20151215 绿和－中国煤电产能过剩与投资泡沫研究（英浏览版）

COAL POWER OVERCAPACITY AND THE INVESTMENT BUBBLE IN CHINA REPORT BRIEFING

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COAL POWER OVERCAPACITY AND THE INVESTMENT BUBBLE IN CHINA

1. BACKGROUND In recent years, new norms have been established in both economic development and the power industry in China. In terms of economic development, an overall look at changes in national GDP over the 12th Five Year Plan period clearly show that while there were cyclical increases in GDP in the latter quarters of 2012, Q3 of 2013 and early 2014, there was an obvious general slowdown in GDP growth. Growth rates of more than 10% that China maintained for over 30 years ended during the 12th Five Year Plan period and continued to gradually fall to just under 7% in Q3 2015.

This new economic norm is not random. Objective factors include a general transition from super-high economic growth to moderate rates.

But a more direct factor may be the continued optimization of industrial structures spurred by a sustained transition in China’s internal demand structure during the 12th Five Year Plan. This is mainly due to continued increase in GDP contributed by the tertiary sector. Data from Q3 2015 show that tertiary sectors contributed 51.4% of domestic GDP, 10.8 percent higher than secondary sectors. [1-7] One of the factors behind the continued optimization of industrial structures is the sustained depressed growth in energy intensive industries, which is the main reason for the new norm in China’s power industry. This is the last year of the 12th Five Year Plan and based on figures on total electricity consumption for the first three quarters of 2015 released by the National Energy Administration, year-on-year growth was

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only 0.8%, nearly 15 times lower than the 12% growth observed at the beginning of the 12th Five Year Plan. [8, 9] In terms of industry contributes to GDP, increases in power consumption by tertiary industries in the first three quarters of 2015 reached 7.3%, while secondary industries, which make up 70% of total electricity consumption, saw negative growth of 1%. This is proof that the decrease in power demand is a result of the slowdown in secondary industry growth.

[9] Industry insiders point out that total electricity consumption will likely continue to follow a downward trend in response to this new economic normal.

However, what conflicts with China’s new economic normal and the decrease in power usage is the continued rapid growth and irrational expansion in new thermal power capacity (mainly coal power). Overall growth of nationwide coal power capacity during the 12th Five Year Plan period showed a decrease from 7.77% in 2011 to 4.30% in 2014 due to rapid growth in renewable energy. The growth of thermal power capacity remained at 4.3% for the first three quarters of 2015 and current trends indicate it will surpass this number in Q4. While growth of coal power capacity is slightly lower than 4.3%, this number is still far beyond the 0.8% growth in total electricity consumption. The result of this is that the operating hours of thermal power units continue to fall with the average number decreasing from a shocking 4,706 hours (the lowest value since 1978) even further to 2,158 hours in the first half of 2015 and 3,247 hours in Q1-3 2015. [8-12]

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Figure 2: Thermal Power Production and Usage Hours for 2010-2014 Data Source: Documents [8-15] 3

COAL POWER OVERCAPACITY AND THE INVESTMENT BUBBLE IN CHINA

While new records continue to be set in the operating hours of thermal power units, the installed capacity of potential thermal/coal power projects is actually increasing. Information released by the media shows that in addition to projects already engaged in production, the capacity of thermal power projects approved in the first half of 2015 alone is as high as 200 gigawatt (GW).

[16] Statistics from Greenpeace show that the total scale of coal power projects who got environmental impact assessments acceptance, are pre-approved or approval in 2015 reached 123 GW. [17] This number is equivalent to nearly 80% of all coal power projects whose environmental impact assessments were approved from 20122014 (not including CHP projects). [10] There are clearly many underlying factors that resulted in this increase, the largest of which is an historical change in the approvals mechanism.

The power to approve CHP coal power projects using back-pressure turbines was delegated to the provincial level in 2013, while approval powers for general coal power projects were gradually transferred from the National Energy Administration, the National Reform and Development Commission and the Ministry of Environmental Protection to corresponding bodies at the provincial level. [18-21] The result of this was that a measure originally intended to simplify bureaucracy and increase efficiency has now become a carteblanche for local governments to increase GDP, especially in provinces heavily relied on coal.

