July 16, 2024 - China plans to test run decarbonization technologies at coal-fired power plants, including co-firing with ammonia and biomass, and carbon capture and storage, to reduce their carbon intensity, the top economic planner National Development and Reform Commission or NDRC said in a statement July 15, the first day of China's 20th Third Plenum.

The Third Plenum is one of China's most important political gatherings focused on economic reforms and is being closely watched by financial markets this year for major announcements on policy, including the role of clean technology the country's economic plan. The Plenum is held in Beijing over July 15-18.

The NDRC has asked provincial governments as well as state-owned enterprises to voluntarily nominate coal projects that can be pilots for this program, which is the first-time these technologies are being deployed in a centralized national scheme targeting coal-fired power plants.

So far, biomass and CCS technologies have been tested by companies and provinces individually, and there have been few major policies around mixing coal with green ammonia for power generation, according to industry experts.

Other countries, such as Japan, which have actively promoted blending of hydrogen-derivatives like ammonia with coal have faced backlash from activists who have called the methods ways to extend the life of coal-fired power plants.

China is the world's biggest greenhouse gas emitter, and over 40%, or 5.1 billion mtCO2e, of its emissions come from thermal power plants, according to official data, making it vital for the country to explore a variety of decarbonization methodologies.

Cutting Emissions

The test runs will help cut carbon intensities of coal plants by around 20% by 2025 and 50% by 2027 from the average industry levels in 2023, the NDRC said. It said cutting the carbon intensity of a coal plant by 50% bring it close to gas-fired power plants by 2027.

The frontier technologies recommended by NDRC include: (1) mixing coal with biomass; (2) mixing coal with green ammonia, which is derived from renewables-based hydrogen; and (3) deploying CCS technologies at coal-fired plants.

For fuel blending, biomass and green ammonia should account for over 10% of the fuel mix, and the projects should take advantage of renewable energy mega-projects being constructed in China's remote desert areas for green ammonia production, NDRC said.

These projects have been facing relatively low utilization rates due to the lack of long-distance power transmission networks, and green ammonia production can help create localized demand for the surplus renewable energy.

The NDRC also called for financial institutions to support these pilot projects.

Third Plenum

This year, the central government was expected to address the implementation of "New Productive Forces" -- a catchphrase proposed by President Xi Jinping which calls for using new technologies and innovation to upgrade conventional industries and drive the economy.

A key agenda expected by various policy analysts is how to accelerate the deployment of decarbonization technologies in emission-intensive sectors, amid concerns over whether China can still meet its 14th Five-Year Plan target of cutting the country's carbon intensity, measured by carbon emissions per unit of GDP, by 18% by 2025 from the 2020 level.

The country has faced critical challenges to meet this target due to the surge in energy consumption during the pandemic control period and the severe shortage of hydropower due to droughts in recent two years, analysts pointed out.

Furthermore, coal-fired power plants have been covered by the country's compliance emission trading scheme or ETS, which set annual targets for its participants to cut carbon intensities.

"This announcement may be a call-out by NDRC that challenges whether the environment ministry, who oversees the carbon markets, is being too 'nice' when setting annual ETS targets and being too slow to finance these frontier decarbonization technologies through carbon markets," a China-based power analyst told S&P Global Commodity Insights.