Yan Qin Profile picture
23 Nov, 11 tweets, 3 min read
📰What caused China's Coal shortage?

An in-depth analysis by Caijing (financial news) with exclusive interviews of coal miners/traders/power plants in the journalists' month-long field visits to Shanxi and Inner Mongolia.

Link: bit.ly/3l1ZQbN
These firsthand interviews of stakeholders provide new insights into China's energy crunch.

Some mentioned the 'cutting coal mines' capacity since 2016' as a major reason causing coal shortage.

Caijing journalist found out this is not the case.
Caijing interviewed a Shanxi coal producer:
'Cutting capacity has led to closure of aging and inefficient coal mines, effective coal production capacity has increased, such as closing down 1Mt/yr small ones, build 5 Mt/yr new ones, improving resource supply'
So what led to the Coal/Power shortage?

Very frank and sharp comments by Caijing:

'Coal production lagged demand growth, then coal plants too optimistic about govern. intervention in coal prices, missed opportunity to restock inventory earlier'
Why have coal plants been optimistic?

'Since April, NDRC has been emphasizing coal supply security, but the state planner's tone turned optimistic in June-August, announcing on 27 June that coal market balanced and coal price will fall in July'
I have been following the coal market and NDRC notices and agree with the observation in Caijing story.

'China coal prices surged since July and spiked in September, this has caught short many power plants who postponed restocking until coal price declines'
What caused the 🇨🇳Coal shortage?

'Not lack of coal resource & production capacity, but various regulatory and accidental factors'

'This is also highlighted by lack of coordination among ministries/departments...... leading to conservative decision-making'
Lack of coordination:

'one at a major coal producer expressed worries when NDRC urged coal mines to ramp up output in late Sep, because ministries of Environ. , Natural resources , Coal Mine Safety all have rules on envi. assessment, land, safety etc'
Following NDRC's intervention measures and raising coal output, China's coal production rose quickly led by the major producing provinces, Shanxi ,Inner Mongolia and Shaanxi.

BUT, market observers interviewed by Caijing expect 30Mt supply gap in December.
As northern China enters winter heating season, coal demand will rise too, so I think it is early to say the Coal shortage has fully eased.

and it is not that easy for coal mines to raise output given restrictions on production safety, environ. etc.
Finally, as Europe is also experiencing high power and gas prices at the moment:

'Tackling climate change and Energy transition requires systemic thinking, which shall not ignore industrial logic and market forces (dynamics)'

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More from @YanQinyq

22 Nov
🏭Coal-fired power plants are still being favored in German power merit order...despite €70/t #EUETS price

European Gas price is just too HIGH

This does exhibit some fundamental support for current carbon rally: high coal burn leads to high EUA demand Image
Coal-fired plants' advantage is clearly shown in its Short run marginal cost vs Gas.

even the 36% efficient coal plants are in the money, as surging gas prices driving up Gas SRMC Image
Thus, it is not surprising to see German coal plants' load hours have picked up notably this autumn.

The chart shows monthly average load of 'hard coal' (not brown coal/lignite). Image
Read 4 tweets
24 Oct
On 24 October, China released Top-level design document in the '1+N' Carbon Peak and Neutrality policy framework.

On the eve of #COP26, and 1 year after China announced 2060 carbon neutral pledge, the implications of this landmark doc are HUGE:

This doc is released by the Communist Party of China and General Office of the State Council:

It is dated 22 September, and titled 'Opinions on Completely, Accurately and Comprehensively Implementing Carbon Peak and Carbon Neutrality'
This official policy document (the Opinions as above) is the 'top-level design' in China's '1+N' policy framework, i.e. the 1⃣

The N will be gradually released, consisting of Carbon peak action plan and detailed sectoral roadmaps

Read 19 tweets
24 Oct
OFFICIAL: China just released the Top-level design of its carbon neutrality policy framework ‘1+N’

On 24 October, the Communist Party of China and the General Office of the State Council issued the Opinions on carbon peak and neutrality

via Xinhua
China OFFICIALLY releases it top-level design in '1+N' Carbon peak and neutrality policy framework on 24 October.

reported CCTV in daily news Xinwenlianbo:
FULL TEXT of China's Top-level design of Carbon peak and neutrality policy framework.

It is officially released on 24 October, and the document is dated 22 September:
Read 4 tweets
21 Apr
🔋China to boost Energy Storage above 30GW by 2025

🇨🇳 state planner NDRC released draft 'Guidelines on Speeding up New Types of Energy Storage (excl. pumped storage) Deployment'

That is tenfold increase in Battery Storage capacity from 2020 level of 3.3GW
The draft NDRC guideline states key targets:

2025: New Type of Energy Storage will evolve from initial commercial stage to large-scale deployment.

2030: Full market-based mechanism for Energy Storage 🔋, meeting needs in New Power System.
🇨🇳energy regulators pinned main measures to boost #EnergyStorage in draft guideline:

🔹Energy Storage sectoral Plan, with targets and key tasks in 14FYP and mid-long term
🔹🔋Technology progress
🔹Energy storage joins power market incl. capacity mechanism
Read 7 tweets
19 Apr
🎉Strong boost for Wind and Solar development in China.

🇨🇳energy regulator NEA aims to raise Wind & Solar generation's share in total power consumption to 11% in 2021 and 16.5% in 2025, from 9.7% in 2020.

This implies adding 100GW Wind&Solar per year. Image
China National Energy Administration released draft Notice on Wind and Solar Development in 2021 for consultation.

The overall objective is to 'achieve 2030 targets of 25% non-fossil share and 1200GW Wind and Solar capacity'

NEA: nea.gov.cn/2021-04/19/c_1… Image
How can China ensure the massive scale of Wind and Solar integrated into power system?

It is quite clear now that 'Provincial RE Quota Obligation' is the central mechanism to implement and facilitate RE integration, supplemented by Green Certificate etc. Image
Read 5 tweets
17 Mar
👇Power trading in China

🇨🇳energy regulator announced 5 new Spot trading pilots, adding to previous 8 pilots since 2017.

In 2020, 8 pilots have all tested full-month continuous settlement, and will start with longer period trial spot trading this year.
NDRC announced the expansion of spot trading pilots at spot market weekly work meeting on 9 March.

In addition to 5 new pilots, it also aim to build regional power markets in Beijing-Tianjin-Hebei and Southern (led by Guangdong).

Total generating capacity in the 13 spot trading pilots will account for more than half of China's power fleet.

=1275 GW ( incl. 800 thermal, 150 wind, 130 solar)

That said, not all types of generators are allowed in the pilot spot trading.
Read 5 tweets

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