Lower Coal Utilization in China Pegged in Part to Massive Coal Power Glut

Tremors in China’s economy rattled its power sector last year. For the first time since the Cultural Revolution in 1968, the country’s power generation dropped from the previous year—modestly, by 0.2%, but a decline that experts say is symptomatic of more to come.

According to the National Bureau of Statistics, by the end of 2015, the country of 1.37 billion people saw a population spurt of 6.8 million since 2014 and nominal growth of 8.9% in the national per capita disposable income of residents. But owing to economic pressures, China’s electric power generation fell to 5.6 trillion kWh, plunging 3.7% in December alone.

Over 2015, the nation’s total thermal power generation fell 2.8%, to 4.21 trillion kWh—representing about 75% of the total power mix (down from 76.96% in 2014). That could also be because, determined to win a war against pollution, the country’s State Council recently tightened rules for inefficient coal power plants. On December 2, for example, it announced ambitious plans that will force coal generators to upgrade and slash emissions of major pollutants by 60% before 2020. In comparison, hydropower surged 4.2%, to 996 billion kWh in 2015, claiming a 17.7% share.

However, some observers say China is grappling with a more insidious issue. Confirming industry estimates, China’s National Energy Administration (NEA) on January 29 said that utilization of all power plants fell to their lowest level since 1978, down 8.1% compared to the previous year. The hardest hit were thermal generators, which saw utilization rates at an average of 4,329 hours last year, and even below 3,500 hours in some regions. At the end of 2014, by comparison, thermal power generation was up 6.7%, claiming a 73.8% share of China’s generation mix, and utilization averaged 5,128 hours.

Some accounts put surplus coal plant capacity at between 130 GW and 200 GW. The lower estimate, 130 GW, is 13% of the total 990 GW of thermal capacity installed at the end of 2015 and nearly 9% of China’s total power capacity of 1,506.7 GW.

The NEA said the plunging coal plant utilization rates resulted because grid operators were able to source more renewable power to meet demand, which had slowed markedly. Another possible explanation is that new builds have outstripped new demand. Reuters reported in December that China has vowed to clamp down on approvals of new coal plants by local governments, noting that nearly 200 GW were given the green light in the first half of 2015.

Sonal Patel is a POWER associate editor.