BNEF Mapped China’s Renewables Curtailment & Coal Risks

China’s power system continues to face numerous problems, including a national power market which in 2016 was oversupplied by 35%, and massive curtailment issues throughout the country’s northern regions, forcing renewable energy and the country’s significant coal industry to compete for dispatch.

Working in conjunction with ClimateWorks Foundation, Bloomberg New Energy Finance (BNEF) has created and this week published the China Renewable Curtailment and Coal Stranded Assets Risk Map (PDF) which aims “to cast light on the issues central regulators will have to weigh up as they steer the power system through fundamental restructuring.”

BNEF’s work shows that China currently faces a social cost of around $237 billion from risky coal investments. Even though China is involved in continued efforts to reduce the number of coal projects in development and further constrict its current coal industry, Bloomberg nevertheless found that China is still constructing more than 120 GW (gigawatts) of new coal generating capacity — all of which are deemed by BNEF as being “highly risky investments that will under-perform.” All in all, China has cancelled 195 GW worth of coal projects since 2016, but nevertheless have another 100 GW awaiting regulatory approval that the country might still bring online after 2020.

Projects cancelled, delayed, retired

Source: BNEF, NEA

The report further concludes that there are no provinces across the whole of the country in which new coal capacity is needed, given the tremendous increase in coal capacity over the past two decades. The authors note:

“Beijing, Shanghai, Jiangsu and Hebei are the only provinces where local generation fleet, de-rated for availability, is not equal to or higher than the peak demand load. However, these provinces can rely on imports as well as cleaner new build (like nuclear) to meet the shortfall. These regions are also severe air pollution control areas, so should not be building more coal-fired capacity for that reason.”

China’s coal power capacity boom since 2000

Source: BNEF, NEA, CEC

Another of the major issues brought about by oversupply and poor transmission infrastructure is the tremendous renewable electricity curtailment issues — defined by BNEF as “unplanned reduction of renewable energy generation output to the grid, whether due to technical or non-technical limitations” — leading to the worst curtailment rates in the world of 17% for wind in 2016 and 10% for solar. Throughout 2016, a total of 56.2 TWh (terawatt-hours) were curtailed, spread dramatically throughout China’s northern regions (see below).

China Renewables Curtailment Risk Map (2016)

Source: BNEF China Renewable Curtailment and Coal Stranded Assets Risk Map

While Bloomberg predicts that a slowdown in new build generation and the addition of long-distance transmission lines to export electricity will eventually alleviate curtailment issues throughout the north of the country, some southern provinces may end up facing curtailment by 2020 — including Hunan, Sichuan, Guizhou, and Fujian — due partly to weaker power demand growth and accelerated build-out of new generation capacity.

BNEF’s key findings detailed in full in the China Renewable Curtailment and Coal Stranded Assets Risk Map are:

1. Curtailment to decline nationally, but it may emerge in southern provinces
2. Highest coal risk regions see little improvement in conditions
3. Long distance transmission and power market reforms crucial for reducing renewable curtailment risk
4. There are no provinces in China where new coal generation capacity is needed
5. China still building more than 50GW of wind and solar in high curtailment risk regions
6. China faces a potential hit of $237 billion from at-risk coal assets