China increases use of coal power amid heatwave and drought, despite rising carbon emissions

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Recent reports on coal-fired power and mining industries show that the Chinese Communist Party (CCP) has been going against its vow to reduce carbon emissions since last year. The subject of reviving coal-fired power generation is no longer evaded among Chinese financial experts, especially after drought-induced power shortages began in July.

Previously reduced use of coal-fired power needs to be accelerated, Cinda Securities, a Beijing-based financial services firm, said in an Aug. 25 report, citing extremely high temperatures that caused a significant drop in hydropower in major provinces such as Sichuan, which not only suffered power and generation limits, but also stopped supplying power to other provinces.

Another Beijing-based investment advisory firm, Capital Securities, expressed a similar view in its Aug. 26 report, saying global energy shortages will further drive up the prices of natural gas, oil and coal; However, compared to natural gas and oil, coal has the highest price-performance ratio for power generation, so China should speed up coal power projects, he said.

Since CCP leader Xi Jinping pledged to achieve peak carbon emissions by 2030 and net-zero emissions by 2060, coal emissions have been somewhat limited in the Chinese market. carbon that was working last July.

However, this decision is almost futile because carbon credits are so preferential, mostly free, and even allow coal industries to profit from the sale of their excess credits, according to a May report (pdf) from the International Society for energy transitions. Studies (ISETS) and EMBER, an independent non-profit environmental energy think tank.

Moreover, in China, the carbon price per kWh of coal-fired electricity is only 0.03 RMB (about $0.0043), less than 8% of the on-grid price, the report estimates.

By the end of 2021, more than half of the provinces have imposed restrictions on power generation as part of the CCP’s national carbon reduction campaign. But after that, the authorities started to lift the restrictions on the coal power sector.

Since the first quarter of this year, coal’s share has risen to 62.8% of the country’s total electricity generation, slightly below 70% at its peak, according to official data.

As the world’s largest coal producer and consumer, China relied heavily on coal-fired power, a major factor that makes it the largest carbon emitter of any country in the world.

An aerial view of the exposed sandy beach along a section of the Yangtze River on August 19, 2022 in Wuhan, Hubei province, China. (Getty Images)

Extreme weather conditions affecting electricity generation

Due to high temperatures, low rainfall and ensuing drought, dozens of rivers and reservoirs in southwest China were drained or their water levels dropped dramatically, leading to a decrease nearly half of electricity generation in major hydroelectric provinces such as Sichuan.

Chongqing, a huge municipality in Sichuan province, continues to experience high temperatures, with the highest reaching 45 degrees Celsius (113 degrees Fahrenheit). The Yangtze River, which originates in the snow-capped mountains of the western highlands, has fallen to a level that usually only occurs during the winter dry season.

The power shortage has prompted factories in Sichuan to implement power restrictions and production cuts. Among them, the factories of Taiwanese electronics assembly giant Foxconn and Chinese electric car battery manufacturing giant CATL have cut production. Japanese Toyota and German Volkswagen factories in the area are also closed for the short term.

China’s power system should be designed to be more resilient and take into account the possibility of an extreme weather event every 10 to 15 years, warned David Fishman, a senior executive in the Shanghai office of Lantau Group, an energy consultancy. Asia-Pacific Energy, The Wall Street Journal quoted Aug. 29.

On August 27, Beijing asked provinces to speed up approval of new power generation projects, mainly by adding more coal and nuclear power plants.

Compared to nuclear, which takes a long time to set up (at least 10 years from design), the construction cycle for a coal-fired power plant is relatively short, generally only 18 months for a 600 MW unit.

In April, Yu Bing, deputy director of the National Energy Administration, said that under the current technical conditions and installation structure, coal power is the most economically viable, safe flexible regulating resource and reliable.

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Smoke rises from a large steel plant as a Chinese worker works at an unauthorized steel plant in the foreground on November 4, 2016 in Inner Mongolia, China. (Kevin Frayer/Getty Images)

China accelerates development of coal power

According to an industry development report by Cinda Securities, since power curbs and production cuts began in the second half of last year, Chinese investment in thermal power (mainly coal) began to rise after declining for several consecutive years.

Citing data from the China Electricity Regulatory Commission, the report said China’s thermal power investment continued to decline between 2016 and 2020 and started to rebound after bottoming out in 2020; investment in thermal power in 2021 increased 21.5% year on year to 67.2 billion yuan (about 9.74 billion US dollars), and in the first half of this year, investment reached 34.7 billion yuan (about $5.03 billion), an increase of 71.8% year-on-year.

Greenpeace data showed that China approved 11 GW (gigawatt) of new coal-fired power installations in the fourth quarter of 2021, representing 59.3% of new installations in the year, and 8.63 GW of new installations coal-fired power generation in the first quarter of 2022, a 103.1 percent year-over-year increase.

According to the China Electricity Council’s April electricity supply and demand report, coal supply costs rose another 130 billion yuan (about $18.84 billion) in the first quarter, much more than the growth in selling prices.

Advantages of coal power in China

Nevertheless, according to Capital Securities, the development of coal-fired power generation remains the best option for China to solve the current power shortage problem in the face of global energy shortages.

In addition to abundant coal resources, coal has a higher price/performance ratio than natural gas and oil. In other words, coal is cheaper than natural gas and oil to provide the same heating capacity: if coal costs $1, natural gas and oil cost $2.11 and $1.41 respectively. , comparing the average price per unit of heat.

In the first quarter of this year, coal-fired power generation accounted for 62.8% of total electricity generation, remaining the main source of electricity. China produced 1.08 billion tons of raw coal, up 10.3 percent year-on-year, according to an April report by the China Electricity Council.

CCP Reduction of carbon emissions

In October 2021, while facilitating the development of coal-fired power, the authorities also planned to renovate coal-fired power plants in terms of energy saving and heat supply, supposedly to promote clean and energy-efficient energy. low carbon.

At a coal industry meeting in April, Lue Qinggang, director of the Institute of Engineering Thermos Physics of the Chinese Academy of Sciences, presented a new technology capable of converting non-flammable solid coal fuels into fuels. gas type.

The application of this technology has been reported to achieve “ultra-low emissions” and clean coal power in the coal chemical industry.

As of last December, the authorities classified both coal and petrochemicals in the energy consumption of raw materials and excluded them from the total energy consumption. This nominal division provides official support for the unrestricted use of coal power in the future.

Also, power generation from biomass in China, such as using straw and other mixtures of biomass and coal, one of the ways to save energy and reduce emissions carbon in the coal power industry, currently occupies only a very small percentage, according to ISETS and BRISE.

As the CCP last month announced its suspension of climate change negotiations, its immature carbon capture, storage and distribution technology could make it difficult to break through in the near future, The Wall Street Journal reported on Aug. 18. .

Jennifer Batman

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Jennifer Bateman is a China-focused journalist.

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