Cover Story | New Rules for Coal-fired Power Plants' Survival

The role of coal-fired power plants is undergoing a massive transformation. The transformation of coal-fired power plants is not only a technological upgrade but also an institutional innovation from "electricity profit" to "value realization." How will the survival rules of coal-fired power plants change?

 

As the world's largest coal producer and consumer, China's energy endowment of "rich coal, poor oil, and little gas" has determined the long-term strategic position of coal-fired power plants as the main power source of the power system—from ensuring a stable supply of electricity for people's livelihood to supporting the continuous operation of the industrial economy, coal-fired power plants, with their stable output and controllable regulation characteristics, have safeguarded the country's energy security during many extreme weather events and sharp fluctuations in international energy prices.

 

However, with the acceleration of global warming and energy transformation, the installed capacity of new energy in China has seen explosive growth. By the end of 2024, China's new energy installed capacity had reached 1.41 billion kilowatts, historically surpassing the installed capacity of coal-fired power plants, and the power system is accelerating its evolution from "mainly fossil energy" to "non-fossil energy dominance."

 

Even in 2024, a year of rapid new energy development, coal-fired power plants still contributed nearly 60% of the country's power generation, 70% of peak capacity, and nearly 80% of regulation capacity. During peak electricity consumption in winter and summer and when new energy output drops sharply, coal-fired power plants have become the "last line of defense" in ensuring the stability of China's power system.

 

When wind and photovoltaic power fluctuate due to weather changes, coal-fired power plants need to have the ability to quickly start and stop and perform deep peak regulation to smooth out grid fluctuations; when extreme weather causes a sharp drop in new energy generation, coal-fired power plants need to immediately step in to avoid power shortages. This transformation from "base load mainstay" to "flexible support" is both a necessary requirement for the high proportion of new energy penetration in China and the core path for the sustainable development of China's coal-fired power plants under the "dual carbon" goals.

 

With the deepening of power system transformation and the construction of a new power system, the operation and management of thermal power plants in China no longer rely entirely on operating hours but need to undertake more grid regulation functions. This has led to a further decline in their operating hours and efficiency.

 

Recently, the National Development and Reform Commission and the National Energy Administration issued the "Implementation Plan for the Special Action on Upgrading the New Generation of Coal-fired Power Plants (2025-2027)" (hereinafter referred to as the "Implementation Plan"), which quickly sparked widespread industry attention to the new generation of coal-fired power plants.

 

The positioning and responsibilities of coal-fired power plants as "basic," "regulating," and "bottom-line" are basically clarified in the new "Implementation Plan." Behind this plan, there is both the rigid demand for ensuring national energy security and the dual driving force of technological upgrades and policy support, reflecting the survival and development rules of thermal power plants in the wave of energy transformation.

 

Under the long-term constraints of China's "dual carbon" goals, coal-fired power plants, as fossil energy, may eventually gradually withdraw from the historical stage or be relegated to the margins. Their specific positioning and role in the future energy system still need further exploration. How coal-fired power plants balance their responsibility for ensuring supply with their carbon reduction mission has become the ultimate question that urgently needs to be answered both inside and outside the industry in China today.

 

Role Transformation

 

The change in the role of coal-fired power plants in China can be traced back to the end of the "13th Five-Year Plan." At that time, China's power supply pattern changed significantly, shifting from an overall balanced, locally tight supply and demand structure to a relatively relaxed and locally surplus structure.

 

However, after large-scale power shortages occurred in the summer and autumn of 2021, during peak electricity consumption in winter and summer, some regions faced insufficient power supply and had to adopt demand-side response and orderly power use measures to ensure power supply. This change directly prompted China to re-examine the positioning of coal-fired power plants.

 

On October 24, 2021, the State Council issued the "Action Plan for Carbon Peak Before 2030," clarifying the positioning of coal-fired power plants as "promoting the transformation to a dual focus on basic security and system regulation." The importance of coal-fired power plants was re-recognized, and China launched a new round of investment boom.

