China's coal market: is peak demand insight?

© 2016 IHS. ALL RIGHTS RESERVED.

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

[email protected]

mailto:[email protected]


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.


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

© 2015 IHS


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


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.


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


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

© 2016 IHS: 50406-1

Source: IHS

Net export

Net import

Generally balanced

Electricity flow

Key Regions in this study


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


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


“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)


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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China's coal market: is peak demand insight?

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