China's coal market: is peak demand insight?
Transcript of China's coal market: is peak demand insight?
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CHINA’S COAL MARKET:
Did peak demand come and go? EIA Energy Conference: World Coal Markets
JULY 12, 2016
Xizhou Zhou Senior Director
Head of Asia Gas, Power & Coal Research
+86 10 6533 4536
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Key implications
• China’s industrial economy is experiencing a “hard landing” as the economic transition
accelerates, impacting major industrial fuels, with coal feeling the most pain.
• This long-term restructuring will make the Chinese economy less energy intensive, lowering
the overall energy demand trajectory.
• Meanwhile, non-coal fuels and technologies are growing rapidly, supported by
environmental and climate policies.
• However, coal remains the cheapest energy source, and the less developed regions in China
will continue to rely on coal, effecting a demand migration westward towards inland regions.
• IHS expects coal consumption growth to gradually recover—mainly supported by power
generation and coal-chemical use in western provinces—reaching a national peak by the
mid-2020s.
• This peak in coal demand is a precursor to a peak in carbon emissions, before 2030.
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A “Hard Landing” for China’s industrial economy, and thus
industry-dominated energy sectors
0%
20%
40%
60%
80%
100%
Electricity Coal Diesel Natural Gas Gasoline Jet Fuel
Powergeneration
Industrial
Transport
Residential
Commercial
Other
Key energy commodities and their driving sectors in China (2013)
Source: IHS, National Bureau of Statistics
Mostly
heavy-
duty
transport
Mostly
passenger
transport
Industry-driven energy Consumer- and service-
driven energy Demand by
Sector
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Only slight recovery expected ahead for coal
Medium-term outlook for Chinese coal demand
• Demand to “bottom out” by 2018, with a slight
recovery by 2020.
• Coal-fired generation will continue to be
squeezed by non-fossil generation resources.
• Renewable, nuclear, and gas plant additions
will remain robust, and government support
will continue to be strong – for both investment
and dispatch.
• Wind and solar will account for over 40% of
incremental generation; adding in nuclear and
hydro, non-fossil generation resources will
meet 76% of new power demand in the next
five years.
271
202
117 106
99 72
50
5,400
5,600
5,800
6,000
6,200
6,400
6,600
China’s incremental power generation by
fuel 2015-20 (IHS Rivalry scenario 2016)
Source: IHS © 2016 IHS
TW
h
Coal Non-fossil
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Coal remains the cheapest energy source, and will continue to grow
in inland provinces
Transmission tariff
Emissions cost
Value-added tax
Fuel
Insurance
Operation &MaintenanceCapital cost
Estimated levelized cost of electricity
Source: IHS Energy © 2016 IHS
Le
ve
lize
d c
os
t o
f e
lec
tiri
cit
y
(20
15
RM
B / M
Wh
)
Coal
(by-wire)
Inner Mongolia
coal at RMB
250 per metric
ton sent to
East grid
Hydro
(by-wire)
Nuclear
Gas price
of $10/
MMBtu
Wind
(by-wire)
Inner
Mongolia to
East grid
Notes:
1. SCPC = super-critical
pulverized coal.
2. Gas-fired technology refers
to combined-cycle gas turbines
(CCGT).
3. Coal prices are converted to
5,500 kcal per metric ton.
4. Transmission tariffs include
line losses.
Coastal coal
price of RMB
370 per metric
ton (coastal)
Gas-fired
CCGT
Coal-fired
SCPC
Gas price
of $5/
MMBtu
Solar
(by-wire)
Inner
Mongolia to
East grid
Gas price
of $15/
MMBtu
Large hydro
Sichuan to
East grid
Small hydro
Sichuan to
East grid
Note: Excluding carbon compliance costs.
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Coal plant additions slows substantially, with coal’s share in total
generation declining to 42% by 2040
0
2,000
4,000
6,000
8,000
10,000
12,000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Other
Solar
Wind
Gas
Nuclear
Hydro
Coal
China power generation by fuel/technology (IHS Rivalry scenario 2016)
Source: IHS
Po
wer
gen
era
tio
n (
TW
h)
© 2016 IHS
Outlook
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NORTHWEST
CENTRAL
NORTH
SOUTH
SOUTHWEST
NORTHEAST
EAST
The Great Migration of power generation in China
New capacity increasingly sited west and transmitted eastward Inter-regional power transmission flows
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Source: IHS
Net export
Net import
Generally balanced
Electricity flow
Key Regions in this study
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0
500
1,000
1,500
2,000
2,500
3,000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Steel
Other
Residential
Feedstock
Industry
Heating
Power
National coal demand outlook (IHS Rivalry scenario 2016)
Note: SCE = Standard coal equivalent, caloric value at 7,000 kcal/kg
Source: IHS © 2016 IHS
SC
E m
illio
n t
on
s
Total coal demand will peak in the mid-2020s
All of the growth will come from western provinces
Outlook
Met coal
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“Peak carbon” achieved by 2030, with total emissions growing only
by 9% between now and 2028
0
2000
4000
6000
8000
10000
12000
14000
2000 2005 2010 2015 2020 2025 2030 2035 2040
China’s Energy-related CO2 emissions (IHS Rivalry scenario 2016)
Source: IHS © 2016 IHS
Millio
n t
on
s o
f C
O2 e
qu
ivale
nt
Outlook
Emissions Peak: 2028
IHS outlook 2015 A lso peak by 2030, but much higher absolutely emissions
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