Stranded Assets and Thermal Coal in China

2017-02

As a comprehensive analysis of environmental-and climate policy-related risks that subject Chinese coal-fired power assets to stranding, this research focuses on a wide range of risk metrics on local levels, including carbon intensity; plant age, air pollution regulations, water risks, quality of coal, CCS retrofitability, and future heat stress; and on the national level, future electricity demand, competition from renewable energy and natural gas, and investor sentiment, etc. The research indicates that Chinese coal-fired power assets are fairly exposed to several of those metrics, leading to worsened financial performance and ultimately to premature devaluations, or conversions to liabilities, among others, collectively known as asset stranding. The four scenarios of this report put the total value of stranded assets between 308.6-720.1 billion RMB, or between 4.1%-9.5% of the Chinese GDP in 2015. While bringing increasing volumes of clean energies on-grid necessitates a certain degree of coal asset stranding, the stranded assets, whether coming from overcapacity or clean energy competition, have to be absorbed by taxpayers and ratepayers. 

×