Quantifying stranded assets of the coal-fired power in China under the Paris Agreement target

• Main Authors: ZHANG, Weirong, ZHOU, Yiou, GONG, Zhen, KANG, Junjie, ZHAO, Changhong, MENG, Zhixu, ZHANG, Jian, ZHANG, Tao, YUAN, Jiahai
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: Coal-fired power; stranded assets; China; Paris Agreement; Energy Policy; Environmental Sciences; Numerical Analysis and Scientific Computing
• Online Access: https://ink.library.smu.edu.sg/sis_research/6969; https://ink.library.smu.edu.sg/context/sis_research/article/7972/viewcontent/QuantifyingStrandedAssetsCoal_av.pdf
• Institution: Singapore Management University

Coal-fired power plays a critical role in China's compliance with the Paris Agreement. This research quantifies China's stranded coal assets under different coal capacity expansion scenarios with an integrated approach and high-precision coal-fired power database. From a top-down perspective, firstly, the pathway of China's coal-fired power capacity consistent with the global 2 degrees C scenario is outlined and then those stranded coal-fired power plants are identified with a bottom-up perspective. Stranded value is estimated based upon a cash flow algorithm. Results show that if coal capacity stabilizes during 2020-2030, China will only incur a sizeable yet manageable stranded asset loss (USD 55 billion, 2020-2045). However, a continued increase of coal-fired capacity, of another 200 similar to 400 GW, would significantly enlarge the loss by 2.7 similar to 7.2 times. Further, once commissioned coal-fired power would form a resource lock-in effect. Thus, it will miss a short-term opportunity to develop new energy sources and induce a long-term need to invest in coal-fired power negative emission technology. Therefore, halting the construction of new coal-fired plants is a low-cost and no-regret option for China. Key policy insights Even with the largest coal-fired power capacity in the world, China still has the chance to decommission the coal-fired power units gradually at a relatively low cost. Continuing to build new coal-fired power units in China will increase the risk of stranded assets, especially for North China Grid and Northwest China Grid. Taking immediate action to stop building new coal-fired power units would be the low-cost and no-regret option for China. The local financial sector needs to work with the energy sector to gradually withdraw from the coal sector and support clean and renewable energy.