A quixotic Covid-zero strategy and the housing market crisis have slowed down China’s economy behind the rest of the Asia-Pacific region for the first time in more than three decades. However, China’s power generation has surged by 2.5% on the year to 5.6tn kWh in the first eight months of 2022.
China’s
economy showed a faster-than-expected 4.2% growth in industrial output in
August. Meanwhile, the country’s power generation totalled 825bn
kWh in the same month, surging by 10% on the year. This also represents 5.4%
points above July’s output.
In August, thermal power generation increased by 15% on the year, while
wind and solar power generation climbed by 28% and 11%. On the other hand,
hydropower dropped by 11% on the year and nuclear power fell by 0.6%.
This rise
in thermal electricity generation was supported by an increase in the country’s
coal production of 10.5% on the year. According to the National Bureau of
Statistics, domestic coal production totalled 370Mt in August and 2.93bnt in
the first eight months of 2022. This cumulative output was 13% higher than the
corresponding period in 2021.
However, domestic coal production in August was lower than the output of
373Mt in July and 379Mt in June. Meanwhile, China’s coal and lignite imports
increased by 5% on the year and 25% on the month to 29Mt in August.
China aims
to produce an additional 300Mt coal in 2022, after a record-high output of
4.1bnt in 2021. China’s
surging power demand has led to concerns that competition for coal from China’s
main suppliers such as Indonesia will rise with recent sanctions on Russian
coal.
Although the
rise in wind and solar generation alone met 92% of China’s electricity demand
rise in the first half of 2022, Beijing is set to add 270GW of coal-fired power
generation capacity in the five years through 2025, according to China Energy
Engineering Corp, rising from an estimate of 100GW to 200GW in
2020.
China’s
Energy Footprint
China
has pledged to achieve carbon neutrality by 2060. This will be driven by the
country’s aim to peak CO2 emissions before 2030 and reduce carbon intensity
of GDP by over 65% from 2005 levels. Beijing plans to increase
non-fossil fuel energy consumption to 25% by 2030, updating its previous target
of 20%.

The energy and process sector in China
emitted 12Gt of CO2 in 2021, up from 11.4Gt in 2020. AME forecasts that China
will generate 11.8Gt CO2 emissions in 2022. China has not reneged on its plans,
announced in 2021, to build an estimated 43 new coal-fired power stations and
18 new blast furnaces, despite President Xi Jinping’s pledge to limit coal
consumption growth in the 14th five-year plan period, 2021-2025, and phase it
down in the 15th.
China has launched its Emissions Trading Scheme, which covers 2,200 companies in the power sector, coal and gas plants.
In 2021, China’s two global policy banks provided no new energy finance
commitments to international governments for the first time since 2000.
China
has accelerated its renewable energy capacity installation. Solar and wind
energy capacity surpassed 300GW each, with hydropower still representing the
largest single source of renewable capacity. China’s rate of renewable capacity
installation aligns with the country’s 2060 net zero.
However, China’s surge in new coal-fired
power capacity vastly offset the retired capacity in 2021, causing a net
increase in the country’s coal fleet of 25GW. In the first half of 2022, China
added 7.5GW, while only retired 240MW.
Although China’s annual capacity
additions have been steadily declining since 2019, plant retirements have also
slowed down. Since 2011, China has removed over 72GW from the market, but only
has confirmed plans to retire about 7GW over the next ten years. Coal power
plants account for 4.8Gt of China’s annual CO2 emissions.

About 40% of China’s coal power capacity has
been operating for less than nine years. New coal power plants have an average lifetime of 29 years,
although some stations are designed to last between 40 and 50 years. This will
see China locking the power sector further into coal dependency in the
medium-term. Although ultra-supercritical plants account for almost half of
this under-nine-year capacity, around 86GW capacity of subcritical power
stations was also added.
Ultra-supercritical coal power stations can
potentially reach an efficiency of 44%, while subcritical plants’ efficiency
oscillates between 33% and 37%. China currently runs over 380GW capacity of
subcritical power stations that are younger than 20 years, which will maintain
the country’s emissions on the rise. Beijing’s ambitious plans to expand clean
electricity generation imply that the utilisation of coal power plants will
fall despite the increase in capacity.
Huaneng
Power International is the largest power generator in China, with 54GW of
operating capacity. The company has another 750MW under construction and 3.6GW
of projects that have been announced or are already seeking environmental
approvals. National Energy Investment Group follows with 52GW of operating
capacity. The group has 2.6GW under construction and further 2GW that has
already been permitted. However, the company has cancelled 30GW of coal-fired
power capacity since 2010.
China
Shenhua not only ranks as the third largest generator in China, but it is also
the company with the largest capacity under construction with 4.7GW in the
pipeline.

Datang
Tuoketuo power station is the largest thermal coal power plant in China with
6.7GW capacity. The plant initially comprised eight 600MW units commissioned
between 2003 and 2006. Two additional 300MW units were installed in 2011. The
last addition was in 2017, with two units of 1,320MW of combined capacity. Coal
is domestically sourced from the Junggar coalfield 50km from the station.
Securing
Energy Needs
AME
forecasts that China will import 62Mt of thermal coal in the December quarter
of 2022, up by 7% on the quarter but down by 14% on the year. Despite increased
power demand, China’s thermal coal imports are below the average volume
registered in 2021, as the government continues expanding its domestic
production.
This shift came amid China’s concerns over its power shortages in
October 2021 and led to a 5.1% annual growth in coal output. Despite a growth
in coal capacity, renewable energy remains a priority. Installed renewable
energy capacity exceeded 1,000GW in 2021. China plans to bring additional 150GW
in solar and wind capacity in 2022.
Over
the medium term, AME forecasts that China’s thermal coal import demand will
decrease at a CAGR of -0.6%, reaching 203Mt by 2027. This will be driven by the
State Council plans to inject US$1.5bn to advanced domestic coal production
capacity and support coal power generators.
Over the long
term, AME forecasts that Chinese thermal coal import demand will shrink at a
faster CAGR of -1.2% between 2027 and 2040, reaching 173Mt in 2040. Although
China has not committed to phasing out coal, Beijing is expected to peak
coal-fired electricity generation by 2030 with a target of a 50% non-fossil
share of electricity generation in 2030.