The great Chinese power exchange

The Economist had a chart of the day earlier this week highlighting the new ultra-high-voltage projects in China:

20170121_WOM945

The largest connector under construction, the Changji-Guquan link, will carry 12,000MW (half the average power use of Spain) over 3,400km, from Xinjiang, in the far north-west, to Anhui province in the east.

This is a good illustration of the changes that are going on in China that will have a big impact on anyone who exports coal to China.

My pictorial version of the issue is shown below:

ice_screenshot_20170119-163627

 

Over in our corner of the world:

ice_screenshot_20170119-163658

 

Now, transporting coal by rail is expensive. Transporting by ship is cheap.

ice_screenshot_20170119-165103

But, China’s plan is to reverse the flow. To produce power in the North West where the coal is and then pipe the electricity to the east. The benefits are:

  1. More inland employment
  2. Less smog in the east (where there are lots of people) and more in the west (where there are fewer people)
  3. Uses Chinese coal at source, so don’t have to pay for transport (basically its switching coal transport with electricity transport)
  4. Too expensive for Australian or Indonesian coal to be imported to north-west China as they would have to pay for both a long maritime journey, then a long train journey
  5. Closer to cheap Russian gas
  6. More consistent wind energy in the north-west

None of this will happen overnight.

But it makes a lot of sense. And it is not helpful for Australian coal.

Damien Klassen is Chief Investment Officer at the MB Fund launching in April 2017. Register your interest now (if you haven’t already):

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Comments

  1. And the other challenge for coal: the 3 (or so) current, 10 (or so) being constructed, and 20 (or so) planned nuclear power plants are concentrated on the east coast.

    • Damien KlassenMEMBER

      Its already flowing. Any of the “solid” lines in the first chart above are operational.
      Check the Economist article link for more details.

  2. “Changji-Guquan link, will carry 12,000MW (half the average power use of Spain)”

    What a useless measure they’ve provided. What % of elecicity required for the destination would it provide? e.g. will these infrastructure projects deliver 10% of a provinces electricity or 80%? I’d expect there would be very different implications for Australia’s coal based on the numbers. How does maintenance of the long distance network compare with shipping coal from Australia?

  3. pyjamasbeforechristMEMBER

    I heard that if your choice is to build a new coal or gas power station OR a new solar or wind power station, it’s actually now cheaper to go with the latter.

    And it should be cheaper to replace even an existing coal or gas power station with a new solar/wind station in 2025ish.

    Time will tell, but the future looks sunny (and windy) to me

    • Josh MoorreesMEMBER

      i just wish we’d switched en mass to nuclear back in the 50’s and 60’s so we could be getting to this point without all the pollution and carbon. And thats not to say anything about nuclear fusion which if it was properly funded over the years probably would be a mainstay by now and completely changing the world with vast amounts of very cheap clean power.

      • If we’d started 40-50yrs ago, we’d be well along with advanced productionised fast spectrum meltdown proof fission reactors, that could even do things like provide heat directly for CO2 intensive industrial processes, or synthesize carbon neutral transport fuels for heavy land sea and air transport. We’ll probably eventually develop successful fusion, but we can’t afford to wait the decades that will take, we need to start deploying what works now. I don’t have any specific objection to wind and solar, but they are inadequate to the task.

  4. Why are they still so reliant on coal in the future? What happened to the huge amount of nuclear reactors they were planning to build?

  5. Hmmm, yea but you’re forgetting that the dominant wind in that region of the world is from West to East.
    The coal that you burn in Western China contributes to the Smog in Eastern China, whereas the Coal that you burn on the East coast becomes Korea, Japan and the US’s problem. I remember seeing an analysis of Californian smog that concluded at least half their smog (outside the major cities) resulted from Chinese power stations.

  6. Australian coal exports to China represent around 23% of the coal export market, thermal and metallurgical. Our biggest customer is Japan (34%) with South Korea and India taking 3rd and 4th place. India is expected to become a key importer in the future and other South East Asian countries grow import share.

