China coal glut threatens to create $90bn in 'stranded assets'

reuters.com Viewpoint 2017-11-14 10:51:00

China's rapid transition to renewable energy will lead to a surfeit of coal-fired power plants, leaving authorities struggling to dispose of coal infrastructure worth billions of dollars.


If current coal investments are not halted, China could by 2030 be saddled with $90.4bn worth of "stranded coal assets" — plants that will never make a return on investment — according to a report published on November 14 by the Paris-based Institute for Sustainable Development and International Relations.


Environmentalists have applauded China's pledge to derive 42% of its electricity from renewable sources by 2030. However, policymakers must now decide what to do with hundreds of gigawatts of coal-fired power capacity, the legacy of decades of central planning and stimulus-led infrastructure spending.


"The losses suffered by the Chinese coal power sector are much worse than in a scenario in which you take practical measures to eliminate a significant share of old capacity," said Thomas Spencer, one of the report's authors, adding that the wasteful investment was most acute in coal-rich provinces such as Inner Mongolia and Shanxi province.


Many of China's coal plants are new — nearly 70% of capacity has been added since 2005, according to the IDDRI. A portion of the plant glut has its roots in electricity shortages in 2003 that led policymakers to fix plant operating hours and electricity rates.


That led to a boom in plant construction, funded by cheap loans from state banks in the name of regional development. A second wave of plant construction began after the 2008 financial crisis as stimulus funding poured into infrastructure.


"Many plants which were approved during this [2003] period are now coming online," said Lauri Myllyvirta, a Beijing-based Greenpeace campaigner.


China is now on track to add another 120 GW of coal-fired capacity by 2020, according to Greenpeace, 20 GW of which came online in the first nine months of the year alone, though that is a slowdown of added capacity from a 2004 peak.


"Provinces historically have been reluctant to import cheap energy from neighbouring provinces, because this sends funds outside of the provinces, so provinces have tended to build more than enough capacity to meet their own needs," said Anders Hove, an independent environmental consultant.


China has been working on integrating regional power grids to promote more efficient power-reserve sharing. However, those plans have hit a snag as provinces struggle to agree on a pricing model and optimise energy storage and deployment.


Yet waning growth in electricity demand has led to falling profit margins and greater competition with renewable energy sources. According to the IDDRI, only about 20-25% of coal-fired plants constructed since 2005 would have made back their investments by 2030.


(Writing by Alex Guo  Editing by Tammy Yang)
For any questions, please contact us by inqury@fwenergy.com or +86-351-7219322.

Share this article
Connect with us

Editors Recommendations

1 Shanxi's 1st new coal mine project starts construction 2018-09-19

China's coal-rich Shanxi province recently started building a new coal mine project, which is the first of such project in 13 years, said sources from the Shanxi Provincial Department of Land and Reso

2 China Aug coal output rises despite environmental and safety checks 2018-09-19

China's raw coal output increased in August compared to the year-ago and month-ago levels, in spite of environmental and safety checks that impacted production in some production areas. T

3 China Coal Daily Track (Sep 19) 2018-09-19

Thermal coal Domestic market A few miners cut down thermal coal prices by 10-20 yuan/t in Yuyang district of Yulin city, Shaanxi province, in response to reduced purchase from Shanxi

4 Vietnam Aug coal imports up 7% on yr 2018-09-19

Southeastern Asian country Vietnam imported 1.52 million tonnes of coal in August, dropping 10.4% on the month but rising 7.14% from the year prior, showed data from Vietnamese customs. V

5 Indonesian coal prices advances after N China's port restricted shipment 2018-09-19

Indonesian miners raised their thermal coal offer prices after China's largest coal-dedicated port limited coal shipment, sources said. One Singapore-based trader reported Indonesian pric

6 China spot thermal coal market in wait-and-see 2018-09-19

Spot thermal coal trades were locked in a standoff at northern China ports, as wait-and-see sentiment has started to increase at seller and buyer sides. "Most suppliers are just taking a

7 Taiwan Aug coal imports down 4% YoY 2018-09-19

Taiwan imported 6.07 million tonnes of coal in August, down 3.66% year on year and 10.56% from July, preliminary customs data showed. In August, Taiwan imported 5.25 millio

8 Australian miner New Hope says coal prices to push higher 2018-09-18

Australian miner New Hope Corp on September 18 said thermal coal prices would push higher in coming months, extending a rise that helped boost its profits in the last financial year. The

9 Dozens of miners raised coal prices by 5-15 yuan/t in Shaanxi's Yulin 2018-09-18

Dozens of miners were synchronously raising coal prices in Yulin city since September 16, northwestern China's Shaanxi province, backed by robust pre-winter restocking in Northeastern China.

10 China Aug power coal price index slides after two-month rebound 2018-09-18

China's monthly-issued price index of power coal edged down 1.9% month on month to 522.4 yuan/t in August, following pickups in June and July, showed data from the National Development and Reform Comm

Most Read Articles

1 High cost props up coal prices at N Chinese ports 2018-09-11

Chinese thermal coal market gained strength at the beginning of this week from stiff prices at production areas, which, plus transport fees, pushed coal prices up at northern ports. The m

2 More Mongolian coking coals flow into China, helping ease supply tightness 2018-09-12

Tightness of coking coal supply in China, caused mainly by strengthened environment-related production restrictions, is expected to get eased moderately with increased arrivals of Mongolian coal follo

3 China import thermal coal prices steadily rise to track domestic upturn 2018-09-10

Prices of import thermal coal offered to Chinese buyers continued to inch up late last week, aligning with recent upturns in China's domestic market. The uptick seen in Indonesian coal wa

4 China import thermal coal market still lacks upbeat momentum 2018-09-11

Not many deals were concluded for import thermal coal at the beginning of this week, said market sources in China, on a lack of support from the demand side. "Recent import market just sh

5 China mulls flexible output curbs in heavy industries this winter, sources 2018-09-13

China is considering allowing its northern provinces to decide individual output cuts by heavy industries including steel to rein in emissions during the winter, sources said. This

6 Chinese thermal coal stays range-bound; demand bounces back 2018-09-10

Chinese spot thermal coal market has moved in a narrowed range for nearly two weeks, with both sellers and buyers keeping the price wrestling but failing to tip the balance. By September

7 Rising demand paints a rosy picture for China's thermal coal market 2018-09-11

Coal miners in main-producing areas of China are optimistic about thermal coal market in the future, as demand continues to increase. Currently, lump coal prices kept climbing up in Ordos

8 China's Aug coal imports rise 13.49% on yr 2018-09-10

China's coal imports climbed by 13.49% from a year earlier to 28.68 million tonnes in August, showed data from the General Administration of Customs (GAC) on September 8. The impo

9 China Aug coal exports skyrocket 710% on yr 2018-09-10

China's coal exports reached 486,000 tonnes in August, surging 710% on the year and 14.35% on the month, showed data released by the General Administration of Customs on September 8.

10 China's coal imports likely to hit 4-yr high at around 300 Mt in 2018 2018-09-12

China's coal import volume is very likely to reach a four-year high of 300 million tonnes or so this year, market observers have anticipated. The latest customs data that showed China imp