China’s Coal Use Is Rising, but Emissions Might Not Follow

10:24 AM @ Thursday - 23 March, 2023

Last year, China consumed more coal, built more coal capacity and approved a record number of potential future coal power plant additions.

On Tuesday, China said coal use rose 4.3% in 2022 compared with the previous year—a higher-than-expected increase that came even as the economy was kept down by widespread Covid-19 lockdowns.

That all looks like grim news for the effort to limit climate change, and for China’s pledge to start ramping down coal consumption in 2026 and to reach peak emissions before 2030.

But China’s unusual approach to the energy transition means the impact might not be as bad as it seems. That matters since China accounts for nearly one third of the world’s total carbon-dioxide emissions.

This past year shows the difficulty in assessing China’s current and future emissions. Global Carbon Project, a research consortium that produces annual data focused on emissions used by the United Nations, forecast in November that China’s emissions had fallen 0.9%. Carbon Monitor currently estimates that China’s emissions dropped by 1.5% and the International Energy Agency said it expected China’s emissions to remain broadly flat.

As China’s newly reopened economy ramps up, emissions could rise again. China started construction on 50 gigawatts of coal power capacity in 2022—six times as much as the rest of the world, according to a report published Monday by two independent climate research organizations, the Centre for Research on Energy and Clean Air and the Global Energy Monitor.

China also added a record 125 gigawatts of new solar and wind energy capacity, more than the U.S., Europe and India combined. The country says it aims to build another 160 gigawatts of solar and wind energy capacity in 2023.

If all goes to plan, this renewable power would relegate coal plants to backup status, meaning they would run well below capacity and add less to emissions than the headline number may suggest.

“The coal data looks scarier than it is,” said Yao Lixia, a senior research fellow at the National University of Singapore’s Energy Studies Institute, who pointed to China’s push for electric vehicles and non-fossil fuel power generation as silver linings for the country’s future emissions trajectory.

The main reason coal use may not surge is economics. The new coal facilities being built will likely lose money for their owners. Instead, they serve an important purpose, meeting Beijing’s goal of boosting energy security by reducing reliance on energy imports and ensuring stable power supply.

After a nationwide power crunch in 2021, China’s leader, Xi Jinping, called for the country “to hold the energy rice bowl in its own hands.” Increases in domestic coal and natural-gas production soon followed.

That boom in the construction and approval of coal projects, in particular, raised global alarms about China’s commitment and ability to kick its dependency on coal. Indeed, all that new capacity “creates a whole additional set of vested interests for continuing coal use for longer,” said Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air.

But while the new coal projects might mean the fossil fuel’s use will continue for longer, experts say the speed with which renewable energy capacity is being added will likely relegate coal to an eventual supporting role in China’s future energy mix.

In fact, some independent emissions-tracking groups estimate that emissions may actually have gone down in 2022 despite the larger-than-expected increase in coal consumption, and may continue to drop this year.

While greater coal consumption generally translates into higher emissions, China appears to be burning more low-quality coal, according to researchers at Citic Futures—generating less power and thus less emissions per kilogram of coal. Thermal power generation, which largely relies on coal, rose by just 1.4% in China last year, while activity in the two largest coal-burning industries, crude steel and cement production, suffered drops of 1.7% and 10.5%, respectively, according to official data.

And, while Chinese power demand is expected to grow by 6% this year, according to the state-backed China Electricity Council, more of that demand will be fulfilled by wind, solar and nuclear power generation, which are predicted to account for more than half of China’s power generation capacity by the end of this year—a first for China.

As long as those non-fossil fuel power sources continue to grow in importance and electricity demand growth stabilizes, emissions from coal power generation will plateau and then decline, says Mr. Myllyvirta.

Many of China’s new coal plants are meant to provide backup rather than baseload power, supporting new large-scale wind and solar parks being built in China’s deserts and plains, which are connected by transmission lines to China’s coastal industrial centers.

In December, state-run China Three Gorges Corp. said it broke ground on a multibillion-dollar renewable and fossil-fuel energy project in the northern Chinese region of Inner Mongolia. The installation will eventually feature 8 gigawatts of solar power and 4 gigawatts of wind power capacity, according to Chinese state media reports. Another 4 gigawatts of coal-fired power capacity, in addition to energy storage, is supposed to increase when the sun isn’t shining and the wind isn’t blowing.

During times of peak demand, for instance when consumers turn on air conditioners or heaters, coal can kick in to supplement wind and solar. Last year, China’s peak capacity hit a record 1,290 gigawatts, a nearly 20% jump from two years earlier.

Using coal plants as balancing power sources means that their utilization will likely drop even further, said Yan Qin, an analyst at financial information provider Refinitiv. In 2022, the average running hours of China’s coal plants fell by eight hours for the year, while the average utilization hours of solar power generation increased by 56 hours, according to data from the China Electricity Council.

It is also likely that some of the newly approved coal plants will end up being shelved or abandoned because of poor project economics, according to energy consulting firm Lantau Group. Coal power generation has largely been a loss-making business for Chinese state-owned enterprises, while their renewables have been posting profit. China Resources Holdings Co., which operates coal plants across China, said in 2021 it had recorded $660 million of losses in their thermal business, while their clean-energy business made $940 million in profit.  – WSJ –