Potential Challenges With China’s Transition Away From Coal

China currently relies on coal for a large % of it’s energy needs.

If China is to transition to other energy sources in the future (such as natural gas and renewables for example), there might be some challenges and barriers in doing so.

In this guide, we take a closer look at what those challenges and difficulties might be.

 

Summary – Potential Challenges With China’s Transition Away From Coal 

Summary Of China’s Current Energy Mix

China currently relies heavily on coal for energy, and looks likely to continue to do so into the short term future 

At this point in time, several reports indicate that China still consumes more coal than the rest of the world combined on an annual basis

Other reports also indicate there is already an over capacity of coal power in China

In terms of other energy sources that China uses …

China may also one of the largest users of natural gas (behind the US and Russia)

China leads the world in renewable energy investment, and installed wind and solar power capacity

There have also been plans made in China for more nuclear power

 

Potential Challenges For China In Transitioning Away From Coal To Other Energy Sources

Below is a list of potential challenges for China in transitioning away from coal.

These issues generally relate to market forces, technological breakthroughs, the welfare of society, environmental health, and other issues:

 

– There May Already Be A Significant Investment In Coal Power Plants In China

China may already have a significant investment in coal power plants

What this may mean is that immediately trying to shut down these power plants without them reaching the end of their useful life or the end of a period where the investment made can be paid back, might lead to stranded investments for investors i.e. these investors would lose money and suffer other financial setbacks

 

– China’s Installed Coal Capacity May Not Peak For A Few Years Yet

Some reports indicate that China’s installed capacity for coal isn’t expected to peak before 2025

So, there may be installation of power plants and infrastructure that has been planned to happen up until then that may not be easy to cancel

 

– China’s Electricity Industry Being A Major Energy Consumer Presents Challenges

Because China’s electricity industry is a major energy consumer, and a significant amount of China’s energy comes from coal, there may be ‘structural hurdles’ in trying to reform China’s energy mix right now with an important sector like the electricity sector depending on it

 

thediplomat.com indicates that:

China’s electricity industry has made up about 71% of total energy consumption in past years, and this has been a structural hurdle to the advancement of reforms in China’s energy mix 

 

– Energy Sources Other Than Coal Currently Only Make Up A Small % Of China’s Electricity Generation

It might be difficult to quickly transition away from coal if alternative energy sources like renewables currently on make up a very small % of total electricity generation in China 

 

… solar and wind … still only make up a small % share of China’s electricity generation (abc.net.au)

 

– Development Strategies In The Energy Sector May Have A Lag In Terms Of When They Can Be Implemented In Current Power Systems

Some reports indicate that the last 15 years’ development strategies in the energy sector can still influence today’s power system.

So, development strategies made now might only come into effect in around 15 years time.

This may be an issue if people are expecting immediate changes to be made.

One of the other points to consider it that China’s objective in the past may have been security of electricity supply to power the rapidly expanding economy, for which coal was a suitable energy source help achieve this objective.

So, this may explain why China’s energy mix currently looks like it does. 

 

– The Current Power Grid May Primarily Be Set Up For Fossil Fuel Energy Sources More Than Other Energy Sources

Power grids and the supporting infrastructure generally have to be set up for specific energy sources in order for them to integrate properly and be able to deliver power to the grid (that can be used by end consumers)

China’s power grid may currently be set up primarily for fossil fuels like coal.

There may be a lack of infrastructure right now to integrate newer energy sources like renewables.

One example of this might be the infrastructure that is required to deal with the variability of wind and solar energy sources.

Energy sources that don’t have adequate supporting infrastructure may be able to generate energy, but that energy may get lost and may not properly transfer to the grid to be used.

Some reports indicate that there isn’t even adequate distribution capacity right now to transition from coal to natural gas quickly, let alone to renewables.

