【Ferro-alloys.com】Chinese policy makers and top power utilities have adjusted their stance on coal-fired power generation after the recent energy crisis and called for a more realistic assessment of the energy transition instead of impulsive plant closures that endanger energy security.

The reassessment includes making room for gas in the energy transition as a bridging fuel with half the emissions footprint, as well as keeping coal plants as back-up power sources instead of complete decommissioning, until technologies and costs to solve the intermittency of renewables meet a certain threshold.

"Coal-fired power plants are required to be upgraded and retrofitted, however, where does the money come from?" Chen Zongfa, Deputy General Counsel with China Huadian Corp., one of China's largest state-owned generation utilities, said at a recent industry forum on The Underlying Logic of the New Power System.

China Huadian was one of the generation utilities impacted by soaring coal prices and regulated electricity prices in recent months. The double whammy on margins has left utilities with fewer resources to fund decarbonization efforts.

"Since 2007, 294 gigawatts of coal-fired power capacity have been phased out. It is reasonable to phase out the excessive coal-fired power capacity. However, is it necessary to phase out so much? Are they being phased out in a proper way?" Chen said.

Chen said policies and attitudes towards coal had somewhat changed after the recent power crisis.

In recent years, Beijing had come down heavily on coal mining, coal-fired power generation and industries that were energy intensive, but the impact of the energy crisis on the daily lives of people and the economy have prompted a reassessment of dependence on coal.

"Our previous estimate was that China's coal-fired power capacities will peak within 1,200 gigawatts, but now the peak is expected to increase to 1,250 to 1,300 gigawatts. In the past, we expected coal-fired generation units will be dismantled, but now it is possible to just stop operations and keep them as spare capacities. These changes are all driven by the power crisis," Chen said.

Coal as the 'ballast'
Power generation is China's most emission intensive sector and accounts for around 40% of annual CO2 emissions.

China has some of the world's largest solar and wind generation capacity, totaling 581 GW as of Oct. 2021, but this has not helped guarantee sufficient and stable power supply, or effectively substituted coal-fired generation.

"What's the new energy system? In my view, it should provide everyone with stable power supplies even if there's no sunlight or wind. Considering our current system, the distance is still far," Xu Xiaodong, senior consultant with China Electric Power Planning & Engineering Institute, a government-backed think tank, said at the forum.

"Like it or not, we still cannot get rid of coal-fired power in a relatively long period, because we need it as the 'ballast' that ensures energy security. Nevertheless, we will target shortening this period and meet the climate pledges in time," Xu said.

He said China's 14th Five-Year Plans for the energy and power sectors are expected to be launched around the end of this year. The five-year economic plans will lay out the targets to be achieved and also indicates whether decarbonization efforts have been incorporated into China's top-down economic policy.

Besides coal, natural gas, which is regarded as the bridging fuel in the interim period, also faces high costs and energy security issues.

"We estimate the demand for coal will peak around 2025, and natural gas will peak around 2040. Natural gas can partially substitute coal for power supplies," Xu said.

"Nevertheless, China's import dependency for natural gas and LNG has increased in recent years and approached 50%. We estimate it will reach nearly 60% in next few years. We hope to utilize more natural gas but keep the demand growth within a reasonable limit, so that energy security issues don't escalate," he added.

Dilemma for power utilities
Chinese utilities reflect the dilemma of power producing companies in the energy transition – they face losses from record high coal and gas prices, while under pressure to maintain electricity supply and are targeted for burning fossil fuels.

"If our power generation utilities cannot survive, the whole power sector will face the sustainability issue. As long as we still need the coal-fired power, we need to give its suppliers the 'dignity' in our ecosystem," Jiang Liping, Vice President at State Grid's Energy Research Institute, said at the forum.

In October, S&P Global Ratings said in a report that losses at China's independent power producers should ease after the government moved to boost coal supplies from both domestic and overseas sources, the ability to moderate some cost impact from increased focus on renewable energy, and more flexibility in tariffs to pass on fuel costs to consumers.

"While we expect risks to ease after the coming winter period, unexpected negative events such as policy missteps may prolong the crisis and its effects," Ratings had noted.

"I think the recent power shortage was beyond everyone's expectation. However, it will not become the norm or trend," said Huang Shaozhong, former director with National Energy Administration, Northwest Regulatory Bureau.

• [Editor:zhaozihao]