Is China Hiding a Renegade “Coal Tsunami”?

The Mountains are high, and the Emperor is far away. – Chinese Proverb

Connections between the Chinese Central Government in Beijing and the people has historically been weak, with much regional autonomy and little loyalty. The proverb has thus come to generally mean that central authorities have little influence over local affairs, and it is often used in reference to corruption.   –   Wikipedia

Really bad news, if true.

China building renegade coal plants.

However, read on – mitigating factors may make this phenomenon somewhat self limiting.

Guardian:

Chinese coal-fired power plants, thought to have been cancelled because of government edicts, are still being built and are threatening to “seriously undermine” global climate goals, researchers have warned.

Satellite photos taken in 2018 of locations in China reveal cooling towers and new buildings that were not present a year earlier at plants that were meant to stop operations or be postponed by orders from Beijing.

The projects are part of an “approaching tsunami” of coal plants that would boost China’s existing coal capacity by 25%, according to the research group Coalswarm.

The total capacity of the planned coal power stations is about 259GW, bigger than the American coal fleet and “wildly out of line” with the Paris climate agreement, the group said in a new report.

“This new evidence that China’s central government hasn’t been able to stop the runaway coal-fired power plant building is alarming – the planet can’t tolerate another US-sized block of plants to be built,” said Ted Nace, executive director of CoalSwarm, which is funded by international green groups and private donations.

CoalSwarm-Tsunami Warning:

• ■  259 Gigawatts (GW) of new capacity are under development in China, compa- rable to the entire U.S. coal fleet (266 GW). If built, the new plants will increase China’s current coal fleet of 993 GW by 25%.
• ■  The new capacity is the result of a permitting surge from late 2014 to early 2016, after a regulatory devolution from central to provincial authorities.
• ■  In 2016 and 2017, central authorities sought to rein in the surge through a series of suspension orders.
• ■  Contrary to previous reporting and analysis, many of the restrictions only delayed new projects rather than stopping them.
• ■  Adding 259 GW of new coal power in China is wildly out of line with the Paris climate agreement. According to the IEA, a 50% chance of limiting future tem- perature increases to 1.75°C requires that China phase out its traditional coal plants by 2045.
• ■  The surge in new projects will overwhelm China’s own 1100 GW coal cap in the country’s current Five-Year Plan.
• ■  Cancelling the 259 GW of new coal plants would free up US$210 billion in capital expenditures, enough to build nearly 300 GW of solar PV or 175 GW of wind power.

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For climate prospects, adding 259 GW of new coal power capacity to the Chinese coal fleet is wildly out of line with the goals of the international Paris agree- ment, no matter what their start date. According to the International Energy Agency (IEA 2017), a 50% chance of limiting average future temperature increases to 1.75°C requires that China, with half of the world’s coal power capacity, close all coal plants without carbon capture and storage (CCS) by 2045.2 Such a phase-out requires aggressive retirement of existing coal plants, not the building of huge numbers of new ones.

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Beginning in 2013, it rapidly became clear that the country’s coal plant boom was outstripping the country’s needs. While high numbers of plants were continuing to come online, production of electricity by China’s coal plants was actually declining, with fleetwide output dropping from 3,981 terawatt hours (TWh) in 2013 to 3,946 TWh in 2016, even though coal-fired capacity rose in the same period from 796 GW to 946 GW (China Electricity Council 2013, China Electricity Council 2016).

Due to the growing overcapacity, by 2015 average coal plant utilization rates dropped to 49%, with the typical plant sitting idle more often than it was being used (Figure 2).

Finding itself in the midst of a worsening overcapacity problem, the Chinese government implemented measures that proved to be highly counterproductive: a decentralization program that moved coal plant permitting authority from Beijing to individual provinces. In September 2014, authority over coal plant construction approvals was moved from the National Development and Reform Commission (NDRC) to the provincial DRCs. In March 2015, environmental impact assessment (EIA) approvals by the Ministry of Environmental Protection (MEP) were moved to the provincial Environmental Protection Bureaus (EPBs).

The measures were reportedly intended to help prov- inces make investment decisions that better aligned their local power demand with supply, with the central government limiting its role to creating total capacity limits and policy guidelines. In practice the devolution of authority resulted in an unprecedented surge in permits, as local authorities raced to approve projects they believed would stimulate local econo- mies and benefit economic interests with influence at the provincial level.

Provincial regulators soon showed themselves to be far more lenient than the central authorities, moving quickly to grant permits that had sat for several years on federal waiting lists, and even retroactively approv- ing 15 GW of coal power plants that had been illegally operating for years without permits. Prior to hand- ing authority to the provincial EPB, the federal MEP had vetoed two projects from Shanxi Province due to emission concerns in an already over-polluted area. Shanxi’s EPB reapproved these two projects immedi- ately after it received the authority, then approved 21 similar projects in seven months.

Overall, permits for construction saw a three-fold increase, from an average of 5 GW a month in 2013–2014 to 15 GW a month in 2015, as shown in Figure 3. There was also a three-fold increase in monthly EIA approvals over the same period (Myllyvirta and Shen 2016, Alkon and Wong 2018). By the time the central government began restricting new permitting in March 2016, the provinces had given construction approval to over 245 GW of new coal- fired capacity.

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While government subsidies and tariffs may guarantee profits for coal plants now, that situation is likely to change soon. In 2015, China announced plans to move toward a more market-based organization of the electricity sector to replace regulated pricing and “equal share dispatch.” Coal power projects permitted by the provincial DRCs after March 15, 2015, will no longer have guaranteed hours and will have to compete in wholesale electricity markets. The shift towards competitive energy procurement and dispatch has already decreased tariffs received by coal plants in pilot provinces (Zhao et al. 2017).

In addition, the Chinese government began implement-ing a national carbon trading market in 2017. Coal plant owners will have to purchase carbon permits to offset their greenhouse gas emissions, raising the input costs of the plants and making them less competitive com-pared to lower-carbon alternatives (Zhao et al. 2017). Also, the central government has begun mandating that grid companies purchase a minimum number of hours for renewable power, which will cut into coal plant’s preferential access to the grid and further lower their utilization hours (Alkon and Wong 2018).

Finally, in 2017 the central government began regulating the number of new coal plants allowed to connect to the grid. The move means surplus coal power capacity will be unable to immediately come online and begin recouping development costs. The average coal plant is already operating for fewer and fewer hours while over-all power capacity continues to grow (China Electricity Council 2018). Recent estimates find China already has excess coal power capacity far beyond its needs, representing “stranded assets” unable to earn an economic return on investment (Feng et al. 2018, Myllyvirta and Shen 2016, Gray 2016).

Takeaway:

I need to find out more.

The coal industry is just as lawless, powerful, and entitled in China as here.

In the US, Republicans generically seek to take regulation power away from Washington’s more powerful regulators, and put them in the hands of more easily influenced state officials. This means weaker pollution controls.
Chinese efforts to do the same thing have resulted in the situation outlined above.

We know that pollution is one of the primary sources of social unrest in China right now – this won’t help. Chinese leaders are of an age to remember what happened in the last cultural revolution – with senior officials ending up picking beans in the provinces. I suspect they are thinking this thru.
More later.