China planning to shut down 13 mln KW of coal-fired power capacity in 2008 —is it becoming more environmentally conscious?

China will close more small coal- fired power stations in 2008, officials said, to save energy and reduce greenhouse gas emissions.

The goal is to eliminate 13m kilowatts in such capacity or about 30 per cent more than the target of 10m kw set in 2007, according to the National Development and Reform Commission (NRDC).

In 2007, China shut 553 small thermal power generators with a total capacity of 14.38m kw, 44 per cent above target.

The State Council, or the Cabinet, has set a target of closing 50m kw of thermal power capacity from 2006 to 2010.

Zhang Xiaoqiang, vice minister of the NDRC, said that the current power shortages in some regions were “absolutely not related to the closure of small coal-fired power stations.”

He said that highly efficient, ecologically friendly generators, with a total capacity of 100m kw, had offset reductions caused by last year's closures.

He said that the shortfall was caused by a combination of increased demand driven up by the adverse weather as well as coal shortages, which had shuttered power stations with an aggregate capacity of up to 40.99m kw, or 7 per cent of the capacity of China's thermal power plants.

Large thermal power generators, each with a capacity exceeding 50,000 kw, would replace small coal-fired generators to help save 18.8m tons of coal and avoid emitting 290,000 tons of sulphur dioxide and 37.6m tons of carbon dioxide every year, according to the commission.

The move showed China's commitment to sustainable development and its latest efforts to face the challenge of climate change as a responsible country, the vice minister said.

The State Electricity Regulatory Commission (SERC) said that coal reserves stood at a little more than 21m tons, less than half of the normal reserves. Nearly 90 power plants, which accounted for more than 10 per cent of the national gross installed capacity, had less than three days of coal reserves.

In addition, the bad weather and rising passenger rail traffic before the Spring Festival, the most important Chinese holiday, have hampered coal transport.

Only an average of less than 25 per cent of the daily demand for coal shipment by rail has been met, according to the Ministry of Railways.

Coal prices had risen nearly 20 per cent month-on-month, said the China National Coal Association, in a report. Meanwhile, coal delivery costs in coastal regions had surged more than 50 per cent in the past six months and were expected to continue rising.

This indicated that coal prices were increasingly affected by market conditions, said an analyst with SINOLINK Securities. In 2007, the contract prices of thermal coal rose by an average of 10 per cent over the previous year.

A senior official of China National Coal, the country's second largest coal producer, said that prices would remain high this year.

Prices for coal shipments between northern Qinghuangdao and Shanghai had risen from 75 yuan per ton (approximately 10 US dollars) in July to 110 yuan per ton in December.

China Shipping Haisheng said it had raised the contract price by 79 per cent in a thermal coal delivery contract signed in January with one customer.

Analysts with Guotai Junan Securities said coal delivery prices would probably rise 40 to 50 per cent in 2008.

Will this move by the authorities indeed ease China's energy woes?