    Scale of Chinese ambition is extraordinary: ‘between 2011 and 2015 China installed an additional 200,000 km of high voltage transmission lines, including 40,000 km of ultra-high voltage DC lines, to bring the total high voltage network to 900,000 km. The estimated cost of the new lines was $269bn. In the period 2016 to 2020 the transmission network will expand at a similar rate. By contrast the US grid has 275,000 km of high voltage lines.’

    In addition to reported intent to deliver electricity to the European market, State Grid has proposed ultra-high-voltage (UHV) global power network to transmit electricity from country to country (eg Mumbai-Delhi-Dacca-KL-Singapore-Bangkok-Beijing-Shanghai-HK-Seoul-Tokyo etc) $50trillion developed by 2050. If this mega grid was established then our coal exports might take a beating 😉

    More generally globally coal will continue to have a role in energy production. A role bigger than expected which will confound some. As we know China recently confirmed a twenty percent increase in coal power capacity through to 2020. Given China routinely under reports coal consumption it would be fair to assume actual consumption will also be higher. Maybe Australia should stop fretting about its CO2 emissions. A drop in the ocean.

  7. An article was posted at Macrobusiness a few days ago critiquing China’s infrastructure spend. Projects like UHV transmission are part of this spend. UHV and many many other long term (visionary when compared to Australia and US) projects designed to provide necessary base for future growth. As I said then, I am in awe of what China can do.

    • There is nothing to be impressed by, in Chinese terms. People are mesmerised by their apparent economic supremacy but everything they’ve achieved has been achieved by theft of ideas …. and debt.

  8. Australia CAN, and is in a unique position to capitalise on the renewable shift.

    We will need:

    1) To build the first of several undersea HVDC links up the Indonesian chain to Sinapore.

    2) Build mega DC solar arrays in the NT, FNQ and WA.

    Even with losses, it is plausible that we can power most of the evening and a chunk of the dawn of Indonesia, Philippines, Malaysia, Thailand, Singapore, Vietnam, India, China etc.

    Stage 2 would be linking Russia and Alaska, where we could realistically power a fair chunk of the USA through their night.

    Naturally, during our night, these flows would significantly reverse, however our population is tiny.

    Yes, it will be a huge up-front investment, but it is literally inevitable for the globe to be linked. This will happen.
    Australia, with its shitty leadership will naturally be the last link built and we’ll still not know what to do with it.

    • Australia can’t even supply dependable electricity to Adelaide – soon to be followed by Melbourne – let alone mainland Asia. All of this is because of fake Renewable Energy.

      There is no solution to intermittency. Batteries are fantastically expensive. Most people have no idea about electric engineering – especially the political class.

  9. Alfred you make a good point as I sit in my darkened powerless office in Adelaide. (Second time in 2 weeks no power in office for more than 12 hours. Welcome to the Third World.

    • Sool,

      Sorry to hear about your problems over in SA. It is all pretty obvious stuff to real-world professional engineers.

      Sadly, we will have to have a real breakdown for a few weeks before the politicos get crucified. Lots of people will have to die unnecessarily and lots of businesses will have to go to the wall before the problem gets fixed. Even fixing it will take months or years and lots of investment. That is what happens when you slip back to being a 3rd world shithole and forget the smart people who put the good infrastructure together 100 years ago – because corrupt psychopaths like Gore, Clinton and Obama told you that they knew better.

  10. Nice diagrams, Damien. You’ve picked up most of the salient coal trade issues. A few details –
    1) Sumatra is not a significant export source.
    2) H&H wld say that India will be an increasingly significant exporter, but I doubt it.
    3)Coal quality, particularly Sulfur content is a problem with all Chinese coals. New PSs will be equipped with FGD pollution control, but at an output efficiency and Carbon emission penalty.
    4) Proposed Carbon tax/trading in China might be the primary policy constraint on coal-fired PSs.

    • Damien KlassenMEMBER

      Thanks – appreciate the tips. Agree with you on India.

      The best India can hope for is to supply more coal domestically – getting the infrastructure to efficiently get it out of the country (given the low quality) is more than can reasonably be expected given India’s history…