MNI INTERVIEW: China Coal Demand To Peak By 2028

China's coal demand will grow slightly this year and likely peak in 2028 when solar and wind energy adequately cover annual increases in energy consumption, however, Beijing’s 2030 carbon-peak target remains on track, a leading Chinese energy policy expert has told MNI.

China’s coal demand will increase to fill a short fall in energy supply should the country maintain 2023’s electricity consumption growth rate, said Lin Boqiang, director at the China Institute for Energy Policy Studies. While wind and solar capacity account for 15% of supply and grow by 20% a year, this will not meet China’s incremental energy needs, he told MNI in an interview.

Officials estimate China’s energy demand will grow by around 6% in 2024, roughly equal to last year's increase, according to the country’s energy agency.

"In the short term, we need coal to fill the energy supply gap as hydro and nuclear power cycles are relatively long," he added.

However, China can limit coal consumption increases should it maintain the 20% wind and solar growth rate, Lin added, noting the generation technology will account for 30% of power supply by 2028, and will then cover incremental energy demand.

“It is therefore vital the government gives policy support to maintain 20% growth per year if it wants to meet carbon peak emissions by 2030,” Lin said.

Carbon targets were not at risk, despite 2023’s 4.1% increase in thermal power installed capacity to 1,390 gigawatts, given plant utilisation had dropped from nearly 5,500 hours to over 4,000 hours, Lin argued, noting this trend would likely continue.

While authorities do not release total consumption data, preliminary figures show China's electricity generation in 2023 equalled about 483 million tonnes of standard coal, with 23.4% coming from renewable sources, such as hydro and nuclear.

COAL IMPORTS

Lin stressed prices rather than geopolitical considerations determine coal import volumes – a factor that drove a 61.8% y/y increase in coal shipments to 47.4 million tonnes in 2023, as Newcastle Coal Futures dropped from over USD400 a tonne in 2022 to USD96.00 a tonne in 2023.

China restricted Australian coal imports in 2020 amid escalating tensions, but a recent thaw led to shipments in 2023 rebounding to 52.47 million tonnes from 2.86 million tonnes in 2022.

Imports could improve further thanks to cheaper Australian thermal coal prices – expected to drop another USD84 a tonne by 2025, according to government analysis, supported by the free trade agreement between the two countries and Beijing’s recent re-introduction of import levies.

U.S. LNG

On the U.S. decision to pause pending LNG-export approvals, Lin said the matter had little impact on China’s energy policy, given shipments from the U.S. had fallen in recent years due to increasing prices.

However the EU’s carbon import tax (CBAM), which began a transitional phase last October, had potential to influence China’s future policy. Officials, however, were waiting to see how authorities implemented the tax, Lin added.