Prediction is very difficult, especially if it’s about the future
Is China serious about phasing out coal? Coal is booming over there ... right now
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In a June 14, Bloomberg piece, Jason Rogers points out that coal is booming in China right now.
It’s shaping up to be a year of plenty for coal in China, the world’s biggest producer and consumer.
The country’s domestic output is running almost 5% ahead of last year’s record. Imports have risen a whopping 90%, and shipments are flooding in from as far afield as South Africa and Colombia. Indonesia remains the top provider, followed by Russia, eager to sell more of any fossil fuel eastward.
One can’t deny that, regardless of the pressures in North America and Europe to rid the world of coal, the coal business is still booming in some areas. But while Rogers points out that China is currently using a lot of coal, he also reports the current boom
“won’t change the longer-term fate of the dirtiest fossil fuel — even in China.”
Rogers likens the current surge to “coal’s last hurrah.” China is telling the world that they plan to peak coal use by the middle of the decade, ostensibly 2050, and then “gradually” move it to a supporting role.
There’s two issues with Roger’s prediction that make it very likely to be proved wrong. First, China has made it abundantly clear that they are focused on one thing—becoming the, or at least one of the, world superpowers.
[At the 2017 19th Party Congress] President Xi Jinping warned of severe challenges while laying out a road map to turn China into a leading global power by 2050, as he kicked off a twice-a-decade party gathering expected to cement his influence into the next decade. …
Xi also laid out an ambitious plan to make China a “great modern socialist country” in the following 30 years — part of what he has called the “Chinese dream.” By 2050, he said, the party would be near the goal of achieving a “beautiful China.”
By removing term limits, President Xi solidified his role at China’s helm in 2018. Many news reports at that time were referring to Xi’s new found ability to remain “President for life.” More recently, and despite internal tensions (widespread protests and the reversal of China’s zero-COVID policy), Xi was reported to have reconfirmed his grip on the reins during the 20th Party Congress.
During that Congress, Xi also noted that, China
will promote clean, low-carbon, and high-efficiency energy use and push forward the clean and low-carbon transition in industry, construction, transportation, and other sectors. We will thoroughly advance the energy revolution. Coal will be used in a cleaner and more efficient way, and greater efforts will be made to explore and develop petroleum and natural gas, discover more untapped reserves, and increase production.
If you pick anything out of that short quote, focus on Xi’s promise to “thoroughly advance the energy revolution.” That promise is key because it is immediately followed by a strong commitment to continue using coal, develop petroleum and natural gas, discover more reserves, and increase production.
Xi’s energy revolution promise will take precedence over any other throw away lines about clean and low-carbon. While I can’t read Xi’s mind, it’s pretty clear to me that his “transition” promises are a sop to elected officials and the media in the U.S. and Europe. They eat that sort of thing up and love to take it back to their meetings and commissions, waving the reports that Xi has promised clean energy for our time.
But, if Xi is clear about anything, he is clear that he intends to do whatever it takes to meet the big picture goal of making China “a leading global power by 2050.”
That reality leads me to the second issue, which I believe will ensure Roger’s contention that coal is on its last hurrah in China is likely to be proved wrong.
One thing that that has remained cemented in my skull, perhaps more than anything that I learned during my time in the energy industry, came to me during a presentation at an industry conference in 2015. One speaker pointed out how, in the early 2000’s, the U.S. coal industry was in the midst of a massive boom. Production and consumption was up and predictions were for continued growth, well into the future.
U.S. coal production increased in 2006 by 2.6 percent to reach a record level of 1,161.4 million short tons (Figure 1 and Table 1), 29.9 million short tons higher than the 2005 production.
American electric utilities were using more coal than ever and coal represented more than half of overall generating capacity.
The word going around utility executives at that time was that coal was effectively untouchable. They couldn’t see anything serious happening to coal’s market share. “It’s 50% of the electricity supply! What could possibly happen to it?”
Fast-forward to 2015 and this industry insider’s presentation. Fracking had taken off and the nation was right in the middle of the Obama Administration. The “war on coal” was front page news for the utility industry and perceptions of “what could possibly happen?” were changing rapidly.
Nearly 18 gigawatts (GW) of electric generating capacity was retired in 2015, a relatively high amount compared with recent years. More than 80% of the retired capacity was conventional steam coal. The coal-fired generating units retired in 2015 tended to be older and smaller in capacity than the coal generation fleet that continues to operate.
Coal's share of electricity generation has been falling, largely because of competition with natural gas. Environmental regulations affecting power plants have also played a role. About 30% of the coal capacity that retired in 2015 occurred in April, which is when the U.S. Environmental Protection Agency's Mercury and Air Toxics Standards (MATS) rule went into effect. Some coal plants applied for and received one-year extensions, meaning that many of the coal retirements expected in 2016 will likely also occur in April. Several plants have received additional one-year extensions beyond April 2016 based on their role in ensuring regional system reliability.
The speaker pointed out the changing perspectives and offered one poignant, closing piece of advice to a room full of over 100 industry experts.
“Whatever you may think you know about the future of the energy industry, you’re probably wrong.”
Fast-forward another eight years, to today. The world looks even more drastically different than it did in 2006: changing technologies, changing perceptions, unpredictable changes in the Overton Window. All these changes pool together, reminding me of Niels Bohr’s, Yogi Berra’s, or Dark Kristian’s statement,
Prediction is very difficult, especially it it’s about the future.
If small modular nuclear reactors take off by 2050, Roger’s could accurately predict the mid-century tailing off of coal use in China. If fusion research continues to “stun” and we see some major advancement there, perhaps Roger’s prediction could be correct. But anyone who has spent more than a few years in the industry knows that the norm is for splashy presentations about the next new breakthrough technology. The norm is the backroom company looking for that next investor that is going to get them into the next stage of production. Very few of those “next new technologies” pan out and we keep using coal, gas, and nuclear to power much of our economy.
To add a bit of perspective about our energy use, even in today’s much-changed energy world, coal, gas, and nuclear still provide the vast majority of our primary energy consumption. Wind and solar make up less than 5%.
At the same time, China continues to build more new coal than the rest of the world, combined—more than two new plants per week.
Coal power plant permitting, construction starts and new project announcements accelerated dramatically in China in 2022, with new permits reaching the highest level since 2015. The coal power capacity starting construction in China was six times as large as that in all of the rest of the world combined.
Each of those plants will last 40-60 years, which means that, barring some catastrophic (black swan-style) change in worldwide energy policies, it is far more likely that China will continue to build and use coal well past mid-century, and even into the next century.
They’ll do for a host of reasons.
They’ll do it because it provides a clear economic advantage for China over its competitors.
They’ll do it because it will provide them the reliable and affordable energy that they need to power President Xi’s “energy revolution.”
They’ll do it because the energy policies being put in place around much of the rest of the world are failing and pushing North America and Europe toward energy shortages, rising energy prices, and unstable supply.
They’ll do it because with the above noted energy policies, everyone else will need the products that can only be produced with reliable and affordable energy.
They’ll do it because they can use their coal-fired energy to produce the solar panels and wind turbines that silly westerners will buy, wrongly believing they can provide sufficient electricity to power our industrial society.
Whatever reasons they need, the Chinese have demonstrated they will focus on reliable energy the need to power their nation. One hopes that we can remember what it took to get North America and Europe to where we are and we will have the good sense to do the same.