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Coal Isn’t Dead: China Proves It

Jude Clemente, Forbes

China approved nearly $6.7 billion worth of new coal mining projects in 2018, and production increased 5.2% to 3.55 billion tonnes.

Responsible for 46% of global production and 51% of global demand, China’s coal reliance is not falling nearly as fast as some like to claim

For demand, too many confuse the crucial difference between “growing less slowly” or remaining “buoyantly very high” versus “shrinking” or “declining.” Similar to U.S. oil demand, China’s coal consumption aligns with the first two. While it could indeed be said that Chinese coal demand has been relatively flat for a few years now, importantly, it hasn’t been falling in the absolute sense.

For production, China’s December coal output was 2.1% higher than it was in 2017,  hitting the highest level in over three years. The country started up new mines last year and then ramped up production to meet high winter demand. Due to domestic gas supply shortages in recent years, China has been softening its stance to displace coal heating with natural gas.

China approved nearly $6.7 billion worth of new coal mining projects in 2018, and production increased 5.2% to 3.55 billion tonnes.

For imports, now a much larger portion of the supply mix, coal imports in China were up 9% last year.

This year, China’s plan to kick start its economy with new stimulus measures could also lead to another uptick for coal. Remember that in China coal is about 60% of all energy supply and generates 65% of total electricity, so economic growth can easily translate into more coal usage.

Looking forward, surely not to grow like the boom years of 2000-2010, there is still pretty solid potential for more coal in China.

For example, Carbon Brief reported last summer that China quietly has 210,000 MW of new coal capacity in the works, or nearly a 25% expansion.

The good news is that these plants will be supercritical or even ultra-superciticial, deploying higher efficiency to generate more power using less coal.

Ultimately, the list of proven false predictions of “peak coal” for China reads like a collection of who’s who in news sites (both conservative and liberal), research organizations, leading universities, and environmental groups.

But as I documented in Forbes back in November 2014, China’s designed transformation for coal is NOT necessarily about using much less as it is about using coal differently. In particular, wanting to use coal less directly, China seeks to lift power generation’s share of its total coal consumption.

As such, seen below, although China’s coal demand has been pretty flat in recent years, coal power generation has been rising at 6% per year – a very high increase for a nation where 100% of the population has access to electricity and per capita wise consumes nearly as much electricity as members of the European Union.

Indeed, China actually now accounts for 45% of the coal-based electricity generated in the world, compared to 37% back in 2010.

China’s goal is to increase the share of electricity generation in its total coal usage.DATA SOURCE: BP; JTC

In addition, China is at the heart of another issue that is quietly emerging for those wanting to “wish the world away from coal.”

The Institute for Energy Economics and Financial Analysis reports that China’s financial institutions are providing $36 billion in funding to build coal power plants outside the country.

China has committed or offered funding for 102,000 MW of coal-based electricity, mostly in Pakistan, South Africa, Bangladesh, and Vietnam.

So yes, while China’s coal demand will remain very high, there is no question that the country seeks to lower an over reliance on the fuel, aimed at diversifying with more natural gas, nuclear, and renewables. This has given Chinese companies more incentive to seek projects in foreign nations.

This is all part of China’s Belt and Road Initiative that will use its own development model to help “finance and build roads, railways, bridges, ports, and industrial parks abroad.” An immense infrastructure build-out that will not just require thermal coal for electricity but also metallurgical coal for steel making. “The One Market That’s Sure To Help Coal.”

And almost a quarter of the coal plants China is funding in other countries would be less efficient, higher emission subcritical units that are no longer allowed to be used in China. These nations have less environmental standards and are desperate for investment of any kind. I do find this a bit contradictory though given that one of China’s major climate plans has been to replace inefficient, older coal plants with state-of-the-art coal plants.

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