A new report by the Institute for Energy Economics and Financial Analysis (IEEFA), finds global renewable energy champion China is simultaneously funding over one-quarter of coal plants currently under development outside the country.
|Image source ©IEEFA|
The report, “China at a Crossroads: Continued Support for Coal Power Erodes China’s Clean Energy Leadership” examines China’s expensive subsidisation of largely imported coal plant investments across 27 countries, all while overtaking the US and Germany in becoming the number one exporter of cheaper greener environmental goods and services.
Report co-author Melissa Brown, IEEFA Energy Finance Consultant, says funding coal plant projects leaves China and the 27 countries reliant on Chinese coal financing increasingly exposed to bad economic outcomes as nations move away from coal.
“The International Energy Agency’s most conservative modelling forecasts declining global coal trade post 2018 for good reason. Coal power locks importing countries into years of uncertainty about power prices as coal prices gyrate. By contrast, renewables are benefitting from huge technology improvements and have a deflationary impact on power prices,” Brown said.
“Many private global financial leaders, including most multilateral development banks, have come to see thermal coal as a poor investment with growing stranded asset risks. The World Bank, Standard Chartered UK, Generali of Italy, and Nippon Life of Japan have all turned their back on coal power for solid financial reasons.
China has committed or proposed approximately US$36 billion in financing for 102 gigawatts of coal-fired capacity in 23 countries. This represents more than a quarter of all coal-fired capacity under development outside of China.
The IEEFA report finds that Chinese financial institutions – both the development finance institutions and state-controlled banks – have committed or offered funding for over one-quarter (102 gigawatts GW) of the 399GW of coal plants currently under development outside China, including investment in export coal mines, coal-fired power plants, and the associated rail and port infrastructure.
Bangladesh has the most proposed coal-fired capacity and funding from China, totalling over US$7 billion for 14GW of capacity, followed by Vietnam, South Africa, Pakistan and Indonesia.
The report finds that most coal funding outside China is being provided by public Chinese banks that back Chinese state-owned enterprises to build the plants with a largely Chinese workforce.
With the majority of the planned Chinese coal projects yet to reach financial close in a number of countries, there is the possibility that the deals could fall through or be cancelled. Countries where Chinese finance is yet to be committed should re-focus their energy markets on investment in the grid improvements needed to support renewables.
“As the cost of renewable energy undercuts new baseload coal-fired plants, IEEFA considers more private investment in cheaper zero-emissions energy to be a smarter path forward, rather than blindly agreeing to investment in outdated and expensive coal-fired plants backed by governments intent on filling their own coffers while everyone else bears the financial burden of global warming.”
This article will appear in full in the Q1 The ASIA Miner print magazine