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China and India, two of the world's three largest GHG emitters,
have introduced policies to promote coal-fired power generation in
recent weeks amid energy security worries following Russia's
invasion of Ukraine.
The moves, which are expected to trigger greater use of the most
carbon-intensive fuel in the short term and possibly beyond, come
despite repeated warnings from many scientists that coal consumption must be
phased out as soon as possible to avoid climate disaster.
China's central bank—the People's Bank of China
(PBOC)—increased 4 May the size of a special relending facility
to CNY 300 billion ($44.6 billion) from CNY 200 billion for "clean,
efficient coal use."
Under the facility, Chinese financiers can provide preferential
loans to eligible coal projects at the prevailing loan prime rate
or lower if the borrowers' credit profiles permit, and the PBOC
would lend the full amounts to the financiers.
The money can be used to fund working capital loans for
purchases of thermal coal for power generation, expand coal reserve
capacity, apply "green and efficient" coal technologies, construct
"modern" and "smart" coal mines, among other purposes, the central
bank said in a statement without
elaborating.
"The world is undergoing complex changes and global energy
prices are fluctuating at high levels, posing greater uncertainties
and challenges to China's energy security and economic stability,"
said the PBOC, adding that the increased quota "could help the
country fully tap into the rich endowment of coal resources, secure
a stable supply of energy, sustain the stability of industrial and
supply chains, and support China's economy to perform within a
reasonable range."
The announcement was made after China's State Council removed
tariffs on coal imports, citing energy security as the
reason.
No tariff is to be applied to unformed anthracite, coking coal,
unformed lignite, and briquette lignite between 1 May 2022 and 31
March 2023, compared with 3% previously. Tariffs for other
bituminous coal, other unbridged coal, and similar solid fuels made
from coal were also reduced to zero from 6%, 5%, and 5%,
respectively.
International coal prices have been near multi-year highs in
recent months, partly due to supply disruptions after Russia, the
world's third-largest coal exporter, launched military attacks on
Ukraine in February.
According to S&P Global Commodity Insights data, the 5,500
kcal/kg thermal coal price for cost-and-freight delivery into South
China was assessed at $201.78 per metric ton (mt) last month, more
than double the same month in 2021's $92.40/mt.
With China's economy facing strong headwinds amid renewed
lockdowns due to its zero-COVID-19 policy, government officials
have prioritized short-term energy security and
economic stability over decarbonization.
The country commissioned 25.2 GW of coal-fired power capacity in
2021, or 56% of the world's new capacity, according to a recent study by Global Energy
Monitor, E3G, Sierra Club, and eight other nonprofits.
Construction started on 33 GW of new coal plant in China last
year, the most since 2016 and almost three times as much as the
rest of the world combined, the study revealed.
China, the world's largest emitter and coal consumer, accounted
for 52% of the 176 GW of coal capacity under construction globally
as of the end of 2021.
India wants more coal power
In India, the world's No. 3 emitter that relies on coal for 70%
of its electricity generation, the government also wants to boost
coal use to solve an ongoing power crisis.
Last week, the Ministry of Power asked
state governments to import more coal while ordering all imported
coal-based power generators to increase utilization and run at full
capacity until 31 October by invoking the Electricity Act.
Of the 17.6 GW of installed coal-fired capacity designed to be
fueled by overseas coal, 10 GW is currently operational, according
to government figures.
"The supply of domestic coal has increased, but the increase in
the supply is not sufficient to meet the increased demand for
power," said the ministry, explaining the reason for turning to
coal imports.
In a parallel move, the coal ministry said India
aims to boost domestic coal production to 1.2 billion mt in fiscal
2023-24 from 777 million mt in fiscal 2021-22, partly by reopening
closed mines.
The efforts to boost coal supplies come as India's coal stocks
dwindle, following months of high usage from the power sector and
low imports amid high international prices.
As a result of heatwaves, dry spells, and a post-pandemic
economic rebound, India's electricity consumption has soared in
recent weeks and touched a record high of 207 GW on 29
April.
The surging demand has led to power rationing in the Punjab,
Haryana, Uttar Pradesh, Rajasthan, Madhya Pradesh, Jharkhand,
Bihar, Goa, Telangana, Andhra Pradesh, and Karnataka states, with
residential, industrial, and farming areas all affected. The
situation could worsen—the summer peak demand season has yet to
arrive.
Looking forward, some players are signaling a shift back to coal
to avoid chronic power shortages. State-run NTPC, India's largest
electricity supplier, will reportedly award a contract to
build a 1.32-GW coal plant in Odisha in eastern India later this
month.
If confirmed, this would be NTPC's first coal expansion project
in six years. The company might also seek to revive two stalled
projects in Lara and Singrauli, according to media reports.
NTPC did not respond to multiple Net-Zero Business
Daily by S&P Global Commodity Insights requests for
comments.
Peak coal?
Aside from China and India, some European
countries—including Poland—may also increase
coal-fired generation as they move away from Russian gas.
Many analysts, including those at the International Energy Agency,
have voiced concerns over the emissions impact.
Based on data from the UN's Intergovernmental Panel on Climate
Change, thinktank Ember estimates that global coal use needs to
fall by 75% relative to 2019 by 2030 to cap global warming at 1.5
degrees Celsius.
"We estimate that in 2021 overall coal use was already 2% higher
than in 2019. We are going in the wrong direction," said Dave Jones, global program lead
at Ember.
Ember believes use of coal for power generation needs to fall
even quicker than overall coal use. Unabated coal power must
decrease from 10,059 TWh in 2021 to 1,153 TWh in 2030 for the
1.5-degree goal, according to its estimates.
"It should be obvious there is no room for new coal power
plants," Jones said.
In terms of CO2 emissions from the power sector, S&P Global
data shows Asia Pacific utilities accounted for 62% of the global
total in 2020. Coal-fired generators were responsible for 90% of
the Asian utilities' emissions.
China and India lead the region in power generation from coal,
installed coal-fired capacity, and planned capacity. Analysts said
they will eventually need to move away from coal if they are to
meet their climate goals.
With a goal of peak CO2 emissions by 2030, China wants to start
phasing down coal consumption between 2026 and 2030. S&P Global
forecasts that installed coal-based capacity in mainland China will
peak in 2027 at 1,188 GW, while power generation may peak slightly
earlier.
India has pledged to achieve net-zero emissions by 2070 but made
no commitments on a peak in its coal consumption. S&P Global
estimates that installed coal-fired capacity needs to peak by 2035
for its net-zero goal to be reached.
For the region as a whole, S&P Global expects coal-fired
power capacity in Asia Pacific to peak in 2027 at 1,697 GW before
to dropping gradually to 961 GW in 2050.
"Owing to the slowdown in capacity additions, coal-fired
generation will peak around the same period as installed capacity,"
said Chengyao Peng, ENR director for Greater China power and
renewables at S&P Global. "Coal-fired generation will taper
year over year as more and more operating fleets will likely be
pushed from baseload supply, to mid-merit or peaking, and
eventually capacity reserve."
Posted 10 May 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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