Chinese coal giants fail to hit disclosure standards: report

One of the firms, China Shenhua Energy, did not consider climate change as a material issue.

China’s large listed power companies are struggling to take meaningful steps on the transition to cleaner energy, according to a report by Singapore-based consultancy firm Asia Research & Engagement (ARE). 

ARE analysed disclosure practices as well as sustainability moves made by Huaneng Power International, Huadian Power International, Datang Power International, China Resources Power, China Power International and China Shenhua Energy.

Compared to their global and regional peers, listed Chinese coal-fired power companies provide scant relevant information on how they are adapting their strategies in line with the energy transition, despite clear government mandates and goals on capping coal use in power in favour of renewable energy, said Ben McCarron, lead author of the report.

“On average, the companies provide answers to less than three questions of the 13 that we used to assess their strategic response to climate change. Significantly, Shenhua did not consider climate change or GHG emissions management as a material issue. The rest of the companies did, but none provided any carbon-related targets and only one company (China Resources Power) provided a near-term renewable energy generation target for 2020,” McCarron said.

In comparison, Asian peers CLP and KEPCO provided six answers. Meanwhile, Hongkong Electric and Tata Power provided four each. From the Chinese companies, only China Resources Power provided more answers.

Reducing the share of coal power was also a prevalent issue amongst the firms. The listed coal-fired companies all have higher proportions of coal than the national target (55% by 2020), which will act as a long-term constraint to growth for the companies under their current business models.

The average decline in their proportion of coal generation was 1.3 ppt between 2015 and 2018, whilst the average increase in the proportion of wind and solar generation was 2 ppt to reach an overall average of 3.7% of total generation. This is far lower than the national proportion of 7.8% in wind and solar, the report noted.

Amongst the six companies, China Power International increased wind and solar generation the fastest from 0.5% of generation in 2015 to 5.0% in 2018, at the expense of hydro. Only China Resources Power performs better than the national average, at 9.2%.

China Resources Power also had the fastest decline in coal. Shenhua is almost exclusively coal and has not added wind or solar to its generation mix. Datang and Huaneng have separate entities that focus on renewable energy, affecting their approach to potential wind and solar additions.

In terms of capacity growth, the power companies added more coal than wind and solar in 2018, even excluding the coal capacity Datang acquired from its parent company. For five of the companies, capacity commitments beyond 2018 for coal (6.4GW) are higher than for wind and solar (5.9GW).

Even with their high rates for coal generation, the efficiency of the firms’ fleets has improved, the report noted. “However, the increases in efficiency are in low single-digit percentages. The technical potential for further improvement at the individual plant level is limited. There remain management options at the portfolio level where companies could accelerate the closure of smaller, older units or rationalise dispatch towards higher-efficiency units,” McCarron said.

In more developed markets, where power growth has flattened, the energy transition requires replacing existing power plants with new renewable energy capacity. However, electricity consumption in China has continued to grow, following an 8.4% increase in 2018. Consequently, China’s energy transition will involve new builds, not just replacement capex, the report said.