China increases coal mining to provide winter power: Kemp

China's coal production has reached record levels, and its imports have also risen. However, the surge in power generated by solar farms and hydro dams has reduced thermal generation.

The reliability of electricity is dependent on coal-fired power generation, especially during the winter when solar and hydro output are lower and the system relies more heavily on fossil fuel.

Even though wind and solar power have been deployed in record numbers, coal is still the most common source of electricity generation, with winter months seeing a rise to over 75%.

It is important to have sufficient fuel to power thermal generators during the coldest winter months.

Generators are building up inventories in order to ensure that they have enough fuel in stock and prevent a repeat of the power shortages which plagued the country during the fall and winter of 2021.

COAL SUPPLIES

China's mines increased production to 390 million tonnes, a record for the season in July 2024. This is up from 378 millions in the same period a year ago and 373 in 2022.

The summer has seen domestic miners increase their output to compensate for the relatively low production of the first five months.

The cumulative production for the year ended July was only 15 million tonnes below the same period one year ago, but the deficit has decreased from 54 million tons in the previous year.

Inner Mongolia, Shaanxi, and Xinjiang - three of the top four provincial producers - have reported record season output so far in 2024.

In the first seven month, only Shanxi where production has been broadly flat in comparison to a year ago, failed set a record.

According to the state-run news agency Xinhua, Shanxi "voluntarily" reduced output after seven consecutive years of rapid expansion to optimize capacity and increase proportion of advanced mining.

Chartbook: China electricity generation

The top four producers are responsible for over 80% of all the electricity generated in the country. They supply generators across the board, with the exception of the extreme south.

Imports also surged, reaching a record 296 million tonnes for the first seven-month period. This is up from 261 millions tonnes in 2023 and 140 million tonnes in 2012.

Imports were used to compensate for Shanxi's lower production, creating breathing room to restructure this sector.

They are also vital in Guangdong, and other areas in the south. It is cheaper to transport coal by sea rather than long rail trips from the far north.

DOUBLE PEACH

China's annual consumption of electricity exhibits a "double peaks" during summer and winter, according to the government.

Airconditioning and Refrigeration account for 30 percent of the maximum load nationwide, and more than 40 percent in some provinces.

Summer is also the time when the East Asian Monsoon is at its peak and the hydro-generation is maximized. This eases some of the pressure on the transmission network except during drought years.

In July 2024 the record output of hydro and solar power plants reduced thermal generation (mostly coal) by 25 billion kilowatt hours (kWh) from a year before, marking the first seasonal decrease in at least a decade.

The secondary peak is between December and January, which is driven by heating and illumination, and not much lower than the summer.

The winter coincides with a dry season when hydro production drops sharply. Typically, by 50% or more compared to the summer.

The solar generation in northern China is also lower due to the shorter daylight hours.

This means that during winter, the electricity system relies more on coal than it does in summer.

Between December and February, in the five-year period between 2019 and 2023 thermal generators will provide 75% of all electricity. This compares to less than 70% between June and august.

The marginal generator in the summer is sometimes an hydroelectric plant or a solar power park. In winter, it's always a coal fired power plant.

As the government increases the deployment of solar park, the gap between winter and summer patterns will likely widen in the coming years.

During the shoulder seasons of spring and autumn, it is important to build up sufficient coal to meet peak winter demand.

Related columns: China's coal production is reduced to focus on structural change (June 21 2024), China's hydropower generation increases and coal decreases (June 18 2024).

John Kemp is an analyst of the market. John Kemp is a market analyst. Follow his commentary on X https://twitter.com/JKempEnergy (Editing by Gareth Jones)

(source: Reuters)