China shock-waves for economy, power and CO2

China suspends coal-fired expansion in 15 provinces, proving there's an over-capacity problem

By Richard Black

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China's coal boom is coming to an end. Image: LHOON, Creative Commons licence
China's coal boom is coming to an end. Image: LHOON, Creative Commons licence

Changes underway in China’s love affair with coal-fired power illustrate some wider changes going on in the economy, CO2 emissions and renewables. I try to illustrate these new trends with four charts.

Change in annual thermal capacity

Chart 1: Last year, China commissioned an astonishing amount of new coal-fired power, equivalent to Britain’s entire generating capacity (about 70 gigawatts). Even more astonishingly, it did not need any of these new power plants: in the same year, actual coal-fired power generation fell, for the second successive year. That implies huge coal over-capacity, and growing credit risk at China’s state-owned coal electric utilities. China’s coal power sector is about to see the same capacity cuts already underway in steel and mining.

Annual change in power demand

Chart 2: Debate continues about whether China will see a hard landing. But the country’s electricity demand last year grew at its slowest rate since at least 1970, at 0.5%. That slowing power demand growth explains why the country doesn’t need new coal power plants. And it contradicts the official headline rate of 6.9% GDP growth last year. Has a hard landing already happened?

Change In Coal Consumption

Chart 3: After being the global engine of coal demand growth for the last two decades, China’s coal consumption has fallen for two successive years. China’s coal use and CO2 move in lock-step. That means that the world’s biggest CO2 emitter has also seen two years of falling emissions.

Growth in RES vs Thermal

Chart 4: Notwithstanding slowing power demand growth and coal generation over-capacity, China continues to over-achieve its renewable power targets, suggesting that the last two years may mark a lasting turning point in the country’s energy mix.

What does it all mean? As the recent Energy and Climate Intelligence Unit report noted, China’s annual installed coal-fired power may have peaked in 2015. That appeared all but confirmed on Thursday, when the country’s energy regulator said that it would halt construction of coal power plants in 15 provinces.

And it seems increasingly likely that global energy-related CO2 emissions will peak before 2020, after steady rises for the past two centuries. If coal consumption has peaked in China, falling emissions in OECD countries may now cancel rises in other developing countries. Peaking CO2 would be an important turning point in the fight against global climate change.

This article was originally posted on Gerard's Energy and Carbon website