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Is coal power winning the US-China trade war?

December 1, 2019
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By Paul Homewood

 

This story from last month seems to have gone under the radar. It fits in neatly with my analysis yesterday:

 

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China has signalled that coal power will be a top priority within national energy policy as the government prepares its next Five Year Plan (2021-25).

On 11 October, Premier Li Keqiang chaired a meeting of the National Energy Commission in Beijing that emphasised China’s energy security and coal utilisation and downplayed the importance of a rapid transition away from fossil fuels.

Each meeting of the commission, which was established in 2010 and has met only four times, has had a significant impact on policymaking. Chaired by Premier Li and attended by more than 20 chiefs of China’s ministries and bureaus, the commission is the top body for coordinating energy policy.

Why is energy security back at the top of the agenda?

Li told the conference: “The government should diversify energy supply to improve energy security… enhance domestic oil and gas exploration and development efforts, and promote oil and gas reserves and production, in order to improve oil and gas self-sufficiency”.

The renewed focus on energy security comes amid an increase in domestic consumption of oil and gas, which is largely being met through imports. China’s dependence on energy imports rose from 9% in 2014 to more than 20% in 2018.

China’s domestic crude oil production has declined and efforts to tap unconventional sources of natural gas, such as shale gas and coalbed methane, have faltered.

Other causes for concern lie outside China. The ongoing trade dispute with the US is a threat to the energy trade between the two superpowers, and supplies from the Middle East are at risk from mounting instability in the region.

The green transition loses ‘acceleration’

The government’s concern over energy security is positive for coal given that China has lots of it. At the meeting, Li Keqiang spoke of speeding up the construction of large-scale coal transportation and electricity transmission infrastructure. He wants to promote “safe and green coal mining”, the “clean and efficient development of coal-fired power”, and to “develop and utilise coalbed methane”. 

Li also downplayed China’s low-carbon energy transition. At the same meeting in 2016, Li called on China to: “increase the proportion of renewables in the energy mix” and “accelerate” such a transition. This year, there was no mention of renewable energy’s share of the energy mix and “acceleration” was replaced by the blander term “development”. The change of tone was hard to miss.

Controlling coal power development and supporting renewable energy is the bedrock of China’s energy policy in the current Five Year Plan (2016-2020). The National Energy Administration announced recently that China had already completed the plan’s objective of eliminating 20 gigawatts (GW) of inefficient coal-fired power units, and is set to stay beneath its cap of 1100GW of installed coal capacity.

Solar and wind power capacity have also grown rapidly in recent years, exceeding the five-year target. As costs fall, the NEA expects that in the early 14th Five Year Plan period – meaning by 2021 or 2022 – solar and wind will compete with coal power without any subsidies. However, Li’s speech suggests momentum in the energy transition could be lost if the next Five Year Plan for Energy charts a different path.

Will China maintain the pace of its low-carbon transition?

The 13th Five Year Plan for Energy was drafted in 2015, the same year China made an international pledge to peak carbon emissions by 2030 and increase its share of non-fossil energy to 20% by 2030.

The plan was created against a backdrop of international pressure for ambitious climate action and domestic concern for air pollution. Released in 2016, the plan and its package of energy policies can be seen as the product of climate consciousness.

But circumstances have changed, leading some to believe the 14th Five Year Plan for Energy  may be very different. Though China has worked to shut down small thermal power stations and eliminate inefficient heavy industry in recent years, phasing out coal entirely will be far more challenging. There is also greater volatility in global energy supplies and jitters over China’s economy.

China achieved its 2020 climate target ahead of schedule but it faces enormous challenges in achieving its 2030 goals. A recent paper from China’s National Centre for Climate Change Strategy and International Cooperation (NCSC) finds that the 13th Five Year Plan’s policies guarantee that 20% of primary energy will come from renewables by 2030. Though these measures can reduce carbon emissions per unit of GDP by 60% to 65% in 2030 compared to 2005 levels, they are insufficient to peak total carbon emissions by 2030.

There is still no consensus on the role of coal in the 14th Five Year Plan. Chen Zongfa, a power industry expert, argues the role of coal should be limited to balancing peak loads on the power system and providing back-up.

Even though so-called “clean coal” and coal-to-chemical projects, such as coal gas and coalbed methane, may reduce local air pollutants they have been criticised for being even more polluting than the average coal-fired power plant once the whole production process is taken into account.

Advocates of the low-carbon transition, including Dr Jiang Kejun of the National Development and Reform Commission, believe fossil fuels are “yesterday’s source of energy” and need to make way for low-carbon sources. Even Fu Chengyu, the former chairman of China Petroleum and Chemical Corp (Sinopec), said recently that cost reductions in renewable energy are the key to China achieving energy independence.

Although China is under international pressure to increase its climate ambition in 2020 and accelerate its energy transition, Chinese policymakers still see coal as the bedrock of the country’s energy security, playing a major role in the 14th Five Year Plan.

https://www.chinadialogue.net/article/show/single/en/11642-Is-coal-power-winning-the-US-China-trade-war-

 

As usual in Chinese affairs, it is important to read between the lines:

1) First of all, this meeting of the NEC is of extreme significance. As the report points out, it has only met four times since 2010, and each has had a significant impact on policymaking.

2) Premier Li has emphasised the importance of energy security. I have long argued that China’s diversification into nuclear, hydro and renewables has had nothing to do with climate change, and everything to do with reducing dependence on imported energy in the form of oil and gas.

It would be extraordinary if they now turned their back on coal, of which they have huge deposits.

3) Li’s words about coal, such as clean and efficient development of coal-fired power are highly significant. At meetings like these, every word uttered has real meaning.

4) Similarly the changes in wording about renewables since the 2016 meeting are not just throwaway statements, but carry real substance.

While there may be dissenting voices, in China it is the Central Committee which makes the decisions.  I suspect Premier Li has already confirmed what they are thinking.

5 Comments
  1. December 1, 2019 2:15 pm

    Reblogged this on Climate- Science.press.

  2. December 1, 2019 3:34 pm

    China continues to get most things right, most of the time. And it continues to correct its mistakes, such as too much expensive unreliable renewables. Coal will help China remain competitive by using the lowest cost base fuel for its industry. Meanwhile, in the West, Global Cooling and lowering oil prices make a mockery of the Billions wasted on solar and bird-killing wind: Silent Spring ahead ? The west also phases out the most efficient transport fuel: diesel because of non-existent pollution. And so the west’s downward path to poverty continues…..for no good reason.

  3. Klaus permalink
    December 4, 2019 5:04 pm

    In this case it is good that China isn’t a democracy! They will win and we will lose.

  4. December 5, 2019 11:09 pm

    China does not have a lot of choices. Coal is not only affordable, but its also easy to store so they can buy up massive volumes from the market while it’s cheap to insulate themselves from price rises in the future. Much harder to do that with oil and harder again with gas. Plus, its a lot more expensive. It is in China’s strategic interest to push coal. The trade war might have further sharpened those senses but was not its origin.

    • Graeme No.3 permalink
      December 5, 2019 11:24 pm

      Rudolf Huber:
      There is also a lot of coal in Africa where the Chinese Govt. is encouraging the locals to install coal burning power stations. That means they also need coal mines, and any excess can be exported for hard currency.
      Currently China is the biggest miner (and user?) of coal, and also imports a lot. India is increasing its use of coal, and may compete for overseas supplies in future.

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