The operating conditions of coal-fired power enterprises will continue to improve in 2024

On the eve of the Spring Festival, with the convening of work meetings of major power generation groups,Five major power generationgroupCoal and electricityThe operating conditions of the enterprise sector have been announced one after another, and the overall result is that the losses of coal-fired power companies of the five major power generation groups will still be more than 40% in 2023. Despite this, thanks to the further improvement of the coal supply and demand relationship and the further implementation of the policy of rising coal-fired power generation electricity prices, the overall operating conditions of coal-fired power enterprises have improved greatly in 2023, and the degree of losses has been alleviated.

Relevant experts believe that although problems such as the decline in the calorific value of electric coal have led to the hindering of effective output of coal-electric units, such as the decline in the calorific value of electric coal, may even worsen, in 2024, with the effect of capacity electricity price policy and the improvement of the supply guarantee capacity of electric coal, the operating conditions of coal-electric power enterprises are expected to continue to improve.

The positive effects of capacity electricity price policy on the coal-fired power industry will gradually emerge

In November 2023, the "Notice on Establishing a Coal Power Capacity Electricity Price Mechanism" was issued, deciding to establish a coal-power capacity electricity price mechanism from January 1, 2024. China ushers in a "two-part" electricity price policy for coal-power capacity electricity prices and electricity prices.

Han Fang, deputy director of the Planning and Development Department of China Electric Power Unit, believes that the introduction of the coal-power capacity electricity price policy in 2023 has achieved the distinction between electricity energy value and capacity value, further improving my country's electricity price mechanism. Coal-power enterprises can recover part of the fixed costs through capacity electricity price, alleviate the business difficulties of enterprises to a certain extent, stabilize industry expectations, encourage coal-power enterprises to make necessary investments and transformations, and increase the abundance of the power system, which is conducive to alleviating the power shortage problem in some parts of my country and plays a crucial role in ensuring the safe power supply of users in the whole society. At the same time, it can increase the ability of new energy to connect to the grid and absorb new energy in the system, and support the high-quality development of new energy.

In 2024, my country's macroeconomic and electricity consumption demand continued to maintain steady growth. At the same time, the green and low-carbon transformation of power continues to advance, and the installed capacity of new energy power generation will still be the main force in the new installed capacity. In light of recent operation, Hanfang expects that the demand for coal for power generation and heating will continue to grow in a certain way in 2024, with a growth rate slightly lower than in 2023. It is mainly affected by factors such as hydropower output, temperature and coal quality, and there is certain uncertainty. Judging from the supply of electricity and coal, she expects that my country's coal production will be able to continue to maintain a high level in 2024, but some coal mines that have not yet completed the production capacity increase procedures face the possibility of policy adjustments and capacity shrinkage. Imports will remain at a high level, but the growth rate will decline. Overall, the supply of power coal in 2024 is generally guaranteed. We need to focus on the supply guarantee of power coal in the southwest and northeast regions, as well as peak coal use periods such as summer and winter, and solve the problem of the continuous decline in the quality of power coal supply as soon as possible.

The decrease in utilization hours does not mean that coal-fired power capacity is over

After the country issued a coal-power capacity electricity price policy, there was a view in the market that with the guarantee of capacity electricity price, localities would have more motivation to build coal-fired power, and it would be more difficult to reduce coal-fired power capacity.

Zhang Lin, director of the Planning and Development Department of China Electric Power United, disagrees with this view. He said that this view does not correctly understand the requirement of "based on my country's energy resource endowment, insisting on establishing first and then breaking, and planning comprehensively. The gradual withdrawal of traditional energy must be based on the safe and reliable replacement of new energy." Because at present, the development of new energy sources such as wind power and photovoltaics cannot form an effective replacement for coal-fired power units.

Zhang Lin analyzed that in order to ensure the safety of power supply, certain coal-fired power projects need to be built. First, meet the power balance requirements and ensure power supply. Since new energy power generation "rely on the weather for food" and has low effective capacity, in order to meet the real-time electricity demand, a certain scale of coal-fired power installed capacity still needs to play a role in "supporting the bottom line and ensuring supply". Second, coal-fired power is needed to provide voltage, frequency and moment of inertia support to the power system to ensure the safety of the power system operation. With large-scale access to new energy, the starting space of conventional units is reduced, the moment of inertia of the power grid is reduced, and the frequency regulation capacity is reduced. Coal-fired power is required to provide reliable power in complex meteorological conditions and extreme emergency scenarios to support the stable operation of the power system.

In the past, in my country's coal-based power supply structure, the annual utilization hours of coal-fired power often reached 5,000 to 5,500 hours. In recent years, the power industry has actively promoted the transformation of green and low-carbon, and the power supply structure has transformed from coal-based to diversification and greenness in the past. With the changes in power structure and electricity consumption characteristics, coal-fired power "gives the way" for new energy power generation, participates more in system adjustment, reduces the rated operating conditions, and runs below the rated power most of the time, or even operates at a lower load rate. In this case, the annual utilization hours of coal-fired power will inevitably show a downward trend. Therefore, the decrease in the number of coal-fired power utilization hours does not mean that coal-fired power production capacity is over.

There is no risk of high-income stranding of coal-electric units due to early retirement

Against the background of building a new power system, it has become a consensus that coal-fired power has gradually transformed from basic support and system regulation functions to emergency support and flexible adjustment of power supplies.

Zhang Lin explained the development path of coal-fired power under the dual-carbon goal: before the carbon peak, a certain scale of coal-fired power projects will be developed in accordance with the principle of "increasing the engine and controlling the quantity" to meet the power balance requirements, control the coal-fired power generation, give priority to the use of clean energy to generate electricity, reduce the intensity of power carbon emissions, and maintain the utilization hours of coal-fired power at around 4,000 hours, showing a gradual reduction trend; from carbon peak to carbon neutrality, coal-fired power has experienced the development stage from "controlling engine reduction" to "reducing engine reduction". During this period, most of the coal-fired power units planned to withdraw can be converted into emergency backup power supplies through "off but not dismantling", playing a role in ensuring supply while contributing to reducing overall energy consumption and carbon emissions; after achieving carbon neutrality, some coal-fired power still needs to retain the moment of inertia and frequency regulation services, and rely on CCUS technology to achieve net zero carbon dioxide emissions.

Zhang Lin believes that there is no risk of early retirement of coal-electric units causing high-value assets to be stranded. Because the average life of my country's active coal-fired power units is about 15 years, the existing coal-fired power will be 30-40 years before 2040. If it is retired, it will reach the design period, and there will be no problem of asset waste; and the current new units will continue to operate to the carbon neutral stage, with a operating period of 40 years or even longer, and will not cause huge asset waste.