Coal is losing its market share in China’s electricity generation

Mike Sonnenberg - Author

Nov. 20 2020, Updated 2:40 p.m. ET

Coal emits the most carbon dioxide (or CO2)

With its massive electricity generation capacity—mainly coal-fired—China emits the most CO2 in the world. It emits 30%. China isn’t the most polluted country. However, the four biggest Chinese cities—Shanghai, Beijing, Tianjin, and Guangzhou—exceed air pollution guidelines. The guidelines are set by the World Health Organization. Air pollution is linked to lung cancer and other cardiovascular diseases.

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Coal is the cheapest fossil fuel, but it’s also the most polluting. That’s why the U.S. Environmental Protection Agency (or EPA) waged war on coal. In the recently concluded United Nations Climate Summit, China’s Vice-Premier Zhang Gaoli said that China wants to reduce carbon emission per unit of gross domestic product (or GDP) by 45% by 2020—compared to 2005 levels.

Coal is losing market share

As a result of coal, China has become the second largest economy in the world. Coal accounts for 70% of China’s total electricity generation capacity. However, the trend started changing in 2013. With climate change and a better energy mix in mind, China is focusing more on other sources—notably nuclear power and wind power. In 2013, thermal capacity additions accounted for only 39% of the total capacity additions. The total capacity additions were 94 gigawatts (or GW).

In 2014, thermal capacity additions accounted for 48% of the new capacity additions. There have been 48 GW of new capacity additions. In contrast, thermal capacity accounted for over 59% in new capacity additions in the past. In 2014, coal imports fell for the first time since China became a net importer in 2009.

Wind, nuclear, and hydro gain

Thermal capacities increased by 5.3% in 2014—the slowest pace since 2008. In contrast, wind and nuclear power capacities have grown by over 21% in 2014. Hydroelectric capacity has grown by over 12% in 2014. It’s growth is due to large dams being commissioned—like Xiloudu.

China has a large land area available. China is also exploring solar power generation opportunities. The push for wind, nuclear, and solar energy could help companies like General Electric (GE), Fluor Corporation (FLR), Yingli Green Energy (YGL) and Trina Solar (TSL). However, it’s a bad news for coal producers (KOL).

Visit the Market Realist Coal page to learn more about the industry.


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