Following its first increase in coal production in nearly four years in 2017, raw coal output is expected to continue growing this year as advanced production capacity is gradually released. On April 11, the China Electric Power Planning and Engineering Institute (CEPPEI) released the "China Energy Development Report 2017" (hereinafter referred to as "The Report") in Beijing. In 2017, coal demand recovered, and raw coal production saw a restorative growth, with annual raw coal output reaching 3.52 billion tons, a year-on-year increase of 3.3%. This marked the first positive growth since 2014. National coal-fired power generation increased by approximately 4.8% year-on-year, and coal consumption in the power industry grew by about 4.1% year-on-year.
The Report states that, barring widespread extreme weather conditions, and with steady consumption growth, stable investment, and a slight correction in exports, total electricity consumption across society this year is projected to see a moderate increase, with a growth rate exceeding 4%, though the increase will be lower than in 2017. Considering factors like extreme weather, the growth rate of electricity consumption could fluctuate by approximately 1 percentage point.
The power industry remains the primary sector influencing coal consumption. This year's demand for thermal coal is expected to be largely on par with 2017, at approximately 3.85 billion tons. However, with the release of advanced production capacity, domestic raw coal output is expected to increase by around 4%, reaching approximately 3.66 billion tons; while imports are projected to decrease by about 15% to around 230 million tons.
Furthermore, demand for coal in the chemical industry is expected to grow, while demand in the building materials and steel sectors will largely remain stable. Demand from other industries, however, will continue to significantly decrease due to the substitution of natural gas for coal. "Looking at electricity consumption, the growth in coal used for power generation will continue to drive the increase in overall coal consumption," stated Xu Xiaodong, Vice President of the China Electric Power Planning & Engineering Institute, at the meeting. He added that the coal industry should continue to unleash advanced production capacity to bring coal prices back to a reasonable range. In 2017, China successfully met its targets for reducing coal overcapacity. While obsolete production facilities were phased out, coal consumption halted its decline and rebounded, leading to tight supply and high coal prices throughout the year. Xu Xiaodong made several recommendations: Firstly, to appropriately raise the standards for phasing out outdated coal production capacity in certain regions. Secondly, to encourage coal mining enterprises to integrate with upstream and downstream industries. These should be complemented by supporting measures such as strictly enforcing the 276-working-day system and strengthening coordination between production and transportation in areas with limited coal inbound logistics capabilities. In 2017, electricity accounted for approximately 24.9% of terminal energy consumption, an increase of about 1 percentage point year-on-year. "However, 830 million tons of raw coal are still directly consumed as fuel at the end-use stage, with 73% of this going to industry. Replacing this portion of coal is a long-term mission for China's clean and low-carbon energy development," Xu Xiaodong stated.
According to the report, in 2017, the national total energy consumption reached 4.49 billion tons of standard coal equivalent (tce), a year-on-year increase of 2.9%. Of this, coal consumption accounted for 60.4%, a year-on-year decrease of 1.6 percentage points. Clean energy consumption accounted for 20.8%, a year-on-year increase of 1.3 percentage points.
From the perspective of energy supply, the national energy mix was further optimized. In 2017, the total primary energy production reached 3.59 billion tons of standard coal equivalent (tce), a year-on-year increase of 3.6%. Among this, fossil energy production accounted for 82.3%, a year-on-year decrease of 0.4 percentage points, while non-fossil energy production accounted for 17.3%. The country has become the world's largest in terms of installed capacity for hydropower, wind power, and solar power generation.
Currently, the country's power generation mix is still dominated by coal power. In 2017, coal power's installed capacity accounted for 55%, and its electricity generation accounted for 64%. Hydropower development slowed down, while nuclear power and new energy sources constituted a smaller proportion of the power generation mix, resulting in limited substitution effects of non-fossil power on coal power.
Against the backdrop of a global trend towards low-carbon and zero-carbon energy structures, the challenges faced by the country in its energy transition are significantly greater compared to other nations. Zhang Yousheng, Deputy Director of the Energy Research Institute of the National Development and Reform Commission (NDRC), pointed out at the meeting, "Developed countries' total energy consumption has largely peaked, and their energy transition primarily involves replacing existing stock. However, the country's energy demand is continuously increasing, which brings immense pressure."
In 2017, China's electricity consumption increased by approximately 390 billion kilowatt-hours (kWh). After deducting the increased generation from non-fossil and other power sources, coal-fired power plants still needed to provide an additional 190 billion kWh of generation, driving an increase in coal consumption.
The development of non-fossil energy continues to face numerous bottlenecks that need to be addressed. In 2017, issues like wind and solar curtailment saw some improvement, but the curtailment of hydro, wind, and solar power, as well as limitations on nuclear power unit output, still persisted. The power system's peak-shaving capacity continued to fall short of meeting the demands of electricity supply gaps.
The report suggests that to enhance the power system's capacity for integrating non-fossil fuel electricity, market-based measures should be implemented in two key areas: On the consumption side, expanding the application of peak and off-peak electricity pricing; and on the supply side, promoting the development of ancillary services markets for peak shaving.
