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Gas demand from Chinese generators

could decline 17% by 2025

PERFORMANCE CHINA’S gas-fired generating sector is strug- Gas is losing out because much gas power
gling to stay afloat as the twin pressures of lower technology used in China still relies heavily on
tariffs and the ongoing trade war could push imported technology from global players includ-
demand for feedstock down by 17% by 2025. ing Mitsubishi, Siemens and General Electric.
Beijing has been reducing regulated gas-fired Furthermore, China’s LNG imports also
power tariffs by 16% to 28% in key provincial surged by 12% in 2019.
markets since June 2020, Wood Mackenzie said By 2025, around 8bn cubic metres per year,
this week, driven by the political goals of reduc- or 17%, of gas demand for power generation in
ing end-user power prices and improving man- four coastal markets could be at risk due to fewer
ufacturing competitiveness. The falling tariffs new builds and lower utilisation hours as a result
come in the wake of trade tensions with the US. of poor economics. Furthermore,
Wood Mackenzie said that power tariffs for Wood Mackenzie estimates around 7 GW out
industries in China had now fallen by 25% in the of 17 GW of gas-fired power projects scheduled China’s LNG
last three years. for commissioning between 2022 and 2025 to be
Gas-fired power tariffs at some higher-uti- at risk as a result of delays or cancellations. These imports also
lised gas plants have even been lowered to a level projects are located in the coastal provinces of
similar to the much cheaper coal-fired power. Zhejiang, Jiangsu, Shanghai and Guangdong. surged by 12% in
This coal parity initiative has a huge impact However, Yu said all is not doom and gloom. 2019.
on the economics of the current gas fleet and China has recovered rapidly from the coronavi-
investment decisions for new units. rus (COVID-19) pandemic, posting an average
“The new regulations will cause at least a 5 to of over 4% power demand growth since May.
6 percentage point decline in the already poor He said: “We expect China to contribute close
margins of gas power plants. Delivered fuel costs to half of global power demand growth in the
at most gas power plants have only declined by next decade, which means the country will need
10% to 13%, while revenues have been cut by to develop all power supply options including
16% to 28% due to the new regulations. Most gas. If power markets become tighter in coastal
projects are now loss-making or barely breaking China, local governments may have to reverse
even,” said Wood Mackenzie principal consult- these policies.
ant Frank Yu. “However, the recent move makes gas-
Despite strong demand growth for sources of fired power less attractive compared to coal
electricity that are cleaner than coal, Beijing has and renewable power, which are supported
chosen to limit gas power development as part of by domestic equipment companies and fuel
its policy of energy security. supply.”™

Week 37 18•September•2020 www. NEWSBASE .com P15