China, the world's largest energy consumer, is at risk of falling short of the Paris Agreement's global warming goals due to its persistent reliance on coal-fired power plants, say energy analysts.
Despite record investments in renewable energy, China is projected to increase its coal consumption until 2026, only seeing declines after 2027 as renewables like wind and solar gain a larger share of the power generation market.
China's aggressive expansion of coal-fired power plants and a lack of a concrete coal phase-out plan have contributed to this lag, even as the country makes strides in renewable energy development. While coal meets more than half of China's energy needs, it is also the world's largest greenhouse-gas emitter, coal consumer, producer, and importer. China's coal consumption rose 3.3% in the past five years to around 4.04 billion tonnes in the previous year.
Although total coal consumption is projected to rise to 4.2 billion tonnes by 2026, it is expected to decline to 2.4 billion tonnes by 2040 and further down to 1.4 billion tonnes by 2050, according to Rystad Energy's report. This aligns with Chinese President Xi Jinping's commitment to start "phasing down" coal use from 2026, as part of China's carbon neutrality goals.
However, China has continued to approve new coal capacity at a rapid pace, adding 52 gigawatts (GW) of new coal-fired capacity in the first half of 2023. The country has justified this increase as necessary to meet peak demand, maintain grid stability, and handle extreme weather conditions.
Despite the focus on renewables, older coal plants in China are being kept operational longer. Policies revised in 2021 by the National Development and Reform Commission (NDRC) allow small, inefficient facilities to continue operating as backup capacity. This has slowed the retirement of older coal plants.
China's overall power demand is projected to increase by about 5% over the next five years, with renewable power generation capacity expected to rise by 18% to 3,000 GW by 2030, reaching a 33% share of the total energy mix. Meanwhile, coal's share is expected to decrease from 61% in 2022 to 43% in 2030, with more coal plants serving as backup capacity for renewable energy during high-demand periods.
However, to achieve the Paris Agreement's 1.5-degree target, China must significantly reduce coal's share in its power mix to single digits by 2030 and phase out coal entirely by 2040, according to a report by Climate Analytics and NewClimate Institute. Currently, China has around 240 GW of coal power plants permitted or under construction, a figure that could rise to nearly 400 GW if approvals continue without concrete action.
As coal generation declines and renewables expand, coal plants' revenue is expected to suffer due to lower utilization. The NDRC is working on mechanisms to compensate coal power plants for these losses as they transition to backup suppliers. While the specifics of these mechanisms are yet to be released, it demonstrates China's commitment to reducing coal reliance in the long term.
In the short term, however, coal remains crucial for China's energy security and grid stability. The gradual reduction of coal dependence as renewable energy capacity increases is seen as the most practical approach to balance energy needs with emissions reduction goals.
This situation underscores the challenge of transitioning away from coal while ensuring energy security and environmental sustainability in a country as vast and energy-dependent as China.
By fLEXI tEAM