• Coal burn rose 96% in Sichuan this summer, driving up thermal cooling water consumption during an acute drought

• The water burden of this additional thermal generation equates to meeting the needs of a population of 1.2 million people

• Much of this extra coal burn is unnecessary, and could be avoided by reforming markets and expanding transmission capacity/utilisation

This article was first published by TransitionZero. Read the original here.

Coal has for decades been the bedrock of China’s electricity system, keeping the lights on and factories humming when other sources aren’t available. But the carbon-intensive foundations of the Chinese grid are beginning to crack under the strain of climate-induced water shortages.

Coal is increasingly playing the role of swing producer in the Chinese power mix. Plants ramp up and down in response to variations in hydro, wind and solar generation, and in concert with power demand peaks and troughs. Coal’s traditional role in energy security came to the fore this summer when China endured an intense and widespread heatwave that dragged on for weeks. By some measures it was the most severe ever recorded anywhere in the world.

The prolonged heatwave triggered a severe drought that depleted reservoirs to critically low levels and curtailed hydropower generation. The hydro-dominated province of Sichuan in south-west China was particularly hard-hit, suffering blackouts and power rationing. Coal was called on to pick up the slack when demand for air conditioning spiked and hydroelectric output collapsed.

Leaning on coal during a drought has several drawbacks. Aside from making the air periodically unbreathable in China’s most populous industrial centres and contributing to the country’s enormous carbon footprint, there is another problem: coal’s own insatiable thirst for water.

Thermoelectric power plants require vast amounts of water for cooling, producing steam to drive turbines, and – for those equipped with sulphur-reducing scrubbers – processing waste gases and cleaning flues.

The unsettling irony for Chinese energy planners is this: propping up the grid with coal during periods of drought exacerbates the very water shortages that erode the availability of hydroelectric power stations. This compounds regional water stress, pitting electricity generation against other water users such as homes, businesses and agriculture.

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Spotlight on Sichuan

Drought is unusual in Sichuan. China’s top hydroelectric-powered province is blessed with abundant mountainous hydrological resources. Hydropower meets 80% of provincial demand, and around one-third of all generation is exported eastwards to coastal industrial hubs. Sichuan’s hydroelectric output tripled over the last decade to 354 TWh in 2020. Coal power generation remained steady at around 50 TWh per year over the same period.

Sichuan’s coal plants enjoyed an uptick in utilisation during the heatwave, producing 25,000 GWh over June-September 2022. This represents an increase of 93% compared to the same period in 2020 and 64% more than in 2021. Considering that tower-cooled coal-fired thermal generators consume on average 2.6 m3 per MWh of electricity generated, the water cost to Sichuan of leaning on coal can be estimated at 541,000 m3 per day during this year’s drought.

To put that into context, the average person in Sichuan consumes 64 m3 of water per year. Therefore, the daily excess water consumption by thermal generators in Sichuan during the summer 2022 drought in comparison to summer 2021 is equivalent to catering to the daily water demands of a population of 1.2 million people or 480,000 households.

Satellite data analysed by climate analytics non-profit TransitionZero as part of the Climate TRACE initiative reveals numerous coal-fired power stations in Sichuan generating at full capacity for long periods during the 2022 drought.

The 1.2GW-rated Fuxi power plant (below) ramped up just as the nearby Nanguang River, an important tributary of upper Yangtze River that provides resources and food to various communities, dried up:

Two other major facilities, the 2.4GW-rated Guang’an and 1.2GW-rated Chengdu Jintang power plants, both continued running as the green areas around them turned brown and parched:

The juxtaposition is striking when one considers the amount of fresh water these plants are sucking up. The graphs below depict the estimated water consumption range of each power station based on capacity factors derived from satellite-observed emissions rates, calculated to a 90% confidence interval. In aggregate, these three thermal generators consumed approximately 21,000,000 m3 of water combined over the June-September period:

Drought? What drought?

The fact that big, thirsty coal plants are allowed to run at full throttle during unprecedented drought conditions should be a red flag to provincial officials. So far there is no sign of a regulatory response, since the risk of water shortages affecting coal plant operations is currently deemed to be low.

The National Energy Administration, Beijing’s central energy planning body, gave the green light to coal construction across nearly all provinces in its latest resource constraint assessment, which considered water resource availability and plant profitability. Several provinces accelerated plans to build more thermal power plants following the 2022 heatwave.

Their zeal could be tempered if climate-fuelled droughts become more commonplace across China. Around 35%-60% of coal-fired capacity in northern China is already threatened by cooling water shortages during low-flow months of December to June, while around 20% face such risks in other regions.

Climate change is expected to reduce river flows and therefore aggravate thermoelectric power plants’ vulnerability to cooling water shortages. Warmer weather means warmer inflows of fresh water. Combined with tougher regulations on discharge water temperature, these factors could limit their usable capacity.

Already feeling the burn

Water availability is not yet a pressing concern for Chinese coal plant operators because they are facing more immediate threats. Nationwide coal shortages led to unprecedented electricity rationing and blackouts in late 2021, pushing fuel security up the political agenda in Beijing.

The National Development and Reform Commission (NDRC), the State Council’s powerful economic planning body, responded by capping thermal coal prices at some mines and introducing a supply guarantee. Reports indicate the cap will be expanded to all mines and extended into 2023, requiring them to prioritise supplies to thermal generators under long-term contracts.

These interventions helped to stabilise coal prices and supplies in 2022, but the outlook for next year is uncertain due to the wildcard of Beijing’s zero-Covid policies. Recent outbreaks prompted officials in China’s main coal producing regions to impose transport restrictions that prevented trucks from entering mines, forcing them to curb or halt output. Since coal is the mainstay fuel source for domestic heating in northern provinces, guaranteeing coal supply to power stations could become tricky in the event of a long, harsh winter.

Supply disruptions stoke fuel price volatility, which is weighing on the already-abysmal economics of coal-fired power and dragging more units into the red. Fixing the structural underperformance of the Chinese coal power sector will require structural solutions.

Begging for reform

China is in desperate need of electricity market reform. Grids managed at the provincial level are riven with inefficiencies that incentivise perverse outcomes, such as coal plants shutting down during periods of market tightness. Load management is unsophisticated and the summer blackouts have been ascribed to a lack of flexibility, both on the demand side and in terms of inter-provincial power transfer agreements.

Renewable energy curtailment is another manifestation of the same problem. Inadequate and uncoordinated interprovincial transmission capacity expansions have hampered grid integration in wind-rich northern provinces such as Xinjiang, Inner Mongolia and Gansu. Outmoded regulations, institutional misalignment and local protectionism stymie utilisation of existing ultra-high voltage power lines. Wind curtailment has improved in recent years but still occurs even when supply margins are tight in neighbouring provinces.

Removing these bottlenecks would allow industrialised central, eastern and southern provinces to tap into cheaper electrons generated across China’s vast northern interior, helping to eliminate unnecessary coal burn. It would also mitigate the risk of thermal plants exacerbating water stress when heatwaves and drought hit power production in hydro-reliant provinces such as Sichuan, Yunnan and Hubei.

The summer 2022 drought is a reminder that water scarcity could soon add to the confluence of economic, operational and fuel supply risks facing thermal generation. Despite committing to peak CO2 emissions before 2030, China remains a long way from peak coal. The energy security justification for continued reliance on coal will quickly evaporate if the cost of running thermal plants when they are most needed is the continued supply of scarce water resources.

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This article was first published by TransitionZero. Reproduced here with permission.