Natural gas in China’s power sector: Outlook for the 14th Five Year Plan

China has pledged to peak carbon emissions by 2030 under the Paris Agreement. Decarbonization of its coal-dominant power sector will be key to fulfilling this goal as natural gas emits around 50% less greenhouse gas emissions than coal when used in electricity generation. With the rapid deployment of variable renewables, gas-fired power plants could also enhance the flexibility of the power system and renewables integration. However, the developments of natural gas in China’s power sector have been slow, with total installed capacity only at 94GW in July 2020. This falls short of the target of 110GW by 2020 set out in the 13th Five Year plan (2015-2020). Gas-fired generation only accounts 3.2% of China’s total power production in 2019, significantly below coal’s 62%.

This paper discusses the latest developments in China’s gas-fired power generation, as well as the outlook for gas in power in the 14th Five Year Plan and beyond. The high price of imported gas, alongside concerns about import dependency; expensive technology costs and the lack of a competitive power pricing mechanism in China are set to limit the role of natural gas in China’s power sector. Still, the need for enhanced flexibility in China’s power system could encourage some coal-to-gas switching, although the progress will vary across provinces, with more gas-fired power plants likely being built in the Eastern provinces.

By: Yan Qin

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China , China Energy Programme , Gas

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