China Still Going Green Despite Coal Moves
By Yuanchao Xu 18 June, 2020
A green Covid-19 recovery is key. CWR's Xu deciphers the mixed signals on coal in China & shows why it stills need coal
Covid-19 has brought huge shocks to the already sagging global economy. Various countries have announced stimulus packages to tackle the downturn economy and high unemployment numbers but a big question here is what about green development? While some packages have mentioned green conditions it is still yet to be seen really how much of the world’s rebuilding and development will be green, especially how much of China’s given its global impact.
China’s 2020 coal consumption est. to be down to 3.8bn tonnes, better than target…
…yet there are mixed signals
Energy, coal are high on the agenda for green packages. China has set an ambitious goal towards ecological civilisation in its 13FYP for energy, targeting to control its coal consumption within 4.1bn tonnes and within 58% of the total energy consumption. It is estimated that in 2020, the last year of the 13FYP, China’s coal consumption will be 3.8bn tonnes, even outperforming the target.
However, there are mixed signals and questions on coal’s future in China, which we look at below.
Potential signal of more coal
China Dialogue has recently expressed concerns over the potential signal that China is going to have more coal in future, as China has downgraded the risk level in many regions according to the latest risk alert for coal power projects.
NEA downgraded risk level for coal projects across many regions
See less red in maps below
The risk alert is released yearly by the National Energy Agency (NEA) showing risks of coal power investments. It is also considered as a restraint on coal power projects, as that no new power projects will be approved if a region is marked with “high risk”.
NEA uses different colours to mark risk levels (red: high risk, orange: medium risk, green: low risk), which is referred to as the “traffic light system”. The Lantau Group plotted the “traffic light system” from 2019-2023 in their recent report, regarding the downgrading of risk levels (relaxing of coal restraints) on coal power projects; see graphic below.
The risk level shown above is the overall risk, which includes three aspects: overcapacity risk, environmental risk and profitability risk. Although the overall risk seems to be downgraded, it is not the case for environmental risk. As presented below, for 2019-2021, 8 provinces are marked as red, while for 2022-2023, a more detailed city level restraint is given including over 80 cities from 10 provinces. Many cities in coal provinces such as Shanxi, Shaanxi and Shandong are still restricted for coal projects given their environmental capacity.
Surprising but some renewables need coal – 6/20 UHV channels are already 100% renewables
Moreover, there are still many other restraints for regions even marked as green in the “traffic light system”.
Renewable energy and power transmission projects should always be prioritised in those regions. To be noted, the newly approved 7.96GW coal power projects in March 2020 all belong to power transmission projects. We suppose that the relaxing restraints on coal power might be related to China’s future power transmission plans.
Relaxing restraints could be to help expand power transmission…
…renewables still mismatched & intermittent thus needs a stable input
The geographical mismatch of renewables and power consumption has long been an issue for China, resulting in large curtailment of renewables as well as heavy pollution in developed regions. Ultra-High Voltage (UHV) power transmission projects are considered as a solution, for the sake of both increasing utilisation of renewables and alleviate environmental pressure.
China has now built 20 UHV channels and become one of the most advanced countries in UHV. In the Central Economic Work Conference in 2018, UHV power transmission projects are included in the “new infrastructure” together with 5G, big data, AI, etc. According to Mao Weiming, Chairman of the State Grid, the confirmed investment for UHV projects in 2020 has reached RMB112.8bn.
Comparatively, some renewables (e.g., wind/solar energy) have intermittent outputs thus stable sources, such as coal power, need to be bundled in the power transmission. As of 2019, the share of renewables in the 20 existing UHV channels varies from 0-100% though on average is 52.4% (see chart on the right), out of which 6 UHV channels are 100% renewables. In May 2020, China just completed construction of a new UHV channel with an investment of USD3.17bn, which is also the first ever UHV channel designed particularly for renewables.
As Ye Chun, an energy expert, commented, renewables might be the main force in power transmission in future, but for now, coal power is still the principal source.
Overall, China is still going green
The loosening of restraints on coal does not mean a stall in China’s green development. Instead, the strict environmental requirements on newly built coal power capacities can promote the cleaner use of coal. Not to mention that most of the plans are for the power transmission and better utilisation of renewables.
According to Bloomberg, China has invested USD904.3bn in renewable energy from 2004 to 2019, even larger than the global investment in power sector in 2018. Despite this, the issue is really how to take better advantage of existing capacities rather than building more.
China is still facing severe environmental issues…
…but green development still the focus of the 14FYP
Ecological targets have already been embedded in China’s millennium plan; they are nothing new. As outlined by Huang Runqiu, the Minister of Ecology and Environment, China is still facing severe environmental issues including heavy chemicals-based industrial structure and coal-based energy mix but ecological protection/green development is still the focus in the 14th FYP. Actually, the ‘General Plan for Key Projects on the Protection and Rehabilitation of Key National Ecological Systems (2021-2035)‘ recently published by NDRC and MNR has already set the scene for the next decade. In the foreseeable future, we can still expect more effort put in this field by China.
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