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China May Waste $490 Billion on Unneeded Coal Plants: Study

  • IEA in Spetember said China may invest too much in coal power
  • Signs show China’s coal generation peaking: Carbon Tracker

China risks wasting $490 billion by building more coal power plants than it needs as slower power demand growth and less polluting energy sources squeeze coal generation out of the power mix, according to a study from an environmental think tank.

As of July, the country had 895 gigawatts of operating coal capacity being utilized less than half the time, with another 205 gigawatts under construction, London-based Carbon Tracker Initiative said in the report.

The study echoed findings of the International Energy Agency in September that showed China may be investing too much in coal power and suggests generators haven’t responded to the government’s ambition to scale back on the pollution causing global warming.

China installed a record 46.9 gigawatts of solar and wind last year, according to Bloomberg New Energy Finance, reflecting the government’s pledge to ratify the Paris accord on climate change and bring greenhouse-gas emissions to a peak no later than 2030. Despite the country’s efforts to clean up the energy industry, coal still accounts for a majority of the country’s power needs.

“Stranded coal power would lower returns for investors," said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd., a London-based research company with a focus on China. “The industry is losing money due to falling utilization rates and relatively higher coal prices."

Additional coal capacity beyond existing plants is only required by 2020 if power generation growth exceeds 4 percent per year and coal plants are run at a utilization rate of 45 percent or less, Carbon Tracker said. Even existing capacity may come under financial pressure by 2020 from power market reforms and carbon pricing.

“There are clear signs that Chinese coal generation is peaking, as the growth in alternative energy sources can meet lower power demand growth during the 13th Five Year Plan” which runs through 2020, James Leaton, Carbon Tracker’s head of research, said in a statement.

“This can only spell bad news for exporters betting on China propping up the seaborne thermal coal market in the future,” Leaton said.

— With assistance by Feifei Shen

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