Published in the October 2022 edition of China Power Enterprise Management, a magazine run by the China Electricity Council. Authored by Feng Weizhong of the Shenergy Power Technology Company and Mao Jianxiong of Tsinghua University’s Department of Thermal Engineering.

Amidst Major Changes in the International Energy Situation…the Strategic Value and Development Dilemma of China's Coal Power Industry

The giant "butterfly" of the Russia-Ukraine conflict continues to flutter its wings, forming a hurricane in the energy sector, sweeping across Europe and the world. The wildly rising gas prices in Europe have driven up electricity prices, not only causing people to feel an early chill of winter, but also hitting the manufacturing industry hard. Many European countries, which were previously singing the "abandon coal", anthem had to restart their coal power, which in turn drove up the price of coal (currently over USD 300/tonne). At this moment, the Russian-Ukrainian conflict shows no sign of easing and is even trending in the direction of being a long-term situation. The recent simultaneous bombing of the Nord Stream 1 and 2 underwater gas pipelines means that the international energy crisis will continue.

At the beginning of last year, many provinces and cities in China saw regional electricity supply tightness, and in the third quarter of last year, the coal shortage led to an intensifying power shortage, which seriously affected people's livelihood and the economy. Provinces all over the country strictly ordered coal-fired generators, as the ballast of the power system, to maintain power supply at any cost.  Coal prices continued to rise, at their highest point exceeding 3000 CNY/tonne. Fortunately, the central government intervened decisively, and coal prices fell in response, but not back to the low levels of the past. This year, the soaring international coal prices caused by the Russia-Ukraine conflict have again affected the domestic market. In September of this year, the standard coal spot price of 5000 kcal coal in Shanghai exceeded 1700 RMB/ton (excluding tax). Although the long-term supply contract price for coal is still lower, the quantity is limited. Even for plants with the most advanced performance specifications, the average purchase price of coal has exceeded their break-even point. Without a doubt, the losses in the coal power industry are unavoidable. The need to purchase more market-price coal for more power generation will inevitably lead to the phenomenon of "the more we generate, the more we lose”. In the long run, the industry's sustainable development prospects are worrying. As a major exporter of industrial products, and with coal as a basic energy source, suppressing the coal price in China is equivalent to subsidizing the entire world.  But releasing coal prices and suppressing the price of electricity, is not only a subsidy to the world, but also endangers the survival of the coal-fired power industry. Finally, if the price of electricity is allowed to rise accordingly with the price of coal, it will affect people's livelihood and the international competitiveness of industrial products, even endanger the survival of many high power-consuming industries. Most recently, a number of large manufacturing enterprises in Europe stopped production and considered moving away due to high energy prices, with many of these projects settling in China. China's low and stable prices for basic energy are a key factor for this.

To ease the pressure on the survival of coal power, it is necessary to appropriately increase the supply of coal to ease the coal price, or to supplement it with a slight increase in electricity prices to give relief to coal-fired generators. However, due to the limited room for lower coal prices or higher electricity prices, it is unlikely that the coal power industry in its current state of technology will ever return to the golden years of high returns. Another key element here is the issue of carbon dioxide emissions reduction. In [pursuit of] the "carbon peaking/neutrality" targets, higher coal prices are likely to be used as a means of promoting carbon emissions reduction. For the coal power industry, which accounts for the largest share of carbon dioxide emissions, the pressure on coal costs is unlikely to be completely relieved. But in any case, the operating environment that has led to industry-wide losses in coal power is unsustainable. [We] believe such an environment should be improved. At the very least, units that meet the industry-wide average coal consumption standard should not lose money, which is the underlying logic of policy regulation. The following discussion is premised on this logic.

Since the signing of the Kyoto agreement, in order to reduce carbon dioxide emissions, China has vigorously developed renewable energy. At present, the installed capacity of renewable energy, including hydropower, wind power and solar photovoltaic, has exceeded 1100 gigawatts. However, because this type of energy has the characteristic of " making a living according to the weather" [the phrase used here is literally "rely on the heavens to eat"], it may suffer when encountering with extreme weather such as dry winters plus sustained low temperatures, such as China's snowstorm in 2008 or Texas's 2021 cold snap and blizzard. This is not to mention this year's high temperatures and drought leading to a significant drop in hydropower output in the southwest of China. Compared to the unsustainability of energy storage, coal-fired thermal power units are still reliable. Therefore, coal plants often must store even coal for 2 to 3 weeks of generation, inevitably "revealing" themselves as the anchor for the power grid in extreme weather.
Based on the reality that China's remaining resources for hydropower development are limited, the current rapid development of renewable energy is mainly wind power and solar photovoltaic, with the current installed capacity reaching 600 gigawatts. However, due to intermittency associated with this type of generation, with its randomness, generation gaps, volatility, and other non-adjustable characteristics, if you cannot solve problem of good backup power supply for peak adjustment, high proportions of this kind of power (i.e., variable generation) will seriously threaten the security of the grid.

