This week is big for China’s climate action both abroad and at home.
Just as President Xi Jinping was delivering his stern defence of the Paris Agreement at Davos and his top climate envoy confirmed China’s resolve to assume a global climate leadership role, Beijing stopped work at a of 47 coal power plants already under construction.
Together those projects were to have a generating capacity equivalent to Germany’s entire coal-fired power plant fleet the world’s fourth largest in the world.
Read more: China suspends 104 planned coal power plants
Over the past four years, China has rapidly transformed itself from a climate laggard to a cautious leader by ending its decades-long coal consumption boom; tackling the current coal power overcapacity crisis is now the key challenge as it prepares to pioneer a new energy age.
The latest policy begins this very process.
The combined cost of the stopped projects is an estimated $30 billion.
The 47 under construction plants make up nearly half of a raft of 104 coal-fired power plants suddenly suspended by the Chinese government. The other 57 have not entered construction yet, based on Greenpeace analysis.
China’s rapid clean energy expansion has seen growth in power demand covered entirely from non-fossil energy sources since 2013, allowing coal-fired power generation to fall. This has made the vast amount of coal-fired power plants that were still under construction and planning completely redundant.
The country’s energy regulator has so far issued 13 decisions, each suspending coal power projects in particular provinces. The move stems from China’s target to limit coal-fired capacity in 2020 at 1100GW.
Similar decisions could be expected for several other provinces.
There are still six provinces with significant coal power overcapacity that were given a “red light” for expansion last April, but that haven’t had a decision on suspensions yet. The total amount of capacity suspended, 120GW, also falls short of the 150GW targeted in China’s five-year plan for electricity.
The planned projects include eight mega coal power projects, with total capacity equal to 25 large coal power plants, that had not started construction yet but were assumed to move ahead, because they were linked to plans to transfer power from China’s west to the more prosperous east. However, these projects got suspended as well.
‘Huge losses for developers’
Stopping projects that have already entered construction is a dramatic decision, because commercial contracts for engineering, construction and supply of equipment will already have been made, and loans arranged with banks.
Unraveling an estimated $30 billion of contracts and financing arrangements will be complicated. However, spending money and resources to finish entirely unneeded coal-fired power plants would represent even larger economic waste.
As a power industry professional commented to the business newspaper Caixin: “The biggest impact of this is on projects already under construction. Power plant developers are worrying about how to handle it. Preliminary investments are in place, but the projects will be delayed for several years. Those delays could cause huge losses for developers. The loan interest alone will be a big burden.”
The provinces with the largest amount of suspended under-construction coal power projects are coal power exporting provinces of Inner Mongolia in the north and Xinjiang in the west, the old coal bastion of Shanxi in central China, and the southern economic powerhouse of Guangdong.
Because it was not immediately clear from the target and from the recent announcements how many of the plants were already under construction and how many still existed only on paper, Greenpeace individually identified all the projects listed in the 13 documents.