Electricity decarbonisation is a mainstay of China’s bid to attain carbon neutrality by mid century. A key aspect of China’s approach to electricity decarbonisation is demoting coal power to a supportive role, where it provides flexibility and backup capacity to the grids before energy storage technologies become mature and can be deployed at the scale considered adequate to replace coal power. This process, in the context of this report, is referred to as the coal power transition.
The main purpose of this report is to review the development of coal power in China during the 13th Five-Year Plan (FYP) period (2016-2020), focusing on its underlying drivers, as well as to identify possible policy entry points to shift the future trajectory of coal power development (i.e., mid-steps between goals and mixes of policy instruments for achieving the goals). This review is intended to form a ‘discussion paper’ to promote debates among energy experts and policy practitioners on how to better progress the coal power transition in China.
Key points from the report include:
- The expansion of coal power capacity in China continued during the 13th FYP period, though slower than initially planned.
- The coal expansion was reportedly to subserve four purposes: 1) alleviating local supply shortfalls; 2) improving the technical efficiency of coal fleet by replacing inefficient subcritical units with more efficient supercritical and ultra-supercritical ones; 3) providing heating services to both industrial and residential sectors, to reduce the use of more emissions-intensive dispersed coal （“散煤”） for that purpose; and 4) supporting the country’s West-East Electricity Transmission projects, aimed at transferring electricity from resource-rich western and southwestern provinces to the eastern coastal city-clusters, most notably Beijing-Tianjin-Hebei, Yangtze River Delta, and Pearl River Delta.
- The following factors have also made important contributions to the expansion of coal capacity: local governments’ fervour for coal power projects, the quota-based dispatching mechanisms for coal power, inefficiencies in the carbon market (for example, excessive and sometimes free allocation of emissions permits), negative externalities associated with overinvestment in coal power (i.e., lower revenues caused by overinvestment are distributed across all coal power plants), and inertia in the thinking of power system operators.
- China has recently signalled its intention to expedite electricity decarbonisation, where coal power will step down into a supportive role in providing flexibility and backup capacity to the grids – essential for attaining higher levels of wind and solar penetration while ensuring supply security and reliability.
The report identifies four entry points for policy interventions to steer the transition of coal power to a supportive role:
