The problem with China's 'clean coal' push is that there is no such thing as 'clean coal'

South China Morning Post Dipublikasikan 00.11, 12/11/2019
The problem with China's 'clean coal' push is that there is no such thing as 'clean coal'

China is a global technological leader in renewable energy and is the world's largest consumer of solar power. Both of these accomplishments came after Chinese policy leaders realised that coal-fired power generation stood in the way of cleaner skies and lower cost power.

Yet in October, Chinese Premier Li Keqiang renewed the focus on what the global public relations arm of the mining industry calls "clean coal" with comments on China's potential for development of new coal and coal bed methane technologies.

As China knows, "clean coal" simply does not exist. "Clean coal" describes a hope that new technology like emissions abatement or carbon capture and sequestration might one day solve the coal problem. To date, both technologies have proven uneconomic and unsuccessful in reducing emissions.

This apparent conflict between China's track record of leadership in clean energy technologies and its troubled relationship with coal will leave China watchers parsing Li's comments for insight into China's upcoming 14th five-year plan, which will cover 2021 to 2025. They may have to dig a little deeper to unpack this saga, however.

While it is tempting to believe that China's leadership may be hatching some special plans for "clean coal", the more likely scenario is that they are using the "clean coal" narrative to distract attention from a more uncomfortable problem.

Simply stated, China has far too much under-utilised coal-fired power capacity. In commercially driven power systems, this would be unsustainable. Beijing, however, is not yet ready to make the tough decisions necessary to acknowledge the problem or to fund the type of regional stabilisation programmes that may be needed to downsize coal production and power.

These decisions are tough for three reasons. The first is that China's coal power fleet is young - reflecting a legacy of planning mistakes and overbuilding due to local government incentives. Tragically, much of this overbuilding took place over the past five years even as Chinese renewable energy technologies were winning market share.

The second reason is cost. To deal with growing health problems associated with nitrogen oxides (NOx), sulphur oxides (SOx) and particulate emissions, leading Chinese coal-fired power companies have spent the past five years extensively retrofitting the fleet with new pollution abatement equipment.

For a sector with high debt levels and very thin margins, this was a major capital expenditure that the companies hope to be able to recover through longer asset lives and improved dispatch ability - neither of which is a sure thing.

The third reason relates to the fundamental nature of coal itself. In a word, coal is dirty and any effort to make it "clean" raises costs and reduces operational efficiency.

Indonesia's Adaro Energy produces "Envirocoal" which purportedly contains less SOx and NOx per kilogramme than grades of coal commonly found in China. Unfortunately, it also has lower energy value.

The Institute for Energy Economics and Financial Analysis estimates that a coal-power plant would have to burn 26 per cent more "Envirocoal" to generate roughly the same amount of power that can be produced using domestically sourced Shanxi coal before considering the added handling, storage or transport costs for increased coal requirements.

This is where the most awkward flaw in China's "clean coal" narrative should be acknowledged. The economics of coal doesn't work. It reinforces the case for accelerating the decommissioning of older and subscale coal plants.

And it also tips the planning balance in the direction of investments that can accelerate China's grid buildout to increase the dispatch of renewables. A grid that can integrate clean deflationary renewables provides a hedge against coal price volatility and reduces the need to pass pollution remediation costs on to price-sensitive consumers.

There is one final problem with China's "clean coal" narrative. It equates "clean" with pollution remediation and airbrushes carbon emissions out of the equation. Investors have seen evidence of this disconnect for years.

China's leading coal-fired power companies are enthusiastic about reporting to investors on dramatic improvements they have made with their new ultra-low emission coal-fired power units. For example, China Shenhua reports reductions in per kilowatt hour emissions of "soot", SOx and NOx of 5.5 per cent, 9.3 per cent and 17.9 per cent respectively over the past five years.

These improvements must be put in context, however. China Shenhua increased its installed capacity of coal power by 46.8 per cent during the same period and coal generation by 25.1 per cent. This means that any gains are offset by more coal-fired generation, adding to the company's conventional pollution emissions and its still unreported carbon emissions.

While Western and Asian power equipment companies have poured money into failed investments in technologies like carbon capture and sequestration, China instead has a legitimate claim on global technological leadership in renewable energy.

"Clean coal" just draws attention to mistakes of the past.

Melissa Brown (mbrownieefa.org) is director of energy finance studies, Asia, at the Institute for Energy Economics and Financial Analysis. Ghee Peh (gpehs a financial analyst with IEEFA

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