China bets on coal in the context of energy security

  • State planner says to increase coal production
  • Coal ‘supports’ expansion of renewables
  • Calls to control the substitution of coal for gas
  • Indicates higher gas prices ahead for urban users

BEIJING, March 5 (Reuters) – China’s state planner on Sunday stressed a greater role for coal in its power supply, saying fossil fuel would be used to improve the reliability and security of its energy system.

Soaring global energy prices following Russia’s invasion of Ukraine and disruption of domestic supply have prompted Beijing to focus more on energy security in recent years.

The world’s second-largest economy relied on coal to generate 56.2% of its electricity last year, according to data from the National Bureau of Statistics, but has dramatically increased its use of natural gas and renewable energy in recent years to reduce carbon emissions.

However, fluctuating output from renewable power plants has led policymakers to rely on reliable and easily dispatchable coal-fired power to bolster the country’s baseload supply. Last year, scorching summer temperatures and a drought in southwest China led to a drop in hydropower generation, leading to power outages.

“We will strengthen the basic support role of coal (and) take orderly measures to increase peak coal production while ensuring security,” the National Development and Reform Commission (NDRC) said in a report. at the annual meeting of parliament.

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China approved the construction of an additional 106 gigawatts of coal-fired power capacity last year, four times more than a year earlier and the highest since 2015, driven by energy security considerations, research has shown. last week.

About 50 GW of this amount went to construction.

“The energy security discourse is still going strong,” said Li Shuo, policy adviser at Greenpeace China.

“It has given impetus to the coal sector in China, as evidenced by the rapid approval of coal-fired power plants across the country,” he said.

The NDRC also stressed the importance of increasing domestic oil and gas supply.

“We will intensify oil and natural gas exploration and development at home to uncover more untapped reserves and increase production,” he said.

Despite a strategy to boost the use of natural gas as a transitional fuel to achieve carbon neutrality by 2060, China is slowing an aggressive campaign launched in 2017 to replace coal with gas.

Concerned about supply shortages amid high global prices, the planner pledged to “strictly control the expansion of projects to replace coal with natural gas”.

The state planner also reiterated his efforts to continue reforming the oil and gas sector, with a focus on improving the natural gas pricing mechanism to better reflect the cost of production and supply.

China imports about 40% of its gas consumption.

“(We will) develop robust mechanisms to adjust urban end-user natural gas prices based on supply costs,” the report said.

China will also continue construction of a second batch of large wind and solar power plants, they added.

The dependence on coal has been described as temporary by some to cover supply shortages as the country develops renewable energy.

“New renewable energy generation has not been able to meet all of the growth in demand in any given year, which means that additional coal generation is still needed every year,” said David Fishman, senior director of China-based energy consultancy Lantau Group.

“In 2023 or 2024, we could see the first year where renewable energy production fully covers the new growth in demand … after that coal consumption should start to decline year on year,” he said. declared.

China has pledged to reach peak carbon emissions by 2030 and carbon neutrality by 2060.

Beijing aims to reduce energy consumption per unit of GDP by about 2% in 2023, according to the NDRC report.

Reporting by Andrew Hayley. Additional reporting by David Stanway and Aizhu Chen; Editing by Simon Cameron-Moore and Tom Hogue

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