[Important translation note: in Chinese the phrase 调峰 i.e., "peak adjustment" is a broadly defined category of power supply actions that includes things that have discrete definitions in English like peak shaving, valley filling, load following, etc. In most cases in this essay, I will translate this phrase as “load following”, as that seems to be the usage that is indicated.]

In developed countries, consumption of these kinds of new energy mainly relies on adjustments from gas-fired power. But in China, due to our natural resource endowment being: "more coal, little oil, lacking gas", new energy consumption mainly relies on our total installed capacity of 1100+ gigawatts of coal power for peaking. Therefore, in China's power grid, coal power plays a key "security" role for the consumption of new energy. But, operating in this way, the average annual utilization hours of coal power will drop significantly, which is another blow to coal power generators.

How to get coal-fired power out of this predicament, and turn their losses into profits, is now the key problem of the coal power industry. Against the current high coal prices, high coal consumption is the first "killer" of power plant economics. On the other hand, low coal consumption can be the trump card that saves the plant's life. For China's single-unit 300MW+ coal power plants, with an average load factor of 75% as the benchmark, their actual annual average operating coal consumption (hereinafter referred to as "coal consumption") is about 280-350g/kWh (including desulfurization, condensing, water-cooling units). For power plants in the east of the country, if the price of standard coal could be significantly reduced to RMB1200/ton (excluding tax), it is expected that power plants with coal consumption at the level of 300g/kWh can achieve break-even. At this price, power plants with coal consumption of 350g/kWh will still be at a huge loss, while those with coal consumption at 280g/kWh will still have some profit. Taking a power plant with two 1000MW ultra-supercritical units an annual power production of 10 TWh as an example, the coal consumption of an excellent power plant can reach 280 g/kWh, which is equivalent to an annual saving of 200,000 MT of standard coal and a cost saving (or relative profit) of 240 million yuan compared to a power plant at a 300 g/kWh coal consumption level. This shows how a big reduction in coal consumption is an important way for power plants to get out of trouble. Of course, this doesn't include those plants that "on paper" are low coal consuming plants.

From the current trend of the international energy crisis, the likelihood of coal prices returning to the price before the Russia-Ukraine conflict is very low, which means coal prices are unlikely to return to the original 700 yuan/MT (the China eastern standard coal price, excluding taxes). The possibility of coal prices even going down to 1000 yuan/MT is also slim. Such a trend is very embarrassing for new coal power projects, because according to the current five factors that affect investment decisions, i.e.: construction cost, labour cost, coal consumption rate, coal price and electricity price, there is no reasonable return to speak of. The first element is construction cost. After years of fierce competition and industry efforts, we have brought the unit cost of power plants today even lower than it was 30 years ago, so it is really not easy to maintain this current cost level in the future. The second element is labour cost. Power plant labour productivity is already 20 times higher than it was 30 years ago, at an advanced level for the whole world, and so the space for further improvement is limited. Finally, considering coal consumption, coal price and electricity price, the current efficiency approval threshold for new coal power has been significantly raised to 270 g/kWh, a relatively advanced level for conventional secondary reheat units. Estimating based on this, the actual annual average operating coal supply consumption could be about 285 g/kWh (75% average load factor, 15 g/kWh higher than the coal consumption threshold). Considering that the new power plant will have to bear an increased cost of loan repayment compared to the old ones, the return on investment at the existing tariff level is worrisome unless an artificially low coal price is set, which is not realistic. If using realistic inputs, the feasibility study for new coal plants will be almost impossible to pass.

However, does this mean that there is no way out of the coal power dilemma? The answer is no. China is fully capable of applying the most advanced and innovative technologies to reduce coal consumption further, thereby significantly increasing profitability, coupled with the corresponding sale of carbon dioxide emission reduction credits, which will also increase profitability. The application of the most advanced and innovative technologies can significantly expand the deep ramping capacity of coal-fired power units while ensuring safety, environmentally-friendly generation, and low energy consumption, thus opening up new profit channels.

[Translation Note: The language occasionally gets a little promotional, like this. I have trimmed out several further instances of this exact phrase later in the essay to avoid distractions. This is my only change to the original text.]

