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Construction : Analysis | April 2016 | Source : Infrastructure Today

Tracking the global coal plant pipeline | Boom and bust 2016

2015 saw India''s first drop in annual installations after continuous growth since 2006.
The world has too many coal-fired power plants, yet the power industry continues to build more. While the amount of electricity generated from coal has declined for two years in a row, the industry has ignored this trend and continues to build new coal-fired generating plants at a rapid pace. This is creating an increasingly severe capacity bubble. The problem of overbuilding is especially severe in China, where the average coal plant is now run less than half the time and the government recently announced plans to halt new coal plant approvals. Worldwide, 338 GW of new coal capacity is in construction and 1,086 GW is in various stages of planning-the equivalent of 1,500 coal plants. The amount of capital potentially wasted on these plants amounts to $981 billion, or close to a trillion dollars. Meanwhile, as clean, renewable energy becomes more affordable and more accessible, the amount of capital wasted on these unneeded plants will be one and a half times the amount the International Energy Agency estimates could provide electricity to the 1.2 billion people who need it worldwide.

In 2015, actual consumption of coal to generate electricity declined worldwide, led by a drop of 3.6 per cent in China.

Despite the decline in power generation from coal, the global power sector added at least 84 GW of new coal power capacity in 2015, a 25 per cent jump over 2014. Since 2010, 473 GW of coal power capacity has been built globally, of which over 90 per cent is in Asia, led by China and India.

Due to falling use of existing coal plants combined with aggressive building of new ones, plant utilisation rates have fallen in all major regions, including a 49.4 per cent utilisation rate in China, the lowest level since 1969. The Chinese government projects that the utilisation rate for thermal power will drop to 45.7 per cent in 2016.

In China, a shift in permitting from central authorities to provincial authorities led to a tripling of plant approvals in the past year. The Chinese government has clearly recognised the problem and is reportedly moving to order 13 provinces and regions to suspend approvals for new coal plants through 2017, and to order 15 provinces and regions to halt the initiation of new construction. The large amount of capacity already under construction across the country, or under development in provinces and regions not covered by the new restrictions, means that without further intervention China's coal power overcapacity will continue ballooning.

Captive coal-fired power plants serving industrial facilities and built largely outside the official permitting process emerged as a major issue in China. One company in Shandong Province, Shandong Weiqiao group, accounts for 23 GW of such projects, as much as all the coal plants built or under construction in the EU since 2010. In India, 11GW of thermal capacity is lying idle. 2015 saw India's first drop in annual installations after continuous growth since 2006, and the drop in 2016 is expected to be even more pronounced.

With solar power now cheaper than new coal plants, a significant uptick in new coal plant construction starts appears unlikely.

Global coal plant retirements are growing, led by retirements in Europe and the United States, but not fast enough to balance out the over-building: worldwide levels of plant retirements are only a fifth the size of new plant building. Europe and the U.S. continue to produce far more carbon dioxide per capita than the global average.

Even with no further building of coal plants, emissions from current coal plants will still be 150 per cent higher than what is consistent with scenarios limiting warming to 2¦C-meaning that most operating and new coal-fired plants will have to be phased out well before the end of their planned lifetime.

Air pollution from coal currently causes an estimated 800,000 premature deaths annually, and planned coal plants would increase such deaths by 130,000 people per year.

The capital expenditure represented by the proposed coal plant pipeline could be applied toward other goals. Currently the power industry is on track to spend US$981 billion on new coal plants. That level of investment could fully fund the scenario from the International Energy Agency (IEA) to provide electricity for the 1.2 billion people currently lacking access, as well as increase the amount of solar photovoltaic (PV) and wind power installed worldwide by 39 per cent.

Much of today''s overbuilding is defended on the claims that newer plants are more efficient than older ones. However, even adding so-called efficient plants is counterproductive because it locks in large, long-lived carbon emitters, interfering with the need to fully de-carbonize the power sector by 2040 in order to limit warming to 2¦C.

Regional Distribution
Since 2010 coal plants have been built in 33 countries, but only eight countries have added more than 2,000 MW of capacity. Just two countries, China and India, account for 85 percent of all new coal capacity.

Over 90 per cent of coal capacity built since January 1, 2010, has been in Asia, with East Asia accounting for 63.6 per cent of the total. This is followed by South Asia with 21.6 per cent and Southeast Asia with 5 per cent. For plants under construction, East Asia accounts for an even larger share: 65.3 per cent of the total, followed by South Asia with 21.6 per cent and Southeast Asia with 7.7 per cent. All other regions combined account for only 5.4 per cent of projects under construction. For coal projects in the pre-construction phase, East Asia continues to dominate with 51 per cent of projects, with South Asia accounting for 23.7 per cent, Southeast Asia rising to 10.6 per cent, and all other regions 14.7 per cent.

Of the top 30 entities building power plants since the beginning of 2010, 25 are Chinese provinces and autonomous regions or Indian states. Chinese provinces and autonomous regions occupy the top seven positions. 

Coal plant retirements worldwide remained under 5 GW annually until 2007, when large amounts of older capacity began to be retired in China under the Small Plant Replacement Policy. The policy linked the building of larger, more efficient plants to the closure of smaller, less efficient ones. The main impact of the program was from 2007 to 2010. Since 2011, retirements in the U.S. and the EU have dominated the global total. From the standpoint of near-term greenhouse gas emissions, replacing inefficient older plants with more efficient newer plants may appear to be beneficial. However, as shown by 'commitment accountin' studies that estimate the lifetime emissions of energy infrastructure, larger and newer plants actually contain a greater amount of committed emissions over their lifetimes than smaller, older plants (Davis and Socolow 2014). For that reason, replacement of older, less-efficient capacity with newer, more-efficient capacity should not be seen as a climate solution. Rather, it locks in a carbon emissions trajectory that is inconsistent with the 2¦C commitments made at COP21 in Paris.

The article is an excerpt taken from a 'Coal Swarm' report titled Boom and Bust 2016, authored by Christine Shearer, Nicole Ghio, Lauri Myllyvirta, Aiqun Yu, and Ted Nace.

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