Under the background of stable coal supply and price, coal-fired power generation industry

In September 2020, China proposed at the 75th session of the United Nations General Assembly that it will strive to achieve the goal of peaking carbon emissions before 2030 and achieving carbon neutrality before 2060. In order to achieve the strategic goal of carbon peak and carbon neutrality, China has introduced a number of policies to continue to promote the development of new energy power generation industry with zero emission advantages, and the corresponding installed capacity has been rapidly increased. By the end of July 2022, China's installed capacity of wind turbines was 344 million kilowatts, an increase of 17.26%. The installed capacity of solar power generation units was 344 million kilowatts, an increase of 26.71%. The rapid increase in installed capacity has led to a rapid increase in power generation. From January to July 2022, the wind power generation of power plants above designated size in China was 0.39 trillion KWH, an increase of 18.55%. Solar power generation from power plants above designated size reached 0.13 trillion KWH, up 27.07% year on year.

From January to July 2022, the thermal power generation of power plants above designated size in China was 3.29 trillion KWH, down 2.04% year-on-year. We believe that on the one hand, the year-on-year decrease in thermal power generation is due to the year-on-year increase in power generation of other energy sources, including hydropower, which has more power generation in the first half of the year due to excessive water supply, and the rapid increase in installed capacity of wind power and solar power generating units, resulting in a faster growth in power generation. On the other hand, because the price of thermal coal is relatively high, the cost of thermal power generation is high, which restricts the willingness of thermal power enterprises to generate power

Since mid-September 2021, more than 10 provinces, including Zhejiang, Jiangsu, Guangdong, Shandong, Liaoning, Jilin and Hunan, have experienced power shortages, power rationing and production stoppage, affecting residents' quality of life and economic development. In this context, China attaches great importance to ensuring the supply of electricity. In December 2021, the Central Economic Work Conference stressed that the regulation of coal, electricity, oil and gas transportation should be strengthened in 2022 to promote adequate power supply. In May 2022, the National Regular Session pointed out that to ensure the normal supply of energy, and never allow power rationing. In July 2022, SASAC stressed that central enterprises should take strong measures to effectively enhance the ability of energy and resources supply security, jointly fight to win the battle of energy and power supply guarantee for the peak summer, and do a good job of preparing for energy and power supply guarantee this winter and next spring. In August, Sichuan, Chongqing and other places experienced extreme weather of high temperature and drought, which affected hydropower generation.

At the same time, hydropower has obvious seasonal characteristics, which is mainly manifested in the periodic change of hydropower generation due to the influence of the river's wet period and dry period. In general, there is more water flow in the rainy season, which drives hydropower plants to generate electricity, and hydropower generation usually peaks in July each year, and then gradually declines in each month. Therefore, in the next few months, China's hydropower generation will decline, and wind power, solar power and other new energy generation capacity is still small, temporarily unable to meet the larger electricity demand, so thermal power demand is expected to increase.

The National Energy Administration said that under the current technical conditions and installed structure, coal power is the most economically feasible, safe and reliable flexible power supply, and coal power will continue to play an important role in ensuring China's energy and power security for a long time. In the medium and long term, the development of new energy sources such as wind power and solar power generation in China started relatively late, and the power generation is restricted by natural conditions such as wind conditions and sunshine time, which is more unstable. The installed capacity of thermal power is relatively large, and thermal power generation is not restricted by external factors such as seasons and natural gas (high thermal power generation in winter and summer is mainly for thermal power plants to actively increase power generation to meet the needs of heating, cooling and other electricity needs of the whole society), and in the future, thermal power based on coal-fired power generation will remain as the main power source for a long time to help power supply.