China Increases Use of Coal-Fired Power Amid Heat Wave and Drought, Despite Increased Carbon Emissions

China Increases Use of Coal-Fired Power Amid Heat Wave and Drought, Despite Increased Carbon Emissions
A worker uses a torch to cut steel pipes near the coal-powered Datang International Zhangjiakou Power Station at Zhangjiakou, Hebei Province, on November 12, 2021. (Greg Baker/AFP via Getty Images)
Jennifer Bateman

Recent reports on coal power and mining industries show that the Chinese Communist Party (CCP) has run counter to its carbon reduction vow since last year. The subject of re-invigorating coal-fired power production is no longer dodged  among Chinese financial experts, especially after drought-induced power shortages started in July.

The previously reduced use of coal power needs to be accelerated, said Cinda Securities, a Beijing-based financial service company, in a report on Aug. 25, citing the extremely high temperatures that have caused a significant drop in hydropower in major provinces such as Sichuan, which not only suffered electricity and production limits but also stopped supplying electricity to other provinces.

Another Beijing-based investment consulting company, Capital Securities, held a similar opinion in its report on Aug. 26, saying that 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, it said.

Since CCP head Xi Jinping pledged to reach peak carbon emissions by 2030 and net zero emissions by 2060, coal power emission was somewhat restricted in the Chinese carbon market that operated last July.

However, the move is nearly futile as carbon credits are so preferential, mostly free of charge, and even allow coal power industries to profit from the sale of their surplus credits, according to a May report (pdf) by the International Society for Energy Transitions Studies (ISETS) and EMBER, a non-profit independent environmental energy think tank.

Furthermore, in China, the carbon price per kWh of coal power is only RMB 0.03 (about $ 0.0043), less than 8 percent of the on-grid price, the report estimated.

In late 2021, more than half of the provinces imposed restrictions on electricity production as part of the CCP’s national campaign of carbon emission reduction. But after that, the authorities began to lift the restrictions on the coal power sector.

From the first quarter of this year, coal power shares rose to 62.8 percent of the country’s total electricity generation, slightly below 70 percent at its peak, according to official data.
As the world’s largest coal producer and consumer, China relied heavily on coal power, a major factor that makes it the highest carbon emitter of all the countries in the world.
An aerial view of the exposed sand beach along a section of the Yangtze River on August 19, 2022 in Wuhan, Hubei Province, China. (Getty Images)
An aerial view of the exposed sand beach along a section of the Yangtze River on August 19, 2022 in Wuhan, Hubei Province, China. (Getty Images)

Extreme Weather Affecting Power Generation

Due to high temperatures, low rainfall, and subsequent drought, dozens of rivers and reservoirs in southwestern China were drained or their water levels dropped dramatically, causing power generation in major hydropower provinces such as Sichuan, to decrease by almost half.
Chongqing, a huge municipality in Sichuan Province, continues to experience high temperatures, with the highest reaching 45 degrees Celsius (113 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.
Electricity shortage caused plants in Sichuan to implement power restrictions and production cuts. Among them, factories of Taiwan’s electronics assembly giant Foxconn and China’s electric car battery manufacturing giant CATL have cut production. Japan’s Toyota and Germany’s Volkswagen factories in the region are also in a short-term shutdown.
The Chinese 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 manager at the Shanghai office of Lantau Group, an Asia Pacific energy consulting firm, The Wall Street Journal cited on Aug. 29.

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

Compared to nuclear power, which takes a long time to set up (at least 10 years from design), the construction cycle for coal power is relatively short, usually 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, and reliable flexible regulating resource.
Smoke billows from a large steel plant as a Chinese labourer works at an unauthorized steel factory, foreground, on November 4, 2016 in Inner Mongolia, China. (Kevin Frayer/Getty Images)
Smoke billows from a large steel plant as a Chinese labourer works at an unauthorized steel factory, foreground, on November 4, 2016 in Inner Mongolia, China. (Kevin Frayer/Getty Images)

China Accelerates Developing 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, China’s thermal power (mainly coal) investment started to rise after it had decreased for several years in a row.

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

Data by Greenpeace showed that China approved 11 GW (gigawatt) of new coal power installations in the fourth quarter of 2021, representing 59.3 percent of the year’s new installations, and 8.63 GW of new coal power installations in the first quarter of 2022, a 103.1 percent increase year-on-year.
According to the April electricity supply and demand report of the China Electricity Council, coal procurement costs surged by an additional 130 billion yuan (about $18.84 billion) in the first quarter, much higher than the growth in sales tariffs.

Coal Power Advantages in China

Nonetheless, according to Capital Securities, the development of coal-fired power generation is still 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 compared to natural gas and oil. In other words, coal is cheaper than natural gas and oil to supply the same amount of 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 made up 62.8 percent of total electricity generation,  remaining the primary source of electricity. China produced 1.08 billion tons of raw coal, up 10.3 percent year-over-year, according to an April report by the China Electricity Council.

CCP Carbon Emission Reduction

In October 2021, while easing the development of coal power, the authorities also planned to renovate coal power units in terms of energy saving and heat supply, reportedly to promote clean and low-carbon power.
At an April coal industry meeting, Lue Qinggang, director of the Institute of Engineering Thermos Physics at the Chinese Academy of Sciences, introduced a new technology that can convert non-flammable solid coal fuels to gas-like fuels.

Application of that technology was reported to realize “ultra-low emission” and clean coal power in the coal chemical industry.

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

In addition, China’s biomass power generation, such as, using straw and other biomass and coal blending, one of the means of energy saving and carbon reduction in the coal power industry, at present, occupies only a very small percentage, according to ISETS and EMBER.

With the CCP last month announcing its suspension of climate change negotiations, its immature carbon capture and storage and distribution technology may make it difficult to make a breakthrough in the near future, The Wall Street Journal reported on Aug.18.