At present, the ramping range of coal-fired thermal power is generally 50% to 100%, with some provinces and cities able to reach 40% to 100%. But with the rapid growth of new energy and its proportion in the grid still rapidly increasing, this new energy will face consumption bottlenecks unless the ramping range of coal-fired power units can be further broadened. Another point is that the rotational inertia and reactive power provided by the turbine generators of coal-fired power plants are extremely important for the safe and stable operation of the grid. Wind power and PV, on the other hand, do not create rotational inertia and reactive power output. Therefore, deep peaking of coal power is even more important, because even if the load of coal power is reduced to 20% or even lower, its rotational inertia is still 100% and it still has reactive power output. Therefore, promoting the deep ramping of coal power, enhancing the grid's ability to consume new energy, and achieving structural carbon reduction in the power system will be important for China's low-carbon power development in the future. In fact, some provinces and cities in China have already introduced subsidy policies for deep ramping of coal power. If there are no accidents, the full implementation of such policies across China is probable. For example, recently, the Energy Regulatory Bureau of an eastern province has introduced a subsidy policy for deep ramping of coal power (see the following table).

Coal Power Deep Ramping Subsidy Standard for a certain Eastern Province (CNY/MWh)
Price Level	Unit Load Rate	Upper Price Limit for Ramping (includes tax)
Level 1	45%-50% inclusive	300
Level 2	40%-45% inclusive	400
Level 3	35%-40% inclusive	600
Level 4	0%-35% inclusive	800

The table above reflects two points. The first point is that the overall subsidy is not small; the second point is that the larger the load transfer, the higher the subsidy value. This effectively opens up a new way for coal fired power plants to make money. Therefore, the relief of coal power is expected to be achieved through technological progress, significantly reducing coal consumption, and significantly increasing the deep ramping capacity.

[Translation Note: It’s probably relevant to point out here that reducing coal consumption/kWh and enhancing deep ramping performing is essentially the life’s work of the two authors, and both are in the field of providing technical consulting services to power plants to do just that. So, while they are hardly uninterested parties, they are also extremely authoritative on this subject. This is a marketing pitch, but a technically adept one.]

In fact, the current state-of-the-art coal power supply coal consumption has gotten as low as 251 g/kWh for a 1350 MW secondary reheat ultra-supercritical unit. Under the same boundary conditions, the operating coal consumption of this unit is more than 20 g/kWh lower than that of a conventional secondary reheat unit, while the unit cost of the former is only slightly higher than the latter. In addition, the unit is also loaded with a package of economical, environmentally friendly, and safe 20-100% deep peaking technologies. Still using the prior project example of 2 1000 MW units, with 10 TWh/year feed-in power and a standard coal price of 1200 RMB/MT, a further reduction of 20 g/kWh coal consumption is equivalent to an additional annual saving of 200,000 MT of standard coal and a further fuel cost reduction of 240 million RMB. If we add the coal savings that corresponds to an emissions reduction of 540,000 tonnes of carbon dioxide, the trading revenue could be as much as 270 million CNY, which is positive for both commercial and social environmental benefits. Meanwhile, if the plant participates in deep ramping for 500 hours/year, (relative to 50%) an average downward adjustment of 20%, it will be equivalent to 200 GWh of deep ramping (less power generation) or about 2% of its annual power generation, which translates into an average subsidized electricity price of about RMB 0.5/kWh, or around 100 million RMB. In addition, as a representative of advanced coal power, the 1350 megawatt unit can also offer Fast Cut Back (FCB) function, which can provide support for the grid to prevent large blackout accidents.

Technical Risk and Cost Analysis of Deep Ramping in Coal-Fired Power Plants

However, besides the coal savings, there are technical risks and costs associated with deep ramping, and the greater the magnitude of deep ramping, the higher the risks and costs. The subsidies for deep ramping are also strongly related to this. The costs associated with deep ramping of coal units are mainly: safety risks, equipment lifespan loss, and coal consumption efficiency drop.
The first category is the safety risk problem. For conventional boiler design, the minimum safe and stable combustion load is specified generally at 35-30% of the rated load. When going lower than this load, it is necessary to adopt fuel stabilization measures like burning oil, but this also means combustion efficiency and dust removal efficiency will be reduced. At this time, the risks of condensation, blockage and corrosion of the air preheater will also rise significantly, which will lead to a rise in the plant’s self-use power rate and a rise in exhaust losses.