 

During the same period, China's coal-fired power plants faced multiple difficulties in their operations. The soaring upstream coal prices, declining coal quality, low long-term contract coal coverage and fulfillment rates, limited electricity price transmission, coupled with the international energy crisis triggered by the Russia-Ukraine conflict, import coal restrictions, and price inversions, led to coal-fired power plants operating at a loss, severely lacking investment and financing capabilities, and falling into a predicament of "difficulty in survival, transformation, development, and transition."

 

To ensure power security, the state clearly proposed the "three 80 million" target in August 2022, requiring 80 million kilowatts of coal-fired power plants to be started in 2022 and 2023, and 80 million kilowatts to be put into operation in two years, and increasing the "14th Five-Year Plan" development target from 1.25 billion kilowatts to 1.36 billion kilowatts.

 

With the emergence of power rationing in many parts of China, the limitations of new energy's "reliance on the weather" have been exposed. The role of coal-fired power plants in ensuring supply and flexible regulation has become increasingly prominent, and coupled with the optimization and adjustment of national coal and coal-fired power policies and the fluctuating downward trend of coal prices, the operational difficulties of China's coal-fired power plants began to turn around in 2023.

 

Taking Huaneng International as an example, after consecutive huge losses in 2021 and 2022, its profits increased significantly in 2023, and its net profit in 2024 reached 10.135 billion yuan, a new high in eight years. This is mainly due to the increase in thermal power profits driven by lower domestic fuel costs and the incremental profits brought about by the orderly expansion of new energy scale.

 

By the end of 2024, the installed capacity share of new energy power generation in China had jumped from 24% at the end of the "13th Five-Year Plan" to 42% in just four years, while the share of coal-fired power plants had dropped from 49% to 36%. The decline in the proportion of coal-fired power generation but good profitability is undoubtedly a positive signal for China's power industry, which faces both "carbon neutrality" and "supply security" pressures.

 

Xu Zhengjun, head of the New Generation Coal-fired Power Technology Research Center at China Datang Group Corporation Science and Technology Research Institute Co., Ltd., believes that coal-fired power plants are gradually withdrawing from the role of basic load power sources. Their annual operating hours are expected to gradually decrease from the traditional 4500 hours or more to 3500-4000 hours, possibly lower in some regions, and the original base load function will be jointly undertaken by nuclear power, hydropower, and large-scale new energy bases.

 

In the view of Hu Wenping, director of the Power Generation Consulting Institute of the Power Planning and Design General Institute, the profound changes in China's power structure have brought unprecedented challenges to power supply and system operation. On the one hand, the installed capacity of new energy has grown by leaps and bounds, but it has not yet formed a supporting capacity for the power system to match it, and the construction of regulating resources lags behind the rapid development of new energy; on the other hand, the dual stochastic fluctuation coupling characteristics of load demand and new energy generation have placed more stringent requirements on the system's regulation capacity, response speed, and regulation accuracy.
 

Technological Upgrades

 

With the changes in the role of coal-fired power plants, the operational requirements of coal-fired power units in China have also changed accordingly.

 

On August 21, 2024, the Office of the National Development and Reform Commission and the Comprehensive Department of the National Energy Administration jointly issued the "Implementation Plan for Large-Scale Equipment Upgrades in Key Energy Fields." The Plan emphasizes the continued promotion of energy-saving, heating, and flexibility upgrades, known as the "three-pronged approach," to further reduce the energy consumption of coal-fired power units and enhance their flexible adjustment capabilities.

According to the "Notice on the Nationwide Coal-fired Power Unit Transformation and Upgrade" previously issued by the National Development and Reform Commission and the National Energy Administration, during the "14th Five-Year Plan" period, the scale of energy-saving and carbon reduction transformation of coal-fired power units in China will be no less than 350 million kilowatts, the scale of heating transformation will strive to reach 50 million kilowatts, and the target for flexibility transformation will be 200 million kilowatts.

