Burning Money

How China could squander over one trillion yuan on unneeded coal-fired capacity

Publication - 2016-07-13
After two decades of breakneck growth in coal-fired power generation, power generation from coal finally slowed down in 2011 and turned into a decline in 2013, as a result of booming clean energy and slowing power demand growth. While this turnaround is the decade’s most important positive development for the climate, it has also precipitated an unprecedented coal power overcapacity bubble, as power generators have failed to scale back their investments in new coal plants in response. A policy change allowing provincial governments to greenlight new projects from early 2015 led to a record surge in new permits and construction starts, with 210 new coal-fired power plant projects, with a total capacity of 165 gigawatts, receiving environmental permits in 2015. In an attempt to resolve China’s coal power overcapacity crisis, the country’s top energy planners put in place a new capacity control and retirement policy in April 2016. This report assesses the implications of the new policies and updates the outlook for overcapacity in coal-fired generation.

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