 

abc.net.au indicates that (paraphrased) power loss for [renewables like solar and wind in] China could currently be up to 20 per cent

 

– There May Be Profit Incentives & Motives For Some Groups To Continue Using Coal Right Now

Coal may be profitable to use right now because of factors such as the cheap price of coal

Because of this, there may be various groups that have profit incentives and motives to use coal right now over other energy sources  

 

– Coal Can Be A Cheap Energy Source

Compared to other energy sources, coal may be a cheap energy source in some parts of China

Not only might it be cheaper for energy suppliers, but it might be cheaper/more affordable for consumers too

Cost/price is important for any product and in any economy

 

– Coal May Provide A Level Of Self Sufficiency In China

In the past, China has mined a good % of the coal they have used domestically

This has meant China could rely on local instead of foreign energy supply when using this coal

This gives China a level of self sufficiency when it comes to energy use

 

– Phasing Out Coal May Impact Taxes

If coal is phased out too quickly, there may be tax revenue implications for the government in China, such as a loss of a certain % of industrial taxes

This may not only affect the government financially, but it may have a flow on effect in society in terms of what those taxes are used for

 

– Speed Of Transition Away From Coal May Impact The Energy Sector In Various Ways

Two issues that may be created when the transition away from coal is too quick might be energy shortages, and also energy price volatility.

With coal in particular, the quicker coal energy supply is reduced, the higher energy prices might go if that energy can’t be replaced immediately with similarly priced energy.

A slower, more stable transition may help reduce the severity of these issues if they develop.

So, how quick changes happen, and the scale of the changes when they are made, can impact the energy sector. 

 

– Several Major Industries May Currently Be Reliant On Coal Power

They may be reliant on both the amount of energy and the price of the energy that coal can provide.

Significantly reducing coal energy may impact these industries and the economy that depends on these industries in a negative way.

 

– There May Be Subsidies For, & Protectionism For Coal 

Some reports indicate that subsidies and protectionism for coal in China right now present challenges in moving to other energy sources.

 

– A Lack Of Environmental Regulations For New Power Plants May Mean There’s No Penalty Using ‘Dirtier’ Energy Sources

In some parts of China, there may be few or no penalties (or regulations) for starting new power plants that use ‘dirtier’ sources of energy like coal.

Where this is the case, little might be done to discourage coal use, and encourage the use of ‘cleaner’ energy sources.

 

– There May Be Few Financial & Business Penalties For Using Coal Energy

In addition to a lack of regulations, there may be few financial penalties in the form of fines to act as a deterrent for businesses using coal energy.

It might be cheaper to pay any dirty energy and pollution fines than invest in ‘cleaner’ energy and emission friendly energy solutions

 

– Renewable Energy May Currently Lack A Performance Or Cost Advantage Over Coal In Several Ways

Although renewable energy may have become cheaper over time in several ways, in may still be more expensive than some fossil fuel energy sources like coal in several ways

Additionally, there may still be some performance issues with some types of renewable energy.

 

Electricity dispatching and absorption for example is an issue [with some renewables, as well as power loss and also variability] (the diplomat.com)

 

– There May Be Negative Social & Economic Effects 

Closing down coal power plants and reducing coal energy supply (or introducing new energy reforms) may:

Negatively impact employment and incomes in the energy sector

Leave some employees with an education and skills gap they can’t quickly resolve

Lead to there being a skills shortage for workers in industries relating to new energy sources

 

– May Negatively Impact Overall Economic Growth

A significant amount of China’s economic growth of the last decade or more might be due to the use of coal for energy

Moving away from coal too quickly may impede economic development if there aren’t suitable energy sources to replace coal’s function

 

– New Power Projects May Have A Lead Time To Consider

New power projects need time to be designed, planned and constructed.

It may be physically impossible in some instances to build new power projects quick enough to have them producing power immediately if coal power plants are taken out of operation immediately.

As one example, new nuclear power reactors may take years to construct and bring into operation.

 

– Some Renewable Energy Sources May Have Specific Requirements In Order To Be Suitable To Use In Some Places

Some of this comes down to ‘geographical suitability’, and some of it comes down to being able to build the required support infrastructure in the areas where renewables will be used.

For example, solar energy needs an adequate amount of sun, and wind energy needs an adequate amount (and intensity) of wind.

Solar panels and wind farms may also need a certain amount of suitable land in order to be set up or installed too.

For example, grasslands and deserts might be the best type of land for solar and wind.

Additionally, new sites for renewables should ideally near cities and industrial centres to make transport of electricity easy, but land is not always available this close.

Further to this, transmission lines must either be built, or upgraded, to carry electricity from land with new renewable energy installations and equipment, to where the energy is going to be converted and used.

There may be limitations on the amount of renewable energy China can install because of these requirements.

 

– Renewable Energy May Create Some Environmental Issues

Such as degrading the land in areas where solar panel farms or wind farms are set up or heavily concentrated

 

– There Can Be Communications Issues & Other Miscellaneous Issues In Transitioning To New Energy Sources

Energy transitions can be large and complex in scale and nature.

This can lead to communication issues and other issues between the parties involved, such as the government, industry/business and citizens.

 

– There May Be Some Social Resistance In Transitioning To New Energy Sources

This might especially be the case where there’s a lack of knowledge or familiarity with the energy sector and new energy sources, and also where businesses and citizens currently depend on electricity from coal energy for work or living

 

– Key Decision Makers May Lack Knowledge In Understanding Whether Or Not To Transition Away From Coal

There may be some issues related to energy supply and power supply that require specialised knowledge or technical knowledge to properly understand.

Some politicians and decisions makers may feel like they lack this knowledge to make an informed decision.

 

– Some May Prioritise The Benefits That Coal Energy Can Provide Over The Drawbacks That It Can Have

For example, some may prioritise the economic and social benefits that coal may provide an economy and society.

 

– Other Specific Challenges

Such as:

Other technical, practical and economic limitations and difficulties in changing energy sources

 

oilprice.com outlines some of the issues specifically for transitioning from coal to gas

Some of those issues include (paraphrased) – coal to gas fired boiler conversions being dependent on gas import capacity being ready, needing adequate gas distribution capacity and infrastructure, households and industrial businesses needing to switch from coal to gas for energy and electricity, and more

 

Additionally, thediplomat.com, and abc.net.au also go into the difficulties, complexities and challenges in deeper detail

You can access these resources from the resources list

 

*An Asterisk On Coal Use 

There’s a difference between the % of an overall energy mix that coal makes up, and total coal use.

A country’s coal use % could go down alongside the rising use of other energy source, but total coal use could still stay the same or increase.

In this instance, total use of resources for that energy source may actually increase (along with other effects of energy use, such as emissions)

So, this difference is worth consideration when assessing the comparative use of different energy sources.

 

What Energy Sources Might China Consider Transitioning To?

Three energy sources that might be considered are natural gas, renewables (like solar and wind), and nuclear

 

The US is an example of a country that has already begun transitioning from coal to natural gas.

 

chinapower.csis.org mentions that:

If a country is still to use predominantly fossil fuels in the short term, natural gas is preferred over coal because natural gas emits 50 to 60 percent less carbon during the combustion process …

 

Additionally, renewables and nuclear might be cleaner than coal from an emissions perspective.

 

What About Energy In Transport?

The challenges we listed above mainly related to transitioning away from coal for stationary electricity generation.

However, coal may also be substituted for other energy sources when it comes to transport 

For example, electric cars may substitute coal for renewable energy or other energy sources for the electricity that they use

This transition may have it’s own challenges to consider

 

Some potential problems in the transport sector when trying to make transport cleaner from an emissions perspective might be:

China’s electricity grid running on coal is an issue for electric cars

Both electric cars and traditional cars in China currently have similar CO2 and small particulate matter emissions (PM2.5) per unit of distance driven (and a large reason is to do with the electricity the electric cars in China use)

Some sources also point out the logistical challenge in switching from gasoline and diesel powered cars to hybrid and electric cars when done at scale

The lithium ion batteries used to power EVs require a huge amount of energy to produce (roughly twice as much as regular cars), can be hard to recycle (due to a range of reasons), and require the mining of metals which may face scarcity issues in the future.

 

chinapower.csis.org outlines these transport issues in more detail.

 

Why Would A Country Want To Transition Away From Coal?

Coal might have a range of ‘cons’ or ‘drawbacks’ to consider as an energy source.

 

 

Sources

1. https://chinapower.csis.org/china-greenhouse-gas-emissions/

2. https://oilprice.com/Latest-Energy-News/World-News/Chinas-Coal-To-Gas-Transition-Sputters.html

3. https://www.weforum.org/agenda/2018/05/china-is-a-renewable-energy-champion-but-its-time-for-a-new-approach/

4. https://thediplomat.com/2018/04/the-stumbling-blocks-to-chinas-green-transition/

5. https://www.abc.net.au/news/2018-03-25/china-pledges-to-drastically-cut-fossil-fuels/9500228

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