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China To Compensate Coal Plants As It Seeks Power Supply Stability

China will start guaranteeing payments to coal-fired power plants based on their installed capacity as of January 2024, as the world’s top coal consumer looks to ensure stability of electricity supply amid soaring renewable energy output.

The National Development and Reform Commission (NDRC), the state planner, said on Friday that thermal power plants in most of China would be able to recover about 30% of their capital costs in the next two years, Reuters reported.

The guaranteed payments will be a tariff collected from industrial and commercial users that coal plants will receive by the grid operator.  

Coal capacity in China continues to increase, but some of it would be idle as it would serve as backup to intermittent solar and wind power generation—at a cost to the utilities. Revenues and profit margins at electricity generators are also squeezed by government-imposed price caps on the rates they can charge to consumers. 

China is the global leader in renewable energy spending, but it’s also one of just a few major economies still approving and building coal-fired capacity. Energy security and the need for stable power generation during peak demand to back the growing economy and supply stability precede concerns about emissions. 

China has already reached its goal to have more non-fossil fuel installed electricity capacity than fossil fuels earlier than planned, with 50.9% of its power capacity now coming from non-fossil fuel sources. Back in 2021, the Chinese authorities said they would target renewables to outpace fossil fuel-installed capacity by 2025.

China is globally unmatched in renewable energy spending, investing in raising its solar and wind power capacity.

So far this year, renewables have helped to partially offset the crippled supply from hydropower generation due to droughts, but coal has saved the day

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During the first half of 2023 alone, China approved more than 50 GW of new coal power, Greenpeace said in a report earlier this year. That’s more than it did in all of 2021, the environmental campaign group added.

By Charles Kennedy for Oilprice.com

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