Electric Vehicle Boom May Force China to Burn More Dirty Coal

(Bloomberg) -- Expanding coal-fired power is China’s “only real option in the short term” to meet rising electricity demand, including from new energy vehicles, according to ANZ Group.

“Power shortages are likely to reemerge as the acceleration in the energy transition continues to put pressure on electricity networks,” analysts Daniel Hynes and Soni Kumari said in a report on Thursday.

China’s power market is already showing signs of strain as extremely low water levels sap hydropower generation in southern provinces. As climate change delivers more frequent and persistent heat waves, the region’s reliance on hydro — China’s largest source of clean energy — is being called into question. The government’s response has included raising domestic production and imports of coal, it’s mainstay fuel.

At the same time, electric vehicles, ostensibly a solution to the climate crisis, are emerging as a pressure point on the grid. The world’s passenger EV fleet is set to displace as much as 600,000 barrels a day of fossil fuel demand this year, ANZ said. China, which leads global growth in EV sales, accounts for as much as 60% of that displacement, according to the bank. 

“Most of that switch would see additional demand for coal-fired power output,” ANZ said.

The Week’s Diary

Thursday, April 20

• China sets monthly loan prime rates, 09:15
• China March output data for base metals and oil products
• China’s 3rd batch of March trade data, including country breakdowns for energy and commodities
• Shanghai auto show, runs through April 27
• Fenwei hosts intl thermal coal summit in Qinhuangdao
• SMM Intl Aluminum Summit in Zhengzhou, Henan. Day 3
• EARNINGS: CATL, Shougang

Friday, April 21

• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30
• Shanghai auto show, runs through April 27
• SMM Intl Aluminum Summit in Zhengzhou, Henan. Day 4

Saturday, April 22

• Shanghai auto show, runs through April 27

Sunday April 23

• Shanghai auto show, runs through April 27
• EARNINGS: Jiangsu Shagang

On the Wire

Scorching temperatures are roasting Asia this week, stretching the region’s power grids and raising health risks as the chances of more extreme events later in the year increase.

ICBC Standard Bank offered a reality check to participants at a copper conference in Chile, saying a much-anticipated Chinese demand rebound is yet to come.

Rio Tinto Group, the world’s top iron ore producer, said shipments rose to a first-quarter record as it continued to ramp up output at a major new Australian mine. Iron ore futures fell.

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