Coal's share in China's power mix will drop from 67.4% to 53.8% in 2026

Over 50GW of coal-fired capacity will be stopped.

BMI Research expects coal-fired power generation to stagnate in China over the coming decade, as the government curbs growth in the segment in order to address environmental concerns and overcapacity in the sector. 

With the Chinese power sector expanding at a steady pace, coal's share in the power mix will fall from 67.4% in2017  to 53.8% in 2026.

On March 5, the National Development and Reform Commission (NDRC) released a report to mark the opening of the annual meeting of parliament - announcing plans to shut down or stop the construction of more than 50 gigawatts (GW) of coal-fired capacity in China.

Here's more from BMI Research:

This announcement aligns with a series of recent policies through which the Chinese government has aimed to tackle overcapacity in the coal sector and intensified its efforts to reduce pollution.

With environmental issues being a priority under China's thirteenth 'five year plan', we expect the continued recentralisation of power to Beijing under Xi Jinping to add momentum to coal sector policy implementation.

As such, the aforementioned closure plans can be seen as a reiteration of government policy, and we highlight that plans to cancel a total of 85 projects on environmental grounds had already emerged in January 2017 (18 more were cancelled in 2016).

The combined number of 103 facilities totals 120GW of capacity, of which 54GW were already under construction. Adding to this narrative of a slowdown in the coal sector, we also note that only 1GW of coal-fired capacity was approved by the government on average per month over H116, compared to 3GW on average per week over 2015 (according to reports from environmental groups).

Furthermore, average utilisation of thermal power capacity fell to 47.5% over 2016, down from 49.8% over 2015 - reportedly the lowest rate in almost 50 years. This adds to the narrative of overcapacity in the sector, and will weigh on coal capacity growth.