The problem has not gone unrecognized by government bodies. The former head of the National Energy Administration, Zhang Guobao, has pointed out that the average opearting hours of thermal power generation equipment was in use in 2014 was only 4,706, indicating that usage of installed power generation equipment was very 4

low and that China’s endemic power shortages were now at an end. Director of National Center for Climate Change Strategy and International Cooperation, Li Junfeng, also noted during a recent media interview that China is currently transitioning toward clean and low-carbon energy sources and that large-scale construction of coal-fired power plants would be a waste of resources. The Chinese government has promised to place a cap on CO2 emissions by around 2030 and would work to reach that cap as early as possible. According to the current timeline, coal consumption would be capped by at least by 2025 if not by 2020. Under these conditions, there is no more room for coal consumption to grow and new capacity need even more coal to accommodate them. The result of this type of arrangement will be an overcapacity similar to that experienced by China’s steel industry, and will ultimately be a waste of both economic resources and investment capital. [24] The aim of this study is to increase understanding of the current overcapacity of coal power production in China based on current discussions of industry development and existing overcapacity, Also, with this study, we want to inspire deeper consideration of the economic issues and industry impacts behind this phenomenon as well as case studies of development trends in certain key provinces. In it, we attempt to answer the following questions: 1. What is the magnitude of current coal power overcapacity? Based on the size of coal power plants whose environmental impact assessments have been approved or are submitted, how far will the current overcapacity expand by 2020? What impact will it have on the current coal power industry?

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2. If increases in coal power overcapacity do happen, what will be the loss on investment?

3. What is a reasonable limit on the number of coal power capacity in order to reach the 15% goal for non-fossil fuels by 2020 as required by the State Council’s “Energy Development Strategy Action Plan (2014-2020)”?

4. By 2020, what will be the coal power overcapacity for Shanxi, Xinjiang, Jiangsu, Zhejiang and Hebei? What will be the loss on investment?

2. METHODOLOGY The unique part of this study is that it analyzes trends in coal power during the 12th Five Year Plan in order to provide a reasonable prediction of future development under the 13th Five Year Plan. It also carries out investment risk assessment for coal power expansion under the 13th Five Year Plan period and fills in information gaps on coal power overcapacity for key prov-

inces. The study was led by Associate Professor Yuan Jiahai and his research team from North China Electric Power University with peer review from the former head of planning for the Ministry of Power and Industry Mr. Wang Xinmao and Deputy Dean of the State Grid Energy Research Institute, Mr. Hu Zhaoguang.

3. CONCLUSIONS 1. The Current State of Coal Power overcapacity: With the arrival of new economic normal in China, the growth in the electricity demand began to level out in 2014. However, due to delayed implementation of existing plans and the long approvals process for power resource projects, the number of new coal power projects in 2014 remained high. By 2015, it is

expected that the operating hours of thermal power plants will drop further to 4,330 hours.

The excess capacity of current coal power units is estimated at 80-100 GW. This overcapacity of coal power production is a risk that both the government and the industry should watch closely.

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COAL POWER OVERCAPACITY AND THE INVESTMENT BUBBLE IN CHINA

-10% 2015 (expected)

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Figure 3: Changes in the Operating Hours of Thermal Power Facilities during the 13th Five Year Plan (Report Figure 2-1) 2. This study carried out three different scenario simulations for the number of planned coal power capacity in the 13 th Five Year Plan period – rapid, recommended and slow. The expected capacity under the recommended scenario was based on a range of power demand growth ranging between 3.5-4.9% and found that after implementing national goals for non-fossil fuels, by 2020 a reasonable output level for coal power capacity should be between 860-960 GW. Based on recommended growth rate of 4.2%, by 2020 total electricity consumption should reach 6920 TWh and if coal fired power plants operate 4,800 hours per year, a reasonable output level for coal power facilities would be 910 GW. If an active policy of power substitution is implemented and power demand reaches its upper limit (4.9% growth), the reasonable output for coal power could be increased by 50 GW, bringing overall output to 960 GW. An increase in the proportion of non-fossil fuel power production

