China to Shut Down Smaller Power Plants; Effects Remain to Be Seen

China to Shut Down Smaller Power Plants; Effects Remain to Be Seen

Yingling Liu, China Watch

8th February 2007

The State Council, China’s parliament, recently endorsed a plan to accelerate closure of the nation’s smaller coal-fired power plants. The plan, developed by the nation’s top two energy policymaking bodies—the Office of the National Energy Leading Group and the National Development and Reform Commission (NDRC)—sets forth concrete targets for decommissioning older and smaller plants. It strongly supports a 2006 NDRC notice that called for a comprehensive check on facility closures over the past seven years and also made public a list of all plants slated to close through 2010.

The intensified efforts are an outgrowth of the avowed determination by China’s top leaders to “prioritize” sustainable development. In its 2006–10 national development plan, the government labeled energy consumption and pollution as two major constraints on economic growth. China has also set ambitious targets for 2010 of cutting the amount of energy consumed per unit of GDP by 20 percent and reducing pollution by 10 percent below 2005 levels. Achieving these goals will require a clear government role.

Coal-fired generation accounts for 82 percent of China’s total power supply and has been chronically wasteful and dirty. Smaller and older generators, which are also the most inefficient and polluting, comprise a large share of the total installations. Currently, nearly 30 percent of the nation’s coal-fired power installations are generators of less than 100,000 kilowatts.

According to Li Junhong, a power expert in Nanjing, generators under 50,000 kilowatts consume 200 grams more energy per kilowatt of electricity generated than those above 300,000 kilowatts. China’s larger “ultra-supercritical” thermal power generators, with over 1 million kilowatts of generating capacity, consume roughly 290 grams of coal per kilowatt, while some smaller generators use around 1,000 grams per kilowatt. The coal used to produce only 1 kilowatt of electricity in small plants will generate as many as 2–3 kilowatts in larger ones.

Statistics also reveal that small plants emit 20 times more particulate matter and smog-forming pollutants than larger ones, and three times the sulfur dioxide. In 2006, coal burning was responsible for 90 percent of China’s sulfur dioxide discharges and 70 percent of its emissions of particulate matter and other smog-forming pollutants, according to World Watch magazine.

In light of the rising impacts of coal burning on China’s energy supply and the environment, the government has sought to tackle the closure of smaller coal-fired power plants for several years. It began issuing notices and set a series of targets for this endeavor as early as 1999, but only now—eight years later—is it beginning to take real action. The latest NDRC list of small power generators scheduled to close by 2010 involves nearly 700 plants with a combined installed capacity of 16 million kilowatts, or 3.2 percent of the national total. Based on earlier mandates, more than 600 of these plants should have been closed before 2002, and more than 11 million kilowatts in installations should have been decommissioned by 2005.

Worsening power shortages nationwide are largely to blame for this policy inefficacy. From 2002 on, China’s fast economic growth has constantly outstripped the nation’s ability to power this growth. Statistics show that electricity shortages amounted to 20 million kilowatts in 2003 and more than 40 million kilowatts in 2004. During the peak demand period in 2004, more than 20 provinces and municipalities nationwide experienced blackouts, and factories along China’s prosperous east coast were forced to shut down production lines several days a week or to operate only at night.

This situation encouraged the construction of a massive new round of small coal-fired power plants, which required low investments but yielded instant returns. In 2004, China installed 51 million kilowatts of new generation capacity, the highest level worldwide; in 2005, this grew to 66 million kilowatts. Local governments invested in the majority of these smaller plants, receiving considerable tax revenues and environmental protection fees in return, according to Nanfang Daily. During periodic crackdowns by the central government, local governments in some regions responded by simultaneously shutting down old small coal-fired plants and starting up new ones.

This latest government crackdown, however, appears to be more serious than previous ones. An official with the NDRC recently stated that all small coal-fired power plants on the list, regardless of their classification, must be shut down according to schedule. The official also told Nanfang Daily that if the plants continue operating beyond their closure dates, they will lose power grid access, fuel supply, financial assistance, and land and water resources.

It is not uncommon for China’s central government and local governments to play cat-and-mouse games on issues where their interests conflict. Whether this most recent “iron blow” by the central government will in fact result in concrete changes remains to be seen. The demands on China’s power supply have relaxed slightly over the past two years, galvanizing the blow, but a sound economy still needs a guaranteed power supply to carry it through the periodic ups and downs. What this relaxation does provide is an opportunity for a reshuffling in the electricity generation sector.

If the government hopes to live up to its promise of sustainable growth, a greener, more efficient structure is sorely needed, with stronger emphasis on clean and renewable energy sources and better technologies.