China Still Addicted To Coal, Grid Additions Show - More Than 50 1-Gigawatt Or Larger Plants Came Online In 2024 Alone

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The importance to China of a steady coal market was reinforced in 2021, the same year that Xi Jinping made his coal pledge, when China suffered power shortages that affected 20 provinces and impacted both industry and consumers. The problem arose as China emerged from the Covid-19 pandemic: Industrial production recovered, electricity demand soared, and that in turn sent coal prices spiralling upward. Coal-fired power stations were locked into regulated prices for the sale of their electricity, but the price of coal was not controlled. When the coal price became too high, the generators began to cut output to limit their losses, pleading supply shortages or technical problems.

In October that year, the then Premier Li Keqiang reacted to the crisis, signaling an adjustment to China’s approach to climate policy. Economic growth, he said, was the key to lowering emissions in the long term and “energy security should be the premise on which a modern energy system is built.” China soon announced a new lending facility to support the “clean and efficient use of coal.” The following year there was a new energy crisis: A severe drought in Sichuan caused output to drop from the province’s hydroelectric plants, normally the source of 80 percent of its electricity. Factories were ordered to close or reduce their output to save households from power cuts, and applications for permission to build new coal-fired power plants reached record levels as provincial authorities worried about having the energy to meet their economic growth targets. The equivalent of two new coal plants per week were approved in 2022, and by 2023, permitting reached a 10-year high of 112.8 gigawatts. The pace of construction continued in 2024, when China started building 94.5 gigawatts of new coal-fired capacity — roughly 93 percent of all new global coal construction that year.

By 2023, analysts were warning that, in addition to putting its climate goals out of reach, the surge in new coal meant that China risked building coal-fired power stations that would never recover their investment and were likely to become stranded assets. Most of the new projects, according to a report from the energy think tank CREA, did not meet the central government’s criteria for new plants since they were located in provinces that had sufficient generating capacity to meet their needs. With a further 243 gigawatts of new coal power permitted or under construction and 149 gigawatts more announced, CREA’s analysts predicted that there were two possible results, both negative: a massive increase in coal power generation and emissions, or the coal plants would have to run well below their capacity. There would be no reduction in coal use, the report concluded, unless new projects were canceled or existing plants retired early.

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In China, which has the largest electricity system in the world, power generation is under the control of provincial governments, while the generating companies and the grid operators who distribute the energy are dominated by state-owned companies. When China started to build large-scale wind and solar projects more than 10 years ago, the energy system was dominated by coal-fired power stations with annual contracts to supply the grid with electricity. Because the grid operator paid for that output regardless of how much it used, the operator ensured that coal output had preferential access. That meant that when wind farms were producing high levels of electricity, they frequently found that they were unable to sell onto the grid, and it was wasted.

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https://e360.yale.edu/features/china-coal-five-year-plan