In a recent analysis by Global Energy Monitor (GEM), it has been revealed that China's coal sector is experiencing significant changes, with a large number of plants being shut down or abandoned, pointing towards a decline in coal demand sooner than anticipated. This new data challenges the prevailing narrative surrounding China's coal usage and highlights the country's efforts towards transitioning to cleaner energy sources.

According to GEM, a staggering 775 GW of coal generation in China has either been closed down or scrapped before construction could commence. This includes older coal plants that utilized less efficient technologies, emitting more carbon dioxide per megawatt-hour (MWh). Comparatively, the currently operating coal generation in China, as well as those under construction, mostly utilize modern coal technology with lower emissions per MWh.

The figures reveal that 652 GW of coal generation was either shelved or canceled before construction, vastly overshadowing the 255 GW currently in the pre-construction phase. It is highly likely that a significant portion of the pre-construction projects will not reach fruition, and operational and in-construction plants may be decommissioned or mothballed.

Another significant aspect is the utilization pattern of China's coal plants. Unlike "baseload" generation in the West, where coal plants run at high capacity consistently, China mainly employs coal as a balancing power to meet peak demand periods across its electricity grid. In 2022, the capacity factor of Chinese coal plants stood at 49%, similar to the gas plants in the United States. China prioritizes low-carbon electricity from wind, solar, hydro, and nuclear sources, utilizing coal as a backup option, further reducing its carbon footprint.

China's commitment to reducing greenhouse gas emissions is also evident in its rapid electrification of various sectors. With over 1.1 million electric buses and trucks, two-thirds of the global market for electric light vehicles, and extensive electrified transportation systems in major cities, China is embracing a coal-heavy grid for these developments. While utilizing coal for transportation may raise concerns, it still proves to be a more environmentally friendly alternative compared to burning gasoline and diesel.

Analysts who possess Mandarin language proficiency, such as David Fishman from the Lantau Group, predict that China will hit its peak coal demand in 2024, a year ahead of its formal target. This projection is attributed to the deceleration of China's infrastructure development, resulting in a plateau in cement demand, as cement production is a major consumer of coal apart from electrical generation.

The shift in China's coal landscape signifies a new phase, wherein coal demand will decline, and the country will increasingly rely on renewable energy sources for electricity generation. Additionally, China's carbon cap and trade program is set to be tightened, providing its firms a competitive edge in exporting to the European Union, as the carbon payments made in China will be acknowledged through the carbon border adjustment mechanism for goods imported into Europe.

While China did permit a substantial number of coal plants in 2022, the latest data reveals that many of these projects will not come to fruition, and those that do face the risk of becoming stranded assets. China's coal demand growth is nearing its end, and though coal burning remains relatively high, it is not accelerating as previously believed. The country is making strides towards a cleaner energy future, with a decline in coal usage expected sooner than expected.

As the world's largest emitter of greenhouse gases, China's transition away from coal will be closely monitored by the international community as it plays a crucial role in global efforts to combat climate change.