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from 13.4% to 14% in the primary energy mix would shrink coal power contributions by 22 GW. The values for all scenarios in this study for coal power output by 2020 were all below industry predictions of 1040-1100 GW. [10, 26] 3. If this out-of-control expansion continues, coal power overcapacity will continue to increase over the 13th Five Year Plan period, resulting in massive losses in investment. Under the recommended power demand scenario, if all of the coal power projects approved between 2012-2014 – an overall capacity of 160 GW, has been putting into operation during the 13th Five Year Plan period, the total capacity of coal power facilities will boost instantly to 1030 GW and the coal power overcapacity will range between 70-120 GW. If the retirement of some currently active facilities is taken into consideration, this value may change. [10] If all facilities that got environmental approvals by the end of September 2015, which have a

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total output of 283 GW, were put into production by 2020, the magnitude of coal power overcapacity will instantly increase to 200 GW. [17] An overcapacity this large has considerable negative implications. At a cost of 3,500 RMB per kW, the loss on investment would be as high as 700 billion RMB. As the operating hours of coal power plants continues to drop to around 3,800, the solvency of these businesses will also decline considerably. The large scale of coal power capacity will also further suppress the development of renewable resources, resulting in renewable energy curtailment. The crowdingout effect, which is due to misplaced investment, may also cause China to miss the opportunity in its energy transition.

4. For China’s five typical provinces, coal power overcapacity will also have an especially large impact at the provincial level. Assuming only

a portion of the facilities currently under construction go into operation by 2020, with the exception of Xinjiang, Shanxi, Hebei, Jiangsu and Zhejiang will all exceed ideal installation capacities by 2-3 GW, although the overcapacity is still under control. If all of these projects enter into production, each of the five major coal producing provinces will have higher than ideal output with Zhejiang being the lowest at 2.3 GW, while the others are much higher than this with the most serious example being major power producer Shanxi, whose overcapacity would exceed 21 GW and result in a loss in investment of 73.5 billion RMB. Xinjiang would have a overcapacity of 15.5 GW and experience losses of 54.2 billion RMB, while the overcapacity of major power importer Jiangsu would approach 10 GW and experience investment losses of 35 billion RMB.

4. GREENPEACE RECOMMENDATIONS If coal power projects continue to go forward on such a large scale, the number of operating hours that these facilities will continue to decrease, creating a massive overcapacity and investment loss as well as a negative impact on the industry that will be difficult to reverse. In addition, this situation is in direct conflict with improvements in the load rate and operating quality proposed by the State Council “Energy Develop-

ment Strategy Action Plan (2014-2020)” as well as the “Plan for Emissions Reduction, Upgrading and Restructuring of Coal Power (2014-2020)” issued in 2014 by the National Development and Reform Commission, National Energy Administration and Ministry of Environmental Protection which includes guideline strategies that give priority to energy conservation and green lowcarbon industries. [27, 28]

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COAL POWER OVERCAPACITY AND THE INVESTMENT BUBBLE IN CHINA

In light of this report’s findings, Greenpeace East Asia raises the following four suggestions: 1. Restrict the rampant expansion of coal power facilities. Under the new norm of slowing electricity demand, no new coal fired power plants should be approved During the 13th Five Year Plan.

2. Closely control the construction of newly approved units. It is recommended all provinces enhance regulation of the large number of newly approved coal fired power plants based on guidelines in the power plan of the 13th Five Year Plan.

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3. Establish an early warning mechanism for investment in power projects. It is recommended that relevant government departments release regular forecast reports on national and regional power markets based on actual growth trends in power demand and the construction of new power plants in order to warn investors of potential risk.

4. Fully implement national guidelines and strengthen coordination between various departments to ensure that policies are better integrated into actual regulation of the coal power industry.

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REFERENCES [1] National Bureau of Statistics, GDP Data for 2011. 2011 http:// data.stats.gov.cn/easyquery.htm?cn=C01&zb=A0201&sj=2011

[2] National Bureau of Statistics, GDP Data for 2012. 2012 http:// data.stats.gov.cn/easyquery.htm?cn=C01&zb=A0201&sj=2012 [3] National Bureau of Statistics, GDP Data for 2013. 2013 http:// data.stats.gov.cn/easyquery.htm?cn=C01&zb=A0201&sj=2013 [4] National Bureau of Statistics, GDP Data for 2014. 2014 http:// data.stats.gov.cn/easyquery.htm?cn=C01&zb=A0201&sj=2014 [5] National Bureau of Statistics, GDP Data for Q1 2015. 2015 http:// data.stats.gov.cn/easyquery.htm?cn=B01&zb=A0101&sj=2015A [6] National Bureau of Statistics, GDP Data for Q2 2015. 2015 http:// data.stats.gov.cn/easyquery.htm?cn=B01&zb=A0101&sj=2015B [7] National Bureau of Statistics, GDP Data for Q3 2015. 2015 http:// data.stats.gov.cn/easyquery.htm?cn=B01&zb=A0101&sj=2015C

[8] China Electricity Council, 2011 Compilation of Power Industry Statistics. 2012 [9] China Electricity Council, Summary of Power Industry Operations Jan-Sept 2015. 2015. http://www.cec.org.cn/guihuayutongji/ gongxufenxi/dianligongxufenxi/2015-10-22/144395.html [10] China Electricity Council, China’s Power Industry Today and Tomorrow. 2015

[11] China Electricity Council, 2012 Compilation of Power Industry Statistics. 2013 [12] China Electricity Council, 2013 Compilation of Power Industry Statistics. 2014 [13] National Energy Administration, Average Operating Hours of Power Generation Equipment at Power Plants with Capacities of 6,000 kW and above in 2013. 2014. http://www.nea. gov.cn/2014-02/10/c_133103830.htm.

[14] National Energy Administration, Average Operating Hours of Power Generation Equipment at Power Plants with Capacities of 6,000 kW and above in 2014. 2015. http://www.nea. gov.cn/2015-01/21/c_133936073.htm [15] National Energy Administration, Average Operating Hours of Power Generation Equipment at Power Plants with Capacities of 6,000 kW and above in the First Half of 2015. 2015. http://www.nea.gov.cn/2015-07/21/c_134430485.htm [16] BJX Power Net, Warning! Local Governments Signing Off on Thermal Power, Threat of Massive Overcapacity Looming.

2015. http://news.bjx.com.cn/html/20150831/658174.shtml

[18] Yinengyuan, Delegation of Approval Power for Coal fired Back-Pressure Thermal Power down to Local Governments: Good News for Industry. 2013 http://www.nengyuan.com/ news/d_2013100611111352783.html

[19] National Energy Administration, NEA Simplifies Bureaucracy

by Delegating Powers Improving the Approvals Process for Coal fired Thermal Power Projects. 2014 http://www.nea. gov.cn/2014-01/30/c_133085359.htm [20] Sina Finance, NDRC Discusses Delegation of Approvals Power for Thermal Power: Local Implementation of National Plans. 2014. http://finance.sina.com.cn/china/20141118/102520848806.shtml [21] Xinhua Net, Ministry of Environmental Protection Delegates Approval Powers for Thermal Power, Geothermal Power and Highways to Provincial Governments. 2015 http://news.xinhuanet.com/politics/2015-03/19/c_1114698435.htm

[22] Sina Finance, Overcapacity in Coal Power Beyond Doubt, Interest Groups in Denial. 2015. http://finance.sina.com.cn/ chanjing/sdbd/20150902/141623149663.shtml [23] BJX Power Net, The Most Talked about Energy Policy of the 13th Five Year Plan is Here!. 2015. http://news.bjx.com.cn/ html/20151028/675698.shtml

[24] ESCN.com, Li Junfeng: Large-Scale Development of Coal Power will Result in the Same Overcapacityas the Iron Industry. 2015. http://www.escn.com.cn/news/show-279217. html

[25] China Energy Net, Would things be better if we didn’t build more thermal power plants? Zhou Dadi predicts negative growth this year in energy consumption. 2015. http://www. cnenergy.org/dl/hd/201511/t20151105_213415.html [26] China Electricity News Network, Wu Jingru: Development of the Power Industry for 2012-2050. 2015. http://www.askci. com/news/chanye/2015/05/29/162316p10.shtml

[27] State Council, State Council Office Notice on Issuing Strategic Plans for Energy Development (2014-2020). 2014. http:// www.gov.cn/zhengce/content/2014-11/19/content_9222.htm

[28] National Reform and Development Commission, Notice on Issuing ‘Plan for Emissions Reduction and Restructuring of Coal Power at the Provincial Level (2014-2020)’. 2014. http://www.sdpc.gov.cn/gzdt/201409/t20140919_626240. html

[17] Greenpeace Database on New Coal Power Projects for Jan, 2012 – Sep, 2015 based on Data Statistics Obtained from the Ministry of Environmental Protection and Provincial Environmental Protection Bureaus.

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