Solar as cheap as coal in China

China coal pollution

I've already commented on the broader BNEF report here, but I want to emphasise this particular nugget from the report:

In China, the largest PV market, our solar benchmark is at $38/MWh, down 9% from the second half of 2019, following a rapid uptake in better performing monocrystalline modules. New-build solar in the country is now almost on par with the running cost of coal-fired power plants, at an average of $35/MWh. This is significant as China advances on its deregulation agenda, opening up competition in the power sector.

This is not the cost of new-build coal.  It's the running/marginal cost of existing coal.  And I remind you, the marginal/running cost of solar is zero.  Once you have built your solar (or wind) farm you may as well use it to the max, because any revenue is better than none.

Capacity utilisation in coal is already low in China because of overbuilding of coal power stations.  It will be very tempting to use solar during the day and coal at night, which will reduce capacity factors even further, making coal power stations even less profitable.  Any coal plants being built now—and there are still some, though the volume has fallen—will be stranded assets.  As the cost of new-build solar declines, coal will get further and further behind.  Even troglodytic, sclerotic state-owned utilities will respond—by stopping building new coal, and by shuttering the less efficient and dirtier old coal power stations.  It's hard to see that more than a few coal power stations will still be operating by 2035.  Their financials will just be too poor.

China and coal are critical to cutting emissions.  And the continuing cost declines in renewables will