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Mining & Energy

China reverts to its dirty coal ways


Chinese Coal Fired Power Plant

Chinese Coal Fired Power Plant

Coal-fired power plants that belch pollution and contribute to global warming were supposed to be phased out in a more environmentally sensitive China.

In recent years, Chinese officials have spun and won applause for new clean environment narratives at various climate change and other environmental events and fora. But the facts on the ground increasingly belie those clean energy ambitions and claims.

In June, China’s National Energy Administration (NEA) said the country plans to boost domestic oil production this year by 1% to 3.85 million barrels per day (bpd). The NEA also outlined plans to ramp up natural gas production, the cleanest burning fossil fuel, by 4.3% year on year to 181 billion cubic meters (bcm).

Pumped up crude oil output is already underway, expanding by 1.3% year on year in May at 16.46 million tons, according to National Bureau of Statistics (NBS) data.

China’s natural gas production increased even more in May, up a whopping 12.7% year on year, as the country’s economy swung back into gear after a Covid-19 lockdown that crushed energy demand in the first quarter.

The NEA plan also aims to increase renewable energy, including hydro, solar, wind, ethanol, and coal-to-liquids, as a larger percentage of the country’s energy mix and to offset reliance on mostly imported hydrocarbons.

The NEA plans 900 gigawatts (GW) of new installed non-fossil fuel power generation capacity in 2020, lowering the share of coal in the national energy mix to 57.5% from 57.7% in 2019, a small but noteworthy reduction.

China will continue to replace coal-fired power plants with electricity-based heating to curb coal consumption, the NEA said. It will also accelerate the construction of liquefied natural gas (LNG) pipelines and storage facilities.

But this is where central plans and statistical reality diverge.

While China – the world’s largest coal producer and consumer – is officially calling for a reduction in its reliance on the polluting fuel, its statistical consumption patterns tell a different story.

Coal used by coastal power plants at five major Chinese utilities hit 488,800 tons during the last week of March, more than double from a record low seen on February 10, according to China Coal Transport & Distribution Association (CCTDA).

Though China’s coal uptick was partly in response to a spike in electricity demand as factories restarted after lockdown measures ended in mid-March, coal imports in April surged 35% to 34.42 million tons from a year earlier.

That demand, which slipped slightly year on year in May, is projected to rise the rest of the year at power plants and among industrial users as the economy stirs back to life.

There are central plans to use much more. China plans to add coal storage facilities across its power plants in 2020 to ensure stockpiles at or above 15 days’ normal supply for coal-driven power plants.

Despite the green rhetoric, China’s coal consumption in 2019 was up not down by 1% over the previous year, driven by stronger energy demand. That marked the third consecutive annual rise in coal use.

The government is also permitting more domestic coal production, with as much as 141 million tons worth greenlighted from January to June of 2019, an increase of 2.6% year on year, according to government data. In 2018, only 25 million tons of domestic production was approved.

Analysts now expect China will not only boost coal production and build more coal-fired plants, but will also ease pressure on local governments to shut older and inefficient coal mines.

The boost in coal production comes as the government struggles to meet energy demand and as it prepares for promulgation of its next Five-Year Plan, which will provide guidance for policy and industrial development from 2021-2025.

China, the world’s largest greenhouse (GHG) emitter due to its massive coal consumption, accounts for a whopping 27% of GHG emissions while representing only 18% of the global population.

China’s increased coal consumption, production and power development, critics say, is inconsistent with Paris Climate Accord goals, under which non-OECD Asia’s coal power generation needs to be reduced by at least 63% by 2030 and then totally phased out by 2037.

Given the reality that most coal-fired power plants have a lifetime of around 50 years, the fact that China is building new ones will necessarily put its stated climate change and GHG reduction agendas in jeopardy.

Simply put, China will remain reluctant to phase-out capex intensive coal-fuelled plants as long as it is faced with ever-rising energy demand and the cost of replacing coal with gas-fueled power plants remains more expensive.

Jennifer Song, an analyst with Morningstar, a global financial services firm, told media two weeks ago “we expect coal to remain the primary source for [power production] baseload dispatch, given China’s cheap and plentiful coal reserves.”

“Coal-fired generation’s reliability and large-scale make it well suited to meet the country’s power needs,” she added.

China’s renewed, if not stealthy, coal playbook may come as a surprise to many given the ongoing supply overhang in global LNG markets, where the super-cooled fuel’s prices are now near historic lows.

Spot prices for the fuel in Asia, home to nearly two-thirds of global LNG demand, have plunged to $2 per million British thermal units (MMBtu), below the cost of most producers’ breakeven points.

That’s led, in turn, to a recent surge of canceled and redirected cargoes. The average LNG price for August delivery to northeast Asia is estimated at between $2.15-$2.30/MMBtu, compared to the July delivery assessment of $2.10/MMBtu and an August estimation of around $2.20-2.30/MMBtu.

But while China’s energy demand is still growing, even with global economic headwinds and a damaging trade war with the US, it lacks the LNG infrastructure to take full advantage of LNG market conditions and reduce its coal dependence.

To be sure, China is not alone to blame for the rise in coal’s usage. In 2018, at the height of climate change concerns, global coal demand rebounded and grew 1.4% due to increased consumption in Asia, where the fuel’s overall usage increased by 2.5%.

Some of the region’s largest coal users continue to rely on dirty hydrocarbons, mostly for their power sectors but also for industrial usage including steel production. Other coal addicts include India, though its coal usage slipped marginally last year, as well as Asian economic tigers Japan, South Korea, Vietnam and Taiwan.

Source: Asia Times – China reverts to its dirty coal ways

About uwe.roland.gross

Don`t worry there is no significant man- made global warming. The global warming scare is not driven by science but driven by politics. Al Gore and the UN are dead wrong on climate fears. The IPCC process is a perversion of science.

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  1. Reblogged this on uwerolandgross.

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    Posted by uwe.roland.gross | July 9, 2020, 3:09 pm

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