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Author: Source: the Internet Published time: March 24, 2016
As recently reported, the National Development and Reform Commission and the National Energy Administration jointly issued an urgent document, urging local governments and enterprises to slow down the pace of coal power development as a way of addressing the increasingly serious overcapacity in coal power and thus the operational risks in the energy industry.
According to insiders, the National Development and Reform Commission and the National Energy Administration will prioritize the following tasks: 1) Building a risk warning mechanism; 2) Strictly controlling the overall capacity of coal power; 3) Promoting coal power development in an orderly fashion; 4) Stepping up supervision and punishment. By carrying out these four tasks, the two agencies seek to alleviate the overcapacity in a combination of long-term, intermediate-term, and short-term efforts.
The overcapacity of coal power is self-evident. In 2015, the GEAHs (Generating Equipment Availability Hours) for coal power were 4329, the lowest since 1978. If 5,500 hours is taken as a break-even point for coal power, the current overcapacity level is more than 20%.
According to the estimates of the National Energy Administration, the demand for electric power in the “13th Five-Year Plan” period is about seven trillion kWh, indicating that the room for the growth of coal power will be only 0.19 billion kW at the best. However, the current installed capacity being built and approved is 0.3 billion kW, far above the demand for electric power.
The current overcapacity has exposed the absence of a warning mechanism in the power industry. Therefore, the energy authorities should first focus on the establishment of a risk-warning mechanism for coal power planning and development.
This mechanism will regularly issue risk warnings in coal power planning and development province by province so that the National Development and Reform Commission can adjust relevant measures in line with the warnings and the changes in trends of demand and supply of electric power.
Externally, such risk warnings will serve as a reference basis for such government agencies as Land and Resources, Environment Protection, and Water Resources and financial institutions such as banks – they can adopt specific policy measures according to these warnings when they are approving coal power projects, provide needed supportive documents for, or provide a loan to such projects. Besides, they can also serve as a reference basis for decision-making by the central government.
The intermediate measure is about strictly controlling the scale of new growth in coal power capacity in various regions. The energy authorities will take different strict control measures for different regions.
In principle, no arrangement will be made for new planned coal power capacity in provinces with electric power surplus and key regions of air pollution prevention and control. Even in provinces short of electric power, non-fossil power projects will be encouraged; cross-province electric power mutual-aid and electric power shortage mutual-compensation will be fully exploited to reduce the demand for new planned coal power capacity.
The development of national energy bases will also slow down, as it is necessary to take into full account the availability of thermal power generating capacity in various provinces.
According to insiders, in the planning and development of coal power projects in these national bases, it is necessary to capitalize on the existing coal capacity and fully consider the impact on the environment and water resources as well as power demand of the receiving provinces. And it is necessary to rationally arrange the existing sequence for constructing these coal power bases, plan and build supportive coal power projects in these bases by phase in order to prevent electric power surplus in the provinces receiving coal power.
The efforts to eliminate overcapacity will be intensified. As required by the authorities, standards will be raised and efforts sped up to gradually eliminate the thermal power generator units that have long been in service and do not meet the requirements for energy efficiency, environment protection, safety, quality, and so on. Pure condensing generator units with a capacity of 300,000kW or lower that have been running for 20 years and extraction condensing thermal power generator units that have been in service for 25 years will be shut down before others.
Short-term and immediately effective measures will be adopted this time: A batch of coal power projects will be cancelled, approved at a slow pace, or suspended.
Coal power projects to be cancelled: those that do not meet the requirements for approval, including: those that had been planned before 2012 and not yet approved; the corresponding capacity will be rolled over to the local future electric power balance and rearranged in 2018 depending on the demand and supply of electric power; 2) The shutdown of those coal power projects that fail to meet requirements for approval for development will be encouraged.
Coal power projects whose approval will be slowed down: The coal power projects in the provinces with a surplus of electric power will be approved at a slower pace in or before 2017, except for the coal power projects for own use such as thermal power for daily life (exclusive of the demonstration projects ratified by the state). There are 13 provinces and autonomous regions with a surplus of electric power, including Heilongjiang, Shandong, Shanxi, Inner Mongolia, Jiangsu, Anhui, Fujian, Hubei, Henan, Ningxia, Gansu, Guangdong, and Yunnan.
Coal power projects to be suspended: coal power projects for own use in the provinces with a surplus of electric power that have not yet started shall be suspended before 2017; as for those that are being implemented, they shall be rescheduled and the pace for launch shall be controlled.
There are 15 such provinces and autonomous regions, including Heilongjiang, Liaoning, Shandong, Shanxi, Inner Mongolia, Shaanxi, Ningxia, Gansu, Hubei, Henan, Jiangsu, Guangdong, Guangxi, Guizhou, and Yunnan.
Besides, the national authorities have reminded the provincial authorities again that they shall undergo the approval procedures by the rules and shall not approve any coal power project that does not meet the preconditions; that any thermal co-generation project shall not be approved unless it is included in the electric power development plan of the corresponding province (autonomous region or municipality); that the shutdown/suspension plan shall be executed before a project meeting the requirements in the policy “Major Power Plants Encouraged and Small Ones Discouraged” can be approved.
The authorities have reiterated severe punishments for any enterprise violating these regulations: The National Energy Administration and its branches shall not issue the violator any license; the power grid shall not accept connection with the violator; the bank or financial institution shall stop lending to the violator according to the laws, regulations, and rules of the state.
This document has undoubtedly put a halt to the currently over-hot coal power development.
As revealed by the data of CEC (China Electricity Council), coal power development is as hot as ever despite the overcapacity of coal power. From January to February, power generation capacity newly added nationwide was 22.28 million kW, an increase of 8.86 million kW year on year. The addition of thermal power capacity was 13.95 million kW, an increase of 6.08 million kW year on year. Obviously, the whole industry remains feverish.
Putting a timely halt obviously helps to address the problem of overcapacity. However, the power of approving coal power projects has been delegated to the provincial governments; as local governments are eager to achieve stead economic growth through investments, their intention to invest in power projects remains strong. Given this circumstance, the effect of this document is to be seen.