 

Currently, more than 1 billion kilowatts of coal-fired power units in China have undergone ultra-low emission transformation, accounting for over 90% of the country's total coal-fired power capacity. Atmospheric pollutant emissions have decreased by over 90%. Based on this, China has a clearer direction for the upgrading of its new generation of coal-fired power plants.

 

In the newly released "Implementation Plan," a comprehensive and systematic new technical indicator system for the new generation of coal-fired power plants has been established. The new system covers four aspects—clean carbon reduction, safety and reliability, efficient regulation, and intelligent operation—with 12 specific technical indicator requirements. The "Implementation Plan" clearly states that safety and reliability are the basic prerequisites for the upgrading of the new generation of coal-fired power plants, and efficient regulation is the core goal.

 

Relevant officials from the National Energy Administration stated: "The efficient regulation of the new generation of coal-fired power plants is not only about the traditional energy efficiency level and deep peak-shaving capacity of the units, but also extends to six indicators: power generation coal consumption, low-load coal consumption increase, minimum output for deep peak-shaving, load change rate, primary frequency regulation, and start-stop peak-shaving.

 

Except for the minimum output for deep peak-shaving and power generation coal consumption, the other four indicators are being clearly defined in industrial policies for the first time.

 

In other words, the previous emphasis on energy efficiency improvement and coal consumption reduction in coal-fired power unit upgrades is no longer the core goal. "After several rounds of energy-saving transformations, the potential for energy efficiency improvement and coal consumption reduction in China's coal-fired power generation has gradually been compressed. As coal-fired power units increasingly frequently perform deep peak-shaving, leading to increased coal consumption, the coal consumption reduction effect of energy efficiency improvement is difficult to show or is even completely offset. This is one of the main reasons why the overall coal consumption of thermal power in the country has increased instead of decreased in the past two years. Under the current and foreseeable frequent deep peak-shaving operation environment, the focus of energy efficiency improvement is no longer, as before, to pursue the lowest coal consumption under rated load, but should be to pursue better coal consumption under low load." Hu Wenping explained.

 

In the view of Wu Xiaolin, director of the New Generation Coal-fired Power Center at the Scientific Research Institute of China Datang Corporation, in terms of system functions, coal-fired power plants are focusing on developing two core capabilities. One is flexible regulation capability. As an important stabilizer for high-proportion renewable energy power systems, coal-fired power plants can effectively smooth out the output fluctuations of volatile power sources such as wind power and photovoltaics through rapid frequency regulation (response time ≤2 minutes) and deep peak-shaving (minimum load rate can reach 20%～30%). The other is capacity reserve capability. Against the backdrop of frequent extreme climate events, coal-fired power plants, as reliable backup power sources, provide critical safety margins for the power system, ensuring power supply reliability and system resilience.

 

Clean carbon reduction is an important direction for the upgrading of the new generation of coal-fired power plants. The "Implementation Plan" does not mandatorily require all units to implement low-carbon transformation and construction. Pilot demonstrations have clearly defined quantitative indicators for electricity carbon emission intensity, actively promoting the implementation of low-carbon transformation of existing units, and new units should focus on studying the reservation of conditions for low-carbon transformation and encourage the simultaneous implementation of low-carbon construction where conditions permit.

 

Intelligent operation is an important support for the upgrading of the new generation of coal-fired power plants. The "Implementation Plan" proposes that the new generation of coal-fired power plants should focus on three evaluation indicators: intelligent control, intelligent maintenance, and intelligent decision-making.

 

Ye Yongjian, member of the Party Committee, vice general manager, and chief engineer of China Energy Engineering Corporation East China Institute, participated in the drafting of the "Implementation Plan." He believes that the new plan, after more than a year of repeated solicitations of opinions and incorporating suggestions from various experts, balancing the demands of all parties, is the result of multiple parties' game. At the same time, the set indicator parameters are scientific and reasonable for power generation enterprises. "It is relatively easy for new units to meet the standards of the new generation of coal-fired power plants, while the transformation of existing units faces more challenges." Ye Yongjian said.

