China set to ban all new coal plant development

After years of “binge-building” new coal plants, China is expected to suspend development of all new coal-fired power generators until the start of 2018, as part of its 13th Five Year Plan for the energy sector, according to state media reports.

The ban reflects the central government’s growing concern with thermal generation overcapacity, as electricity demand declines and new plant build-out outpaces the decommissioning of older units.

It also reflects the broader concerns of groups like Greenpeace, that state company investments are “being used to drive short term GDP numbers with no regard for market demand or investment returns.”

As The Wall Street Journal reported in May, China already has more power-generating capacity than any other country in the world and is projected to add nearly 200GW of new thermal power capacity between 2015 and 2017, most of it coal-based.

In April, Beijing moved to address this by banning construction of new coal-fired power plants in areas with surplus power supply, like Shandong, which according to Greenpeace analysis could have over 30GW of excess capacity by 2020.

The news this week of a ban on all new coal-fired power stations – which was reported by Xinhua News’s Economic Information Daily – suggests government is now taking the supply-demand disparity more seriously.

Of course, China’s coal power problem is not limited to weakening demand. Cutting coal-fired electricity generation is also crucial if Beijing is to meet its 2030 carbon reduction pledge, and to address its air pollution crisis.

Furthermore, as Tim Buckley from the Institute for Energy Economics and Financial Analysis has noted, developing new coal power plants puts China out of step with a world that is shifting to cheaper and cleaner renewable energy generation.

“Once wind, solar and hydro [power plants] are built they will always be cheaper than coal,” Buckley said in The Financial Review on Monday.

“Why would China buy and burn expensive imported coal when they can generate renewable energy for nothing?”

As with coal, China has installed more renewable energy capacity than any other country for the past five years running. But according to the AFR, much of this renewables capacity is currently being wasted.

Official figures show 15 per cent of wind generation was not used during 2015 and this increased to 26 per cent over the first quarter of the year.

At the same time the utilisation rate of China’s coal-fired power stations was just 48 per cent in the first quarter of the year, down from above 60 per cent in 2011.

This is expected to fall further as the government-owned distributor and retailer continues to prioritise renewable energy. Coal’s share of electricity generation is expected to fall below 60 per cent by 2020, after peaking at 79 per cent between 2009 and 2011.