National Association Says China Is Approaching Peak Consumption of Coal

During the China Coal Import International Summit held in Xiamen, the National Coal Association of China revealed that the country was nearing peak coal consumption. Zhang Hong, the association’s deputy-secretary general, added that concerns on energy security would cause coal use to level for a while after it peaked. He also noted that the growth recorded in the solar and wind industry in 2023 would decrease coal demand in the power sector.

This announcement comes after China Petrochemical Corp stated late last year that it expected the country’s consumption of coal to hit almost 4.4 billion metric tons by 2025. In its 2060 outlook, the company forecasted that by 2045, nonfossil supplies of energy led by wind and solar would become the dominant source of energy for more than one-half of primary energy consumption.

At the moment, however, China consumes and mines more than one-half of the coal produced globally. For the last 10 years, more than 20% of CO2 emissions produced globally from fossil fuels annually have originated from the combustion of coal in China. Estimates from the International Energy Agency show that last year, coal-fired power generation in China rose by 7%, driven by a drought that decreased availability of hydropower.

Another report from the agency also forecasts that coal consumption will drop in China this year and level off for a two-year period.

China president Xi Jinping has stated that coal use in the country will reduce beginning 2026. This aligns with the country’s fifteenth five-year plan, running from 2026 to 2030, where China’s policymakers agreed to begin phasing down the use of coal.

Despite the above estimates and statements, however, evidence suggests that coal use will continue to increase in China. Christopher de Vere Walker, Carbon Tracker’s head of power and utilities research, stated that the issues with the country’s grid system made the transition toward renewable energy harder.

Currently, China’s grid is operated on a regional level. This means that assets in different grids don’t have a reliable way to share power, which results in inefficiencies. Having one overall grid operator would make this process far more efficient. At the moment, this approach hasn’t been implemented.

The construction of coal-fired power plants also points to an increase in coal use. This sentiment is shared by players in the industry, who also expect coal use to increase in China. For instance, Guangdong Energy Group head of coal management Wu Wenbin stated during the summit that he expected consumption of coal in China to rise by 4% this year alone

The data coming out of China shows that it is likely that other countries around the world may also increase their coal use before tapering off the fraction of the energy mix that this fossil fuel contributes. Coal producers such as Arch Resources Inc. (NYSE: ARCH) may consequently take time before seeing their earnings dropping to a level where the income stream is no longer viable.

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