Chinese Thermal Coal Demand Set To Fall With Launch Of New Power Transmission Line
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A new ultra-high voltage transmission line launched this week in China is expected to dramatically cut demand for thermal coal, according to market sources quoted by S&P Global Platts.
The new ultra-high voltage transmission line, stretching 3,324 kilometers (2,065-miles) from the Xinjiang province in Western China, through the Gansu, Ningxia, Shaanxi, and Henan provinces, before ending in the Anhui province city of Xuancheng, in the country’s east.
The new transmission line, with a voltage of 1,100 Kilovolts (kV), is designed to transmit 66 billion kilowatt-hours (kWh) each year, according to Xinhua News, the state-run Chinese news agency, which reported the news last week. It is believed that the majority of the electricity to be transmitted will stem from the Zhundong coal-fired power plant in northern Xinjiang, which has an installed power generation capacity of 28 gigawatts (GW).
The transmission line is part of a larger plan to reduce coal reliance in the east of the country. New coal-fired power stations have been banned in the east of the country due to the massive air pollution problems suffered there.
However, Xinhua News Agency is also reporting that the transmission line is expected to reduce Chinese coal usage by about 30 million megatonnes per year. S&P Global Platts, quoting several unnamed market analysts from China, expects that the new transmission line will not only affect China’s demand for imported thermal coal but will also place pressure on domestic coal prices.
“In the past, it was difficult to transport coal out of Xinjiang, so the impact of Xinjiang coal production [on China’s overall demand] had been minimal,” said an east China-based coal analyst quoted by S&P Global Platts. “Now, with the direct power transmission, it’s equivalent to adding a stable supply to the market. In addition, Xinjiang coal prices are much cheaper [than other regions].”
“Demand for thermal coal from coal-fired power plants in east China will fall further [with the launch of the new line],” said another east China-based trader, quoted by S&P.
The expected reduction in coal, while unclear in all English-based reporting, seems to stem from the difference between locally-generated coal-fired electricity and imported thermal coal generation. By transmitting electricity from an already coal-heavy area of China, which presumably is not utilizing the entirety of what is generated, coal demand on the other side of the country will decrease.
These ultra-high voltage transmission lines are also expected to be able to transfer high levels of renewable energy generated in the west of the country to provinces in the east and central region of China. The country’s National Energy Administration approved 12 of these new transmission lines last September, which are aimed at specifically transferring renewable electricity.
According to Reuters reporting on the launch of the new transmission line, China had 136 GW worth of cross-region electricity transmission capacity as of the end of 2018.
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