 

The current transformation of coal-fired power plants is not easy, with technological bottlenecks and cost pressures being two major core challenges. Guo Dong, director of the Boiler and Environmental Protection Center of Huaneng Group Electric Power Research Institute, pointed out that when coal-fired units perform deep peak-shaving, the steam-water system is prone to uneven temperature distribution, and rapid load changes can cause temperature fluctuations, potentially putting excessive stress on equipment or even causing cracks. Taking the load change rate as an example, the "large lag" problem of traditional pulverized coal systems severely restricts the fuel response speed. Even with the optimization of "small powder silo" technology, the average load change rate under all operating conditions can only reach 2.6%/min, while the policy-required target of 4%/min requires energy storage support to be achieved. This means that each million-kilowatt unit needs an additional energy storage cost of tens of millions of yuan.

 

The technical path for low-carbon transformation also faces challenges. Biomass co-firing has no technical problems, but due to the limitations of the raw material supply radius, co-firing ratios exceeding 20% will significantly increase fuel transportation costs; green ammonia co-firing needs to solve the balance between the storage safety and combustion efficiency of ammonia fuel, and the co-firing ratio of current pilot units is mostly below 5%.

 

In terms of transformation investment, the unit investment for energy-saving and carbon reduction transformation is about 300-500 yuan/kilowatt, and the transformation of a 600,000-kilowatt unit requires 180 million to 300 million yuan; the unit investment for flexibility transformation (including control system upgrades, valve transformation, etc.) is about 200-400 yuan/kilowatt, and a 600,000-kilowatt unit requires 120 million to 240 million yuan.

 

 

Huatai Securities estimates that the total investment to achieve the "three-pronged approach" target nationwide will exceed 200 billion yuan, and the average annual transformation investment needs to be maintained at over 50 billion yuan. Coal-fired power flexibility transformation is one of the lowest-cost types of existing flexibility resources in China's power system (0.12 yuan/kilowatt-hour).

 

However, the significance of the upgrading of the new generation of coal-fired power units to the construction of a new power system cannot be ignored.

 

"The special action requires the minimum load rate of coal-fired power plants to be reduced to 20%～25% (currently the industry average is 35%), which is equivalent to increasing the peak-shaving capacity by 120 million kilowatts and can accommodate an additional 350 million kilowatts of fluctuating renewable energy. Through primary frequency regulation and efficient regulation transformation (such as load change rate ≥1%～2%/min), the risk of grid frequency instability caused by a high proportion of renewable energy can be addressed." Xu Zhengjun explained.

 

Despite the numerous challenges, a number of benchmark technical transformation projects have emerged in the industry. At the beginning of this year, the national key research and development plan "Key Technologies for Wide-Load and Rapid Flexible Peak-Shaving of Supercritical and Ultra-supercritical Units," led by Huaneng Electric Power Research Institute, was successfully demonstrated and applied to a 350MW supercritical coal-fired unit at Huaneng Wucaiwan Power Generation Company. This project broke through the upper limit of 2% load increase and decrease rate, reaching a maximum of 3.5%.

 

尽管挑战重重，行业内已涌现出一批技术改造标杆项目。今年初，由华电电科院牵头的国家重点研发计划“超（超）临界机组宽负荷快速灵活调峰关键技术”在华电五彩湾发电公司350MW超临界燃煤机组成功示范应用。该项目突破了2%的升降负荷速率上限，最高达3.5%。

 

The Datang Yuncheng National Power Demonstration Project utilizes two 1000MW ultra-supercritical once-through coal-fired generating units, representing China's "highest pressure, highest temperature, highest efficiency, and lowest coal consumption" single-shaft million-kilowatt thermal power unit. This project innovatively developed key core technologies such as flexible and efficient power-balancing dual-unit (main steam turbine and feedwater pump turbine) reheating technology and multi-medium coupled waste heat recovery, enabling the unit's thermal efficiency to surpass 50%.

