Coal power in China

Coal power in China is electricity generated from coal in China and is distributed by the State Power Grid Corporation. It is a big source of greenhouse gas emissions by China.

China's installed coal-based power generation capacity was 1080 GW in 2021,^[1] about half the total installed capacity of power stations in China.^[2] Coal-fired power stations generated 57% of electricity in 2020.^[3] Over half the world's coal-fired power is generated in China.^[4] 5 GW of new coal power was approved in the first half of 2021.^[2] Quotas force utility companies to buy coal power over cheaper renewable power.^[5] China is the largest producer and consumer of coal in the world and is the largest user of coal-derived electricity. Despite China (like other G20 countries) pledging in 2009 to end inefficient fossil fuel subsidies, as of 2020^[update] there are direct subsidies and the main way coal power is favoured is by the rules guaranteeing its purchase – so dispatch order is not merit order.^[6]

The think tank Carbon Tracker estimated in 2020 that the average coal fleet loss was about 4 USD/MWh and that about 60% of power stations were cashflow negative in 2018 and 2019.^[7] In 2020 Carbon Tracker estimated that 43% of coal-fired plants were already more expensive than new renewables and that 94% would be by 2025.^[8] According to 2020 analysis by Energy Foundation China, to keep warming to 1.5 degrees C all China's coal power without carbon capture must be phased out by 2045.^[9] But in 2023 many new coal power stations were approved.^[10] Coal power stations receive payments for their capacity.^[11] A 2021 study estimated that all coal power plants could be shut down by 2040, by retiring them at the end of their financial lifetime.^[12]

Retirement and addition of coal-fired power capacity

The annual amount of coal plant capacity being retired increased into the mid-2010s.^[13] However, the rate of retirement has since stalled,^[13] and global coal phase-out is not yet compatible with the goals of the Paris Climate Agreement.^[14]

In parallel with retirement of some coal plant capacity, other coal plants are still being added, though the annual amount of added capacity has been declining since the 2010s.^[15]

To curtail the continued rapid construction of coal fired power plants, strong action was taken in April 2016 by the National Energy Administration (NEA), which issued a directive curbing construction in many parts of the country.^[16] This was followed up in January 2017 when the NEA canceled a further 103 coal power plants, eliminating 120 GW of future coal-fired capacity, despite the resistance of local authorities mindful of the need to create jobs.^[17] The decreasing rate of construction is due to the realization that too many power plants had been built and some existing plants were being used far below capacity.^[18] In 2020 over 40% of plants were estimated to be running at a net loss and new plants may become stranded assets.^[6] In 2021 some plants were reported close to bankruptcy due to being forbidden to raise electricity prices in line with high coal prices.^[19]

As part of China's efforts to achieve its pledges of peak coal consumption by 2030 and carbon neutrality by 2060, a nationwide effort to reduce overcapacity resulted in the closure of many small and dirty coal mines.^[20]: 70 Major coal-producing provinces like Shaanxi, Inner Mongolia, and Shanxi instituted administrative caps on coal output.^[20]: 70 These measures contributed to electricity outages in several northeastern provinces in September 2021 and a coal shortage elsewhere in China.^[20]: 70 The National Development and Reform Commission responded by relaxing some environmental standards and the government allowed coal-fired power plants to defer tax payments.^[20]: 71 Trade policy was adjusted to permit the importation of a small amount of coal from Australia.^[20]: 72 The energy problems abated in a few weeks.^[20]: 72

In 2023, The Economist wrote that ‘Building a coal plant, whether it is needed or not, is also a common way for local governments to boost economic growth.’ and that ‘They don’t like depending on each other for energy. So, for example, a province might prefer to use its own coal plant rather than a cleaner energy source located elsewhere.’^[21]