over the next decade to give a 2C limit any chance.
Meanwhile, Chinese banks are financing a blizzard of new coal plants across south-east Asia as part of the Belt and Road, even in countries where renewables have reached grid parity and the projects may be rendered financially obsolete in a decade. It is a way to export China’s technology in “clean coal”.
These practices risk a riposte once the Trump anomaly is over in Washington. Democratic contender Elizabeth Warren is proposing a carbon border tax in the US presidential campaign. This can be dialled up to levels that amount to a trade blockade. It is a veiled threat to shut China – or Jair Bolsonaro’s Brazil – out of the US market.
China is going to waste a lot of money on stranded assets. Demand for electricity generated from thermal coal is already beginning to fall.
Carbon Tracker’s New Energy Strategist Kingsmill Bond
Yet there is a big twist to this Chinese saga that may ultimately turn the picture on its head. Utilisation rates of China’s coal plants have collapsed to 48.6 per cent. “China is going to waste a lot of money on stranded assets. Demand for electricity generated from thermal coal is already beginning to fall,” says Kingsmill Bond from Carbon Tracker.
Behind this is disruption from super-cheap solar and wind power hitting the grid. A recent paper by three Chinese economists in Nature Energy concluded solar has trumped coal in all of China’s 344 cities.
Bloomberg New Energy Finance (BNEF) says solar module costs have fallen 89 per cent and onshore wind by 49 per cent since 2010. “In China, their levellised costs are now below the average regulated coal power price,” it said. Ergo, a new solar park in Guangdong or an Inner Mongolia wind farm undercuts a new coal plant.
BNEF says we are now going further. By 2030 renewables will be so cheap that it makes economic sense to shut even the most modern coal plants and write off the sunk costs. It thinks solar is heading for $US25 per megawatt hour, tantamount to free power.
‘Green leap backward’
Much has been made of a “green leap backward” in China over the last two years. The sudden elimination of wind and solar subsidies has been a market shock. Renewable investment has crashed by 60 per cent.
One should not to read too much into this policy shift. The same happened in Spain. Renewables later rebounded. “The Chinese were trying to test whether renewables can fly on their own but overdid it. This is just a pause,” said Lord Turner.
Despite all, China added 44.3GW of solar capacity last year, a big chunk of global installations (104GW). “There is no sign that the Chinese are turning their backs on renewables,” said Bob Ward from the Grantham Centre at the London School of Economics.
The optimistic view is that China’s latest coal mania is the last futile roar of an industry facing annihilation. The coal lobby still has some residual hold over Communist Party bosses but ultimately China itself faces an existential threat from snow melt in Tibet and desertification.
“A political battle is going on in China over two versions of the future: one is dirty; one is clean. My money is that clean will win and that China’s CO2 emissions will peak well before 2030,” said Professor Ward.
By all means be cross with China for breaches of the Paris climate accord, but let us not overreact. The hard logic of the market will defeat coal soon enough.
The Daily Telegraph, London