The Emperors King Coal, part 3 – Reform in the making

Part 3 out of 6, in this “King Coal” series by Juha Tuominen. Juha is a foreigner living in Beijing since 2008. Having worked several years in central government-controlled industries such as energy, this series of articles also reflects the writer’s own experiences and observations on how things work or do not work in China.

Reform in the making

The coal industry in China has been going through significant reform during this decade. The central government has taken stronger steps to control the industry in order to limit polluting. While there has been a long list of reforms and new regulations starting from the end of last decade, the most significant ones have included the closing of some most pollutant capacity as well as upgrading others. This does not mean that the country is cutting its coal capacity, quite the opposite.

During 2015 and 2016 China added some 90 GW of coal capacity, but over 80 percent of this was so-called supercritical or ultra-supercritical coal power plants as opposed to the old subcritical plants. In short, the first two mentioned plants utilize technology and innovations that make the coal to energy far more efficient and far less pollutant than the old subcritical fleet. As a comparison, the average age of US coal plants is around 39 years, almost 90% of the fleet being built between 1950 and 1990. In China, the oldest plant on the top 100 list was commissioned in 2006.

The Players

The Coal industry is rather shattered when considering the typical Chinese energy market characteristics. Top eight coal producers have less than 35 percent of the market share. But there are abundant private players as well in the market, not only local SOEs. In general, it is the smaller private players that utilize older technology and avoid general regulations. And it is the private players in particular that the central government wants to target with the reforms. Current plans include developing 14 large modern coal centers around the country to be run by SOEs. These plans include making the western province of Xinjiang a strategic energy base for the country.

The province is estimated to have up to 40 percent of Chinese coal reserves, and in addition, it is a significant renewable energy base with high installed wind power capacity. Xinjiang’s remote location from the energy-consuming east has restricted its contribution to the country’s energy scene before. Plans to build 12 new ultrahigh voltage UHV power lines across the country west to east will significantly improve this situation. Also, new major rail connections between, for example, Inner Mongolia and Shanxi will allow better utilization of domestic reserves. China has been a net importer of coal since 2009, and one key factor behind this has been the missing transportation connections domestically.

Blue Skies

In addition to a bundle of reforms, China is also known for being able to take drastic measures for short term goals. The first example that drew international attention was the Beijing Summer Olympics in 2008. During that time, the nation was at its peak when it comes to economic and energy consumption growth. The host city received huge amounts of criticism for its air quality during the two years leading to the Games itself. But when the games started, Beijing skies were bright blue, surprising everyone. Although the city announced already six months before the Games huge restrictions to traffic in order to cut pollution from the growing number of vehicles, the work for blue skies started a couple of years earlier.

While official numbers are difficult to get, it is estimated that the central government force closed or relocated a three-digit number of power plants and factories in the city and surrounding areas. In 2014, when Beijing was hosting the APEC meeting, coal plants in surrounding Hebei province were ordered to stop production in order to create what the local people still call “APEC Blue Skies.” But these rather drastic measures do not always end with good results. In 2017 the country got a lot of negative attention from the international community after an attempt to improve air quality during unusually dry winter by severely restricting coal usage for heating in Hebei province, pictures of school children having classes in below zero Celsius temperatures spread in the media.

Feel free to leave a comment, and make sure to check out part 4 and the rest of this extensive 6 part series coming out in the following days. Don’t forget to read our other interviews and articles on our homepage, or continue the discussion on our Facebook and Twitter pages.

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