China deems coal reserves insufficient after past power crises hit industries, livelihoods
- A new national backup system for coal production will seek to stabilise prices and ensure sufficient supplies as energy security is increasingly prioritised
- Mines must be able to provide enough coal when Beijing says spot prices exceed a ‘reasonable’ range, or when supplies are tight, according to China’s economic planner
China will establish a backup coal-production system by 2027 to stabilise prices and secure its supply, the country’s economic planner said on Wednesday, as the world’s biggest coal consumer presses on to boost energy security.
The new system aims to create 300 million metric tonnes of “dispatchable” annual coal production by 2030, the National Development and Reform Commission (NDRC) said in a circular posted on its site seeking public feedback.
Mines with at least 3 million tonnes of annual production capacity may apply to be included, the NDRC said.
They must be able to dispatch output when the government deems spot prices to have exceeded a “reasonable” range, or when supplies are tight, the NDRC said. These mines “must strictly fulfil their responsibilities of ensuring coal supply and stable prices” and must prioritise supply according to “relevant state policies”, the NDRC said.
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In 2021, the NDRC said China would aim to have coal reserves equivalent to 15 per cent of its annual consumption.
China’s raw coal output in 2022 was 4.56 billion metric tonnes, and the target for its annual production capacity reserve will account for roughly 6.58 per cent of total output, Citic Securities said in a note on Thursday, adding that the backup system would not have a significant impact on short-term demand and supply.
“If this goal is achieved, China’s coal-supply-guarantee capability will be significantly enhanced, and supply elasticity and resilience will continue to improve, which will be conducive to achieving energy security,” Citic Securities said.
Because the NDRC said the planned coal reserves would be mainly used to ensure power generation, heating and energy consumption for people’s livelihoods, the reserve capacity is primarily used to balance the supply and demand of thermal coal, Citic Securities noted.
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While China is the world’s biggest producer of coal, it also imports the critical resource from countries such as Australia and Indonesia.
Asia has added more than 40 gigawatts (GW) of new coal-fired capacity in each of the last five years, and it is expected to add 52GW next year, Norwegian energy consultancy Rystad Energy said in a note on Monday.
Most of this new capacity is in China, followed by India and Indonesia, Rystad said. However, it also forecasts that capacity levels will continue to rise until 2027, albeit at a slower pace, and thereafter it expects that coal power plants will begin to decline.
“Countries around the world that are highly dependent on coal, like China, Germany and the US, are developing renewable capacity fast enough, and at favourable economics, to displace coal easily,” the consultancy said.
