In 2017, a paper predicting China’s future fossil fuel production included the following graphic which has been annotated to show where we are up to:
The different coloured lines are predictions of future coal production by various Chinese academics. The red line is the author’s preferred prediction which has a broad top about 20 years long. The profile predicted is consistent with vigorous exploitation of a finite resource.
Now in 2021 we are right at the peak of forecast Chinese coal production with another six or seven years of plateau before production plunges at much the same rate that it rose at.
Since that graphic we have had another four years of data up to 2020:
That graph shows that China’s domestic coal production peaked in 2012. It looks like the top is in. China would produce more domestic coal if they could. The fact that they don’t means that they can’t.
Ten years ago in the eastern coal province of Shandong, underground coal mines were at an average depth of 675 metres, more than halfway to their final depth of 1,200 metres.
Operating costs tend to start rising strongly when a resource is more than half-depleted. Notably Chinese coal miners have complained that they cannot compete with imported coal on price.
Imports have risen to 300 million tonnes per annum, mainly from Mongolia, Indonesia and before it was banned, Australia.
So where did the Chicoms obtain the extra power to keep their economic growth going from 2013? As shown in this graphic, hydro made a big contribution:
The best rivers are now mostly dammed and the graph shows that growth from hydro has tapered off. Renewables destabilise the grid and nuclear has a slow rollout.
Coal is continuing with building coal-fired power station building but presumably the extra demand will be supplied by imported coal.
There is another complication for China in that the north half of the country gets quite cold in winter. During the 1950–1980 period of central planning, the Chinese government established free winter heating of homes and offices via the provision of free coal for fuel boilers as a basic right.
Due to budgetary limitations, however, this right was only extended to areas located in North China, which is defined by the line formed by the Huai River and Qinling Mountain range as shown by the following map:
The use of coal for domestic heating has a downside in that the life expectancy of those living north of the Huai River is five years shorter than those living south of the river due to the air pollution in winter caused by burning coal for heat.
China’s power producer are going into the northern winter with coal stocks 40 million tonnes lower than they should be for this time of year.
Rotating blackouts have already started in China. China also has peak oil in the rear vision mirror:
Peak domestic oil production was in 2014 and the country has now entered a long decline. Perhaps that doesn’t matter so much when the country is already importing 10 million barrels per day, making it the world’s largest oil importer.
It looks like peak oil for the world was in 2019 with US shale oil beginning to decline. The oil price will also respond positively. China has built near to one million barrels per day of coal-to-liquids capacity.
But that industry is now competing for feedstock with the power industry. Coal is no longer cheap in China as shown by the rise in 2021 in the Zhengzhou thermal coal futures for the nearest contract:
Another consequence of peak coal in China is that it will derail the economics of renewable energy.
Solar panels have been made in China using power from coal costing US$0.04 per kWh. Those solar panels, when installed in ideal conditions next to gold mines in the West Australian desert, produce power costing US$0.15 per kWh, equivalent to that from diesel.
Using power from solar panels to make solar panels would send the price of the power produced to perhaps US$0.40 per kWh. You can’t use power from solar panels to make solar panels.
The cost of the power produced would end up being infinite. Tripling of the power cost in China, which is a near term possibility, would have a similar effect.
Energy poverty is real poverty and we have seen peak China.
David Archibald is the author of The Anticancer Garden in Australia