 

Power generation enterprises such as China Huaneng, China Datang, State Power Investment Group, and China Power Investment Corporation have already made layouts in aspects such as rapid load changes of coal-fired power plants, efficient regulation under wide load ranges, clean decarbonization, intelligent operation, and life extension and upgrading, based on the current situation and trends in the development of new-generation coal-fired power technologies.

 

Future Direction

 

China's coal-fired power transformation path has entered a new stage of "new-generation coal-fired power," evolving from initial pollution control (desulfurization and denitrification transformation) to flexibility improvement and then to low-carbon transformation.

 

In June 2025, the National Energy Administration issued the "Notice on Organizing and Carrying Out the First Batch of Pilot Projects for the Construction of a New Power System." Focusing on the frontier directions of new power systems, it conducts single-direction pilot projects based on typical projects and multi-directional integrated pilot projects based on typical cities to explore new technologies and models for the construction of new power systems and promote breakthroughs in the construction of new power systems. Among them, new-generation coal-fired power is one of the directions.

 

Against the backdrop of the rapid increase in the proportion of new energy installations, when there are periods of insufficient power generation and difficulties in absorption, the flexibility transformation of coal-fired power units can better demonstrate their value.

 

In the future, coal-fired power will further transform towards "clean, flexible, and intelligent," integrating with new energy, energy storage, and hydrogen energy to become an important transitional support under the "dual carbon" goals while ensuring energy security.

 

"Coal-fired power is an important emergency reserve power source for ensuring energy security and power security. Its function is irreplaceable given the increasing uncertainty of factors such as extreme weather and sudden public events (such as war and fuel supply shocks)." Ye Yongjian emphasized.

 

Taking the East China region as an example, affected by factors such as the national dual control policy on carbon emissions and the increase in external electricity from the construction of ultra-high voltage transmission lines for West-to-East power transmission, the local demand for thermal power has decreased, and the operating hours of thermal power units will decrease, potentially leading to a decline in investment returns. The increase in new energy penetration will increase the demand for ancillary services, and the regulating performance of thermal power (such as peak regulation and frequency regulation) will become a scarce resource. Although the proportion of thermal power installed capacity is currently declining, the value of its regulating capacity is expected to be reflected through market mechanisms in the future, bringing additional returns to thermal power units.

 

In addition to policy regulations, market driving forces are particularly important.

 

According to Document No. 1501 of the National Development and Reform Commission in 2023, the current capacity charge standard is uniformly set at 330 yuan per kilowatt per year nationwide. In 2024-2025, most regions will recover 30% of the fixed costs, and some regions with faster transformation (such as provinces with a high proportion of new energy) will recover 50%. From 2026 onwards, the national recovery rate will be no less than 50%.

 

In the spot market, thermal power can utilize its regulating capacity to generate more electricity during periods of higher electricity prices and less electricity during periods of lower electricity prices, thereby increasing the average on-grid electricity price. With the implementation of spot markets across the country and the widening of peak-valley price differences after the entry of new energy, the demand for thermal power regulation capacity will increase accordingly. In the carbon trading market, coal-fired units with lower coal consumption can profit by selling surplus carbon allowances. Although carbon prices are currently low, in the long run, with the expansion of the carbon market and the tightening of carbon allowances, there is still considerable room for carbon market prices to rise.

 

It is worth noting that, in terms of heating economics, the high-output characteristics of new energy during peak output periods will put significant pressure on electricity prices in the spot electricity market. Against this backdrop, the rigid operating mode of combined heat and power units, which is "electricity determined by heat," faces severe challenges—the power generation constrained by heating demand will passively participate in market clearing, potentially settling at a marginal electricity price lower than the variable cost, resulting in an operating predicament of "losing money for every kilowatt-hour generated." This exposes the limitations of China's current single-electricity-volume bidding mechanism in the electricity market. It is urgently necessary to build a market-based compensation system covering multiple dimensions such as electricity energy, capacity, and regulation through institutional designs such as capacity cost recovery mechanisms and the explicit valuation of ancillary services, to ensure the sustainable development capacity of thermal power enterprises in the new power system ecosystem.