China leans on coal amid energy security

  • State planner says to increase coal production
  • Sees coal ‘supporting’ renewable energy expansion
  • Calls for controls on replacing coal with gas
  • Indicates that higher gas prices are coming for urban users

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

Rising energy prices in the world market following the Russian invasion of Ukraine and the disruption of domestic supply have prompted Beijing to pay more attention to energy security in recent years.

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

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

“We will strengthen coal’s fundamental support role (and) take orderly steps to increase advanced coal production while ensuring security,” the National Development and Reform Commission (NDRC) said in a report to the parliament’s annual meeting .

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China approved 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 showed last week.

About 50 GW of that went into construction.

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

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

The NDRC also stressed the importance of ramping up domestic oil and gas supplies.

“We will intensify exploration and development of petroleum and natural gas domestically to discover more untapped reserves and increase production,” it said.

Despite a strategy to boost the use of natural gas as a bridge fuel to become carbon neutral by 2060, China is stalling an aggressive campaign started in 2017 to replace coal with gas.

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

The state planner also reiterated its efforts to further reform the oil and gas sector, focusing on improving the natural gas pricing mechanism to better reflect production and procurement costs.

China imports about 40% of its gas consumption.

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

China will also continue to build a second batch of large wind and solar plants, she added.

The reliance on coal was described by some as temporary to cover supply shortfalls as the country develops renewable energy sources.

“New renewable energy generation has not been able to cover all of the growth in demand in any given year, meaning some additional coal generation is needed each year,” said David Fishman, senior manager of the China-based energy consultancy. the Lantau Group.

“In 2023 or 2024, we may see the first year where renewable generation completely covers new demand growth…after that, coal consumption should start to decline year over year,” he said.

China has pledged to reach maximum CO2 emissions by 2030 and be carbon neutral by 2060.

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

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

Our Standards: The Thomson Reuters Principles of Trust.


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