China approves new coal projects as consumption continues to decline

China is greenlighting coal power projects again.

Months after Beijing introduced measures designed to halt the approval of new and excess coal-fired capacity, three large projects were given the go-ahead in August and September.

The news comes as fresh government statistics show Chinese coal consumption fell by 3.1% in the first 8 months of this year.

It also follows a series of Unearthed analyses that detailed the inflation of a massive coal power bubble, with hundreds of projects worth billions of dollars in the pipeline despite significant overcapacity in the sector.

The projects

China’s coal overcapacity policy – which was announced in April of this year – appeared to be doing just what Beijing wanted.

The country’s coal glut was diminishing and the coal price had risen to the point where previously uneconomical companies were viable again.

But August saw China greenlight a clutch of new projects: a 4GW power plant in Gansu, a 700MW industrial power plant in Inner Mongolia, and the expansion of a combined heat and power facility in Guangdong.

It’s hard to tell whether this a return to normal – China greenlit 255 coal projects in 2015 alone – or part of a capital spending splurge.

Our energy expert Lauri Myllyvirta says the Gansu project in particular “could be a one-off” seeing it is directly linked to an already approved long-distance transmission line, from the country’s west to its central provinces.

He, however, also observed that “the government has reverted this year to gigantic spending on infrastructure and construction projects, often with very questionable economic justification, to prop up the industrial and construction sectors”.

Another 2400MW of non-coal thermal capacity was approved as well.

Falling consumption

This potential shift in policy comes as China’s falling coal consumption has continued to fall, down 3.1% so far this year, according to research by the National Development and Reform Council.

That does represent a slight uptick on the 4.6% decline in the first half of the year, with August witnessing a spike in coal use due to high industrial output and residential consumption.

But the trend is clear: China’s coal use is set to fall for the third year running.


China already has over 900,000 megawatts of coal-fired capacity, equivalent to 1,300 large coal-fired power plants.

And that number is set to grow substantially over the next several years, with hundreds more coal projects currently in the pipeline — more than 200 of which were given in the greenlight in 2015 alone.

You may have heard the stat that China builds one new coal plant per week, well – by our reckoning – it’s now building one idle coal plant per week.

With coal plants across the country running less than half of the time, the sector faces the very real prospect of a financial reckoning.

Recent research estimates that the equivalent of $11 trillion (more than an entire year’s GDP) has been spent on energy and infrastructure projects that generate little to no economic value.