The Coal Sector and Power Generation in China

The Chinese power sector, which is the major consumer of coal, is one of the fastest growing generating industries in the world with the country’s installed capacity increasing by 81,300 MW to reach 874,070 MW at the end of last year. 71% of electricity is generated with coal. With restructuring and an increase in hydro and oil generation, the share of coal in the generation mix will decrease to an estimated 58.6% in 2020, but on a much increased base.

According to the National Power Technology Market Association of China, the generating capacity targets formerly set by the State Power Corporation had been accelerated in 2004, bringing the target for 2030 forward to 2020. The coal-fired generating capacity of China was to reach 296 GW in 2005, and is targeted for 389 GW in 2010 and 545 GW in 2020. The installed generating capacity is expected to exceed 1.4 billion kilowatts by 2016. Growth in demand should only be constrained by government policies to encourage energy conservation.

At the end of 2009 there were 112 GW of new coal-fired capacity under construction, more than any other country. While coal consumption per unit power output will decrease due to energy and emission reduction measures, overall coal consumption by the sector is expected to rise due to rapid new build of coal-fired plants.

The biggest competitor to coal-fired plants is gas plants. On average the capital costs for gas plants is RMB 3,800 per kW compared to RMB 4,100 per kW for coal-fired plants.

As part of a move to promote energy efficiency, the government has been closing small inefficient power plants. The 4,000 MW Yuhuan plant is classed as a global benchmark for efficiency. At the end of 2009 small coal-fired power plants with a combined capacity of 60.38 million kW were closed down. It is expected that a further 10 million kW of inefficient small power plant capacity will be shut down this year. Over 50% of power plants in operation have been fitted with flue gas desulphurisation (FGD) to reduce the plant’s SO2 emissions.