By Abdullahi Lukman
China’s government has urged coal producers to maintain stable production after a recent surge in thermal coal prices raised concerns over the cost and security of electricity generation.
Spot prices for thermal coal recently reached their highest level in three years, increasing pressure on Beijing to prevent supply disruptions and further price volatility.
Coal accounted for 49.7 per cent of China’s electricity generation in the first half of the year, falling below 50 per cent for the first time as rapid growth in wind and solar power reduced its share of the energy mix.
Despite the expansion of renewable energy, coal remains an important source of electricity because wind and solar generation cannot consistently meet demand at all times.
China aims to increase the share of clean energy in its power generation to 30 per cent by 2030, from about 22 per cent currently. Analysts expect renewable energy to become increasingly important while coal continues to serve as a flexible source of power when renewable output is insufficient.
The country’s continued approval and construction of coal-fired power plants also points to a sustained role for coal in its electricity system, exposing power producers to fluctuations in the cost of thermal coal.
The recent price increase has already affected coal imports. Data from the Centre for Research on Energy and Clean Air showed that Chinese coal imports fell by 1.5 per cent in August after recording double-digit growth in each of the previous two months.
The government’s call for stable production reflects efforts to balance China’s transition towards cleaner energy with the need to maintain reliable and affordable electricity supplies.
