China excess power capacity raises concerns

A man rides past a coal power plant in Daqing, China February 15, 2005. Doug Kanter/Bloomberg News©Bloomberg

China stands to waste Rmb900bn ($134.6bn) of capital expenditure on power plants that have been given the green light despite adding to over-capacity, Greenpeace warned in its latest report tracking the country’s coal fired plants.

An economic slowdown combined with intensive investment in coal, hydro wind and solar power capacity in the past few years has depressed utilisation rates in China, especially for coal-fired power plants and wind farms.


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New targets for renewable energy and nuclear power as well as plans for further development of large coal deposits in the north and northwest mean that power generators face even greater competition in the future.

According to Greenpeace, the environmental activists, plants either approved or already under construction suggest an additional coal-fired power plant per week will come on stream for at least the next four years.

Overcapacity is dogging swathes of Chinese industry, including steel and petrochemicals, stifling profitability and damaging the environment. “That’s going the wrong direction in terms of economic and financial reform,” said Lauri Myllyvirta, Beijing-based coal campaigner for Greenpeace.

The glut will likely worsen competition between provinces, which will all fight to keep their own plants running. Many of China’s plans for expanded power generation are in Xinjiang and southwestern China, designed to serve industrial centres and cities along the more prosperous coast.

Some of their generation capacity is expected to be retired to meet air quality standards as well as China’s commitments on reining in its emissions of carbon dioxide and other greenhouse gases. Local media have also reported that Beijing could halt all new power plant approvals.

Unusually public lobbying by China’s wind industry has already succeeded in a rare victory in the form of higher mandated use of wind power a development that could further stress thermal generators and lead to new, behind-the-scenes struggles for preferential policies.

In addition to power generators competing with each other, China’s growing excess of power could lead to water strains and ultimately, more tensions with ethnic groups along the frontier.

In Inner Mongolia, where large coal developments are planned for the Ordos and Xilingol basins, there has been a marked rise in protests and other disputes with displaced Mongolian herders.

Xinjiang, targeted for extensive coal development, is also home to the Uighur people, a Muslim ethnic group that already chafes under Chinese rule. Water use there is dominated by Han Chinese paramilitary settlements dating to the 1950s.

“The western coal bases are also among the most water-stressed areas in the country,” Greenpeace wrote in its report.

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