China Releases Policy Directive to Control Coal-Fired Power Capacity Until 2020

August 25, 2017

China Releases Policy Directive to Control Coal-Fired Power Capacity Until 2020

On August 14, 2017, National Development and Reform Commission and National Energy Administration, along with 14 other national ministries, jointly released a policy directive on controlling coal-fired power capacity until 2020. This document sets a target of limiting total coal power capacity within 1100 GW by 2020 and requires to stop or postpone 150 GW of coal power projects during the 13th Five-Year Plan (2016-2020). This newly released document shows Chinese government’s determination in reducing the risks of excess investment in coal power projects.

By the end of 2016, China’s total coal power capacity reached 943 GW. Considering that 350 GW of coal power projects have been included in electricity planning or approved to be constructed, total coal power capacity would potentially reach 1300 GW by 2020, much higher than the goal of 1100 GW. Even so, many scholars have argued that the goal is still conservative and should have been stricter. This echoes a recent LBNL report, Excess Capacity in China’s Power Systems: A Regional Analysis, which analyzes reserve margins of each grid in 2014, 2020 and 2025. This report introduced planning reserve margin as a metric to measure resource adequacy requirement at a regional grid scale to inform the policy debate in China on overcapacity in the power sector. The report concludes that China does not need new base load coal units, before 2020 and potentially not until 2025.

Future research on robust approaches of electricity demand forecasting and integrated resources planning are needed to support sound decision making in power sector investment. In addition, further research are needed to understand the potential financial risks of existing and future power plant investment as China introduces a greater degree of competition among generators.