With a significant increase in non-thermal electricity generation, coal fired power generation declined by an estimated 4% yoy and coal consumption is estimated to have built on the decline reported in 2014.
With declining coal consumption, China has moved to protect domestic production by cutting imports. Figures out last week confirm coal imports declined 30% yoy over January-December 2015, according to Energy Finance Studies director at the Institute for Energy Economics and Financial Analysis Tim Buckley.
“With the collapse in both Indian (down 34% yoy) and Chinese (down 35% yoy) coal imports in December 2015, the seaborne thermal coal industry is entirely beleaguered,” he said.
“This telling import data confirms the last flicker of hope has been snuffed out, not least for Australia’s Galilee Basin. It also carries massive negative implications for Indonesia’s coal export market, given the concurrent collapse in Indian demand.”
Within the overall Chinese electricity sector’s +0.5% growth, heavy industry’s consumption fell 1.9% over 2015. In contrast, service sector electricity consumption grew 7.5% and households' consumption grew 5%. This illustrates the rate at which the economy continues to transition away from heavy industry, according to Buckley.
“The decoupling of economic growth and electricity demand is a key driver of the Chinese energy transformation and is being witnessed first hand,” he said.
Coal consumption per kWh thermal power generated fell 1.3% yoy to 315g, maintaining a decade long improvement in average thermal power plant efficiency gains.
This data underlines a significant decline of total coal consumption in China, with IEEFA estimating a reduction of 5% yoy in volume terms, an acceleration on the 2.9% yoy decline in coal consumption reported for 2014.
The NEA confirmed the evidence that has been consistently reported over 2015 that China is successfully diversifying away from thermal power generation at a far-faster than expected rate. Wind, solar, hydro and nuclear continue to gain share at coal’s expense, consistent with the trend evident since 2011.
Thermal power capacity utilisation fell by 9% yoy from 54.1% in 2014 to only 49.4% in 2015, the lowest on record and the first time utilization has fallen below 50%, as an absurd 64GW or more of effectively idle thermal power generating capacity was added.
IEEFA forecasts that China will install an additional 24 gigawatts (GW) of wind, 16GW of new hydro, 6GW of nuclear and a new record of 18GW of solar (60% utility scale, 40% distributed rooftop solar) in 2016. With the economic transition continuing, electricity demand is forecast to grow only 3-4% yoy in 2016; this 64GW of additional zero carbon electricity capacity will be more than sufficient to meet total demand growth.
As a result, the decline in China's coal production of 2014 and 2015 is expected to continue in 2016. The China Academy of Sciences expects coal production to fall another 4% in 2016 to 3.6 billion tonnes, down from an estimated 3.76 billion tonnes in 2015.
The Chinese Coal Association and National Energy Administration likewise both forecast a further decline in 2016. The third straight year of decline, again reinforcing that peak coal was passed in 2013.
Consistent with this, at the end of 2015, the head of China’s National Energy Agency made another significant announcement: China will not approve any new coal mine projects for the next three years and will close down a thousand small mines.
