Coal-fired power's share in Chinese energy mix to drop to 55% by 2025

Central government urges local bodies to hasten reforms.

The Chinese government will push-on with its coal reduction policies, despite ongoing provincial-level resistance, in a bid to reduce overcapacity in the power sector and curb pollution. "We expect coal-fired power generation to contract over 2016 and 2017, with coal accounting for around 55% of the total electricity generation mix by 2025," it said in a report.

The disconnect between the government's national energy agenda - which is centred around reducing reliance on coal and boosting the usage of 'alternative', cleaner fuels - and provincial-level coal consumption and production policies will remain a dominant theme in China's coal sector. The Chinese government remains committed to curbing coal use, highlighted in China's recently released 13th 'Five-Year Plan', in which environmental stewardship and the implementation of environmental policies was a central theme. Furthermore, the government has pledged to eliminate as much as 500mn metric tonnes of annual coal output in the coming three to five years.

However, coal capacity continues to be brought online and government-mandated cuts to coal production in certain provinces are not being met - including the largest coal producing regions of Inner Mongolia and Xinjiang (see chart above). Overall, it was announced by the National Development and Reform Commission (NDRC) that the coal sector only accomplished 38% of the 2016 objective of cutting 250mn tonnes over the first seven months of the year. As a consequence, the central government has started to urge provincial governments to pick up the pace of reform.