China’s unraveling love affair with coal illustrates wider changes underway in the country’s economy, CO2 emissions and renewables. I try to illustrate these with four charts. (please see this report, for the Energy and Climate Intelligence Unit (ECIU), for more detailed commentary and sourcing).
Chart 1: Last year, China commissioned an astonishing amount of new coal-fired power, equivalent to Britain’s entire electricity generating capacity (about 70 gigawatts). Even more astonishingly, it did not need any of these new power plants: in the same year, actual coal-fired power generation fell, for the second year. That implies huge coal power plant over-capacity, and growing credit risk at China’s state-owned coal electric utilities. China’s coal power sector is about to see the same capacity cuts already underway in steel and mining.
Chart 1. China’s annual installed thermal (mostly coal) power, gigawatts (GW)
Chart 2: Debate continues about whether China will see a hard landing. But the country’s electricity demand last year grew at its slowest rate since at least 1970, by just 0.5%. That slowing power demand growth explains why the country doesn’t need new coal power plants. And it contradicts the official headline rate of 6.9% GDP growth last year. Has a hard landing already happened?
Chart 2. China’s annual electricity demand (TWh) and year on year growth (%)
Chart 3: After driving global coal demand growth for the last two decades, China’s coal consumption has fallen for two years running. China’s coal use and CO2 move in lock-step. So the world’s biggest CO2 emitter has also seen two years of falling emissions.
Chart 3. Annual change in China coal consumption, %
Chart 4: Despite slowing electricity demand growth and coal power generation over-capacity, China continues to over-achieve on its renewable power targets, suggesting that the last two years may be a turning point in the country’s energy mix.
Chart 4. Annual growth in wind, solar, hydro and nuclear, vs thermal (mostly coal)
What does it all mean? As the ECIU report noted last week, China’s annual installed coal-fired power may have peaked in 2015. That seems all the more likely after last Thursday, when the country’s energy regulator said it would halt construction of coal power plants in 15 provinces.
And it seems increasingly likely that global energy-related CO2 emissions will peak before 2020, after steady rises for the past two centuries. If coal consumption has peaked in China, falling emissions in OECD countries may now cancel rises in other developing countries. Peaking CO2 would be an important turning point in the fight against global climate change.