China has laid out specific rules to establish an elementary coal capacity reserve system by 2027 that will allow government to deploy certain amounts of coal capacity when necessary, according to guidelines that the National Development and Reform Commission (NDRC) and National Energy Administration (NEA) jointly published on 12 April.
The coal reserve system is expected to enhance the country’s ability of coping with coal shortages in extreme situations, like volatilities in global energy market, adverse weather conditions and drastic changes in supply and demand, according to the guidelines.
A draft plan for the rules was issued by NDRC last December to solicit public comments, and the call for achieving a reserve capacity of 300 million tonnes (mnt)/year by 2030 – equivalent to about 6% of China’s total raw coal output last year – is retained in the final guidelines. These guidelines will be effective for five years.
The reserve system mainly applies to thermal coal used in power and heat generation, and qualified mines nationwide could apply for 20%, 25% or 30% of their total designated capacity as reserve capacity. Large mines with advanced facilities or good safety conditions in China’s top coal-producing regions, namely North China’s Shanxi and Inner Mongolia, Northeast China’s Shaanxi and Xinjiang, will be prioritised for inclusion into the coal reserve plan, the guidelines noted.
In view of tight coal supplies or unreasonable coal prices, NDRC and NEA will have the authority to commission the reserve capacity and deploy the coal cargoes produced, according to the guidelines. This means coal produced under the reserve system will no longer be subject to the medium- and long-term contracts that mines sign with buyers under local government’s requirements.
In addition, mines involved in the coal reserve system will be granted some privileges as incentives, the guidelines pointed out. First, they will enjoy certain extent of exemption from capacity replacement based on the reserve capacity they apply for. Second, they are allowed an extra expansion in capacity at most 30% of their current designated capacity. Third, the reserve capacity of these mines will be excluded from the quota of new capacity in the region they are located.
With the new coal capacity reserve system gradually in place in the coming years, China will be able to deploy its domestic coal supplies more flexibly amid the increasing changes in both climate and global energy market in recent years, a step forward to ensure its national energy safety.
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