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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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China Leans On Coal As Hydropower Slumps

  • Despite massive investments in renewable energy, China is turning to coal to cope with increasing power demand caused by a significant decline in hydropower capacity due to insufficient rainfall.
  • China's total power generation rose by 5.2% in the first half of 2023, with coal-fired power output compensating for the decreased hydropower output, bringing the share of thermal power generation to 71% of China's electricity output.
  • China's coal production rose by 4.4% in the first half of 2023 compared to the same period in 2022, leading to record-high coal stocks at power plants and optimism about avoiding power rationing or factory closures during the summer.
Coal

China is investing record amounts of money into renewable energy sources, but it continues to rely heavily on coal to cope with rising power demand. 

During the first half of this year, coal production, coal imports, and coal-fired electricity generation jumped and offset a significant decline in power output at China’s massive hydropower capacity due to insufficient rainfall and drought.    

China is the global leader in renewable energy spending, but it’s also one of just a few major economies still approving and building coal-fired capacity. Energy security and the need for stable power generation during peak demand to back the growing economy and supply stability precede concerns about emissions. 

China has already reached its goal to have more non-fossil fuel installed electricity capacity than fossil fuels earlier than planned, with 50.9% of its power capacity now coming from non-fossil fuel sources. Back in 2021, the Chinese authorities said they would target renewables to outpace fossil fuel-installed capacity by 2025.  

China is globally unmatched in renewable energy spending, investing in raising its solar and wind power capacity. 

So far this year, renewables have helped to partially offset the crippled supply from hydropower generation, but coal has saved the day. 

China’s total power generation rose by 205 billion kilowatt-hours (kWh), or by 5.2% on the year, between January and June 2023. But hydropower generation plunged by 23% to the lowest in eight years as the key hydropower provinces, Sichuan and Yunnan in the southwest, saw low rainfalls and water levels at reservoirs, according to data from China’s National Bureau of Statistics (NBS) compiled by Reuters market analyst John Kemp Related: UAE Says OPEC+ Cuts Are Enough To Support The Oil Market

Wind and solar power helped offset, to some extent, the slump in hydropower generation, but it was mostly coal-fired power output that compensated for the decreased hydropower output. The share of thermal power generation – mostly from coal – rose to 71% of China’s electricity output in the first six months of 2023, up from 69% in the same period last year, according to Kemp’s estimates. 

Nearly three-quarters of global hydropower capacity additions in 2022 happened in China, the International Energy Agency (IEA) said in its latest report on global hydropower. China added 24 gigawatts (GW) of hydropower capacity in 2022, as this energy source remains integral to China’s 14th Five-Year Plan for Renewable Energy released in 2022. However, the global capacity utilization factor remained below historical levels due to persistent droughts in hydropower-rich countries such as Canada, China, Turkey, and the United States, as well as in western Europe, the IEA said. 

Rainfall in the Yunnan province in China dropped by more than 60% yearly during the first four months of 2023, according to South China Morning Post.

At the same time, China’s coal output has increased from last year, and coal imports have surged, while top officials are meeting with power firms and the state grid operator to stress the importance of keeping power on during the summer when China also hopes to see its economy rebounding from the lower-than-expected growth in the second quarter. 

China’s coal production rose by 4.4% in the first half of 2023 compared to the same period in 2022. Coal imports into China have surged year to date, resulting in record-high levels of coal stocks at power plants. 

This has made Chinese authorities more optimistic about going through the hot summer without power rationing or factory closures.

No new coal plants have started construction across the OECD and EU since 2019, while the second half of 2022 saw the largest-ever increase in new coal plant permitting in China, climate change think tank E3G said in a report earlier this year.  

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“China’s hasty prioritisation of new coal is at odds with the significant global trend away from new coal,” E3G said, adding that “The significant scale of China’s coal expansion plans directly threatens the 1.5°c temperature goal of the Paris Agreement.” 

As China puts the security of energy supply ahead of any other consideration, and despite the massive expansion of solar and wind capacity, the world’s second-largest economy will rely on coal for years to come.

By Tsvetana Paraskova for Oilprice.com   

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