As reported in Issue 6, the National Energy Administration (NEA) eased its restrictions for provincial level approvals of new coal power plants through its “traffic light system”. This move prompted speculations that a surge of new coal power plants could ensue in conjunction with efforts to boost economic growth in the wake of the COVID-19 outbreak.
The power sector will likely play a significant role in the economic recovery. While capital spending fell by 6% from January to May, spending on utilities increased by 14%. The direction of these investments will strongly influence the future composition of energy generation and corresponding carbon emissions in China.
In June, it became known that so far, China’s power industry has proposed 40.8 GW of new capacity for 2020, and that 17.0 GW has been permitted for construction. This constitutes a significant increase compared to the 12 GW permitted in 2018 and 2019 combined. Greenpeace Asia reported that they identified 48 GW in new coal projects on the project lists of local governments. These developments indicate that coal power investment is part of many local governments’ measures to bolster economic growth.
Investments in renewable energy also continue. Prior to the COVID-19, the industry expected a 50% increase in solar photovoltaics (PV) installations in 2020. Currently, a 15-30% increase through an added 35-40 GW is projected. Total wind and solar additions may increase by 25% over 2019 levels to 70 GW.
Having dropped by 25% during the peak of COVID-19 lockdowns, China’s CO2 emissions in May were reportedly 4-5% higher year-on-year. Overall emissions are still 6% below 2019 levels so far. The main drivers of emissions increases were coal power and cement production. To date, it is unclear whether the surge in cement represents a mere catch-up in growth after previously lower production, or whether there has in fact been an increase in construction volumes.
Many recent developments seem to indicate a renewed increase in coal power permitting and construction. There are, however, political developments that point to an interest on the part of the central government to curb growth in new coal power capacity.
In May, the State-owned Assets Supervision and Administration Commission announced the next phase of its regional pilot scheme for the integration of coal assets from China’s five largest power generating companies. This policy involves the merging of assets of different companies into one for each region. According to a previous notice, the closing of coal power stations would be the next step, reducing capacity by 25-33%, although this has yet to be officially announced.
Moreover, in June, a policy jointly released by six Chinese ministries asks provinces to prioritise clean energy, cross-province power transmission and flexibility measures over approving or commissioning new power plants. This paper did not announce new measures or policies but emphasized a strict interpretation of the NEA “traffic light system”. Moreover, it restated the importance of the 1100 GW cap for coal capacity and reiterated that the “Supply-Side Structural Reform” will be continued, which involves a reduction of overcapacities and a transition to more qualitative growth.
Lauri Myllyvirta: “Analysis: China’s CO2 emissions surged past pre-coronavirus levels in May”, Carbon Brief. (EN)
Global Energy Monitor and Center for Research on Energy and Clean Air: “A New Coal Boom in China.” (EN)
China Energy Portal: Notice of the first batch of companies to be transferred under the regional integration of central government SOE in the coal fired power sector (EN/CN).
National Development and Reform Commission: 关于做好2020年重点领域化解过剩产能工作的通知 (CN)