The second category is costs associated with reduction of equipment lifespan. When the unit’s equipment is under ultra-low load, usually the main steam temperature of the unit will drop significantly, which is equivalent to experiencing a warm start. The manufacturer sets a limit on the number of starts for the unit’s lifespan, and the limit for warm starts is only in the hundreds of times. If the unit is operated frequently with deep ramping, rapid equipment lifespan loss will occur, unless good countermeasures are taken.

The third category is fuel consumption efficiency losses. After the unit enters into ultra-low load, the heat consumption of the turbine will rise sharply, which will be further aggravated by the significant drop of steam temperature. Together with the significant decrease of boiler combustion efficiency, rapid increase of plant electricity consumption rate and a rise in exhaust losses, when the plant’s load drops to 20%, its coal consumption will generally be more than 150g/kWh higher than when under normal rated working conditions.

Typical Cases for the Application of Advanced Coal Power Technology and Outlook for their Promotion

To summarize, if the deep ramping subsidy is to really become a new way for a coal power plant to be profitable and ensure unit safety, these costs mentioned above must be controlled. Fortunately, the 20-100% deep peaking technologies applied at the aforementioned 1350 MW unit have adequately solved the three types of problems described above. However, the decline in coal consumption efficiency during low load operation is inevitable. The rise in in coal consumption of this unit at 20% ultra-low load is only at the level of 70g/kWh (relative to normal conditions), which is perfectly acceptable compared to the value of the deep ramping subsidy.

Most new units are at the 660MW or 1000MW capacity level and these units characteristically have a single shaft arrangement. The upgraded "Turbine Generator Full High Level Arrangement Technology" developed accordingly for the characteristics of these units is mature, and both its performance and cost performance are better than the original "High-Low Level Arrangement Technology". It is expected to achieve a net efficiency of 50% (corresponding to a coal consumption of 245.67g/kWh) for the 660MW class units. At the same time, such units will be all be loaded with 20-100% deep ramping technologies.

Among the stock units in China, the most economically challenged ones are sub-critical units with high coal consumption, whose real annual average operating coal consumption is about 335~350g/kWh (including desulfurization, condensing and wet cooling units), followed by super-critical units with coal consumption of about 315~325g/kWh. How to resolve the predicament these units find themselves in? There are only two ways out, that is, through the use of innovative technologies for significant efficiency improvements, which usually see coal consumption reduction of at least 30 g/kWh. The other way is to install deep ramping technology to fight for the deep ramping subsidies.

One current successful case is a 350 million RMB retrofit project implemented at the 320MW sub-critical Unit 3 of a power plant owned by China Resources Power. During testing the unit achieved an average performance test power supply coal consumption of 285g/kWh, which was 35g/kWh lower than before the retrofit. At the same time the minimum unit load level was brought all the way down to 19%. In addition, after the implementation of the retrofit, the unit will receive an approve for at least 15 years of life extension according to the latest policy. Therefore, the cost effectiveness of this type of retrofit is very good.

All in all, for stock units, whether sub-critical or super-critical, or even small units with combined heat and power supply, implementing relevant advanced retrofit technologies can allow them to be ranked among advanced coal power plants. However, due to the general operating difficulties of coal power enterprises in the past two years, large-scale technological transformation is often unaffordable, even if the intention is there. But, purely from the point of view of capital investment, the return on investment for this type of retrofit is much higher than rate for bank loan interest. Therefore, if social capital funding could be introduced into this sector, it will certainly form a win-win situation.

[Translator Note: A little unclear here, but it sounds like by asking for “social capital” the author is asking for private capital or funds to take an interest in retrofitting coal pants.]

It is important to note that none of the discussion above includes the issue of combined heat and power supply. In reality, if there are heat consumers, the power plant will be more successful.

However, in terms of the ultimate carbon neutrality target, it is impossible for coal power to meet CO2 emissions thresholds of <100g/kWh by improving efficiency. But, from the successful experience in Europe, large coal power plants can achieve zero CO2 emissions by replacing coal with biomass fuel, and maybe even realize negative emissions by installed CCUS technology.

To sum up, in the context of the international energy crisis, China's coal power, through its own efforts as much as possible, should arm with the most advanced low-carbon coal power technology, realizing two-pronged benefits from substantial coal savings and deep ramping subsidies. This allows the industry to go along with the historical trend of decarbonization and transform technological innovation into economic benefits. In this way, it will blaze its own path for a solution to the problem, stabilize electricity prices for the country, enhance the international competitiveness of China's manufacturing industry, and make great contributions to the rapid development of renewable energy and the realization of our carbon goals.