Quantifying stranded assets of the coal-fired power in China under the Paris Agreement target

ABSTRACT

Coal-fired power plays a critical role in China’s compliance with the Paris Agreement. This research quantifies China’s stranded coal assets under different coal capacity expansion scenarios with an integrated approach and high-precision coal-fired power database. From a top-down perspective, firstly, the pathway of China’s coal-fired power capacity consistent with the global 2°C scenario is outlined and then those stranded coal-fired power plants are identified with a bottom-up perspective. Stranded value is estimated based upon a cash flow algorithm. Results show that if coal capacity stabilizes during 2020–2030, China will only incur a sizeable yet manageable stranded asset loss (USD 55 billion, 2020–2045). However, a continued increase of coal-fired capacity, of another 200∼400 GW, would significantly enlarge the loss by 2.7∼7.2 times. Further, once commissioned coal-fired power would form a resource lock-in effect. Thus, it will miss a short-term opportunity to develop new energy sources and induce a long-term need to invest in coal-fired power negative emission technology. Therefore, halting the construction of new coal-fired plants is a low-cost and no-regret option for China.

Key policy insights

• Even with the largest coal-fired power capacity in the world, China still has the chance to decommission the coal-fired power units gradually at a relatively low cost.

• Continuing to build new coal-fired power units in China will increase the risk of stranded assets, especially for North China Grid and Northwest China Grid.

• Taking immediate action to stop building new coal-fired power units would be the low-cost and no-regret option for China.

• The local financial sector needs to work with the energy sector to gradually withdraw from the coal sector and support clean and renewable energy.

KEYWORDS:

• Coal-fired power
• stranded assets
• China
• Paris Agreement

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 China Electricity Council (CEC).

2 State Grid Energy Research Institute (SGERI).

3 China Electric Power Planning & Engineering Institute (EPPEI).

4 National Energy Administration (NEA).

5 China Renewable Energy Engineering Institute (CREEI).

6 Due to the frequent increase in electricity tariffs charged by the electric utility, poor reliability of electric supply, forced outages, long power cuts, etc., a large number of industries have switched over to their own generating station (plant) within their own campus. This method of generation is called Captive Power Generation and such plants are known as ‘Captive Power Plants’. (https://electricalvoice.com/captive-power-plants/).

Additional information

Funding

This paper was supported by the National Natural Science Foundation of China (71673085), the Fundamental Research Funds for the Central Universities (2018ZD14), and the 111 Project (B18021).