China Relaxes Limits on New Coal Plants, But Analysts See Renewables Boom Continuing
The last few days have seen conflicting analysis of China’s recent decision to allow new coal plant construction in 11 of its provinces, with an initial report on Bloomberg asserting that the country is “far from finished with the most-polluting fossil fuel”, but a follow-up suggesting relatively few developers will take the national government up on its offer.
“The National Energy Administration forecast that only 10 provinces and regions would have an excess of coal-fired electricity generation capacity in 2022, down from last year’s outlook for a glut in 21 areas by 2021,” the news agency reported last Friday. “That means 11 areas can start building plants again, as the overcapacity label had suspended construction of new projects until the issue was addressed.”
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
But on Monday, Bloomberg was back with an analysis concluding that the NEA’s announcement “probably won’t usher in a flurry of new construction, as most policies and investments in the [world’s] top energy user will tilt toward renewable sources”. While the overcapacity designation was a deterrent, “many of the nation’s largest power companies are under a state drive to develop more clean energy projects, according to Morningstar Inc., which expects growth in coal-fired capacity to lag other sources,” the news agency noted.
“The profitability of coal-fired power plants is so low, there’s no incentive for them to build more,” said Morningstar analyst Jennifer Song. “China as a whole has set consumption targets for renewable energy sources. We can see those large power groups also have quotas to build more renewable projects.”
Bloomberg noted that China “has spent more on renewable energy than any other country and led a campaign to burn gas instead of coal. Yet it’s still pumping money at home and abroad into coal-fired generation, and it’s forecast by the International Energy Agency to continue to consume about half the world’s coal through 2023.”
In the first three months of this year, however, China’s coal investment fell 30% compared to the same period last year, while wind and hydropower investments rose 30 and 48%, respectively. And CleanTechnica says China is expected to start the transition to subsidy-free solar as early as 2021.
“Most of the capital expenditure planned by coal-fired power companies will be in renewable energy,” Shanghai-based analyst Song Qiuyi told Bloomberg, and the NEA announcement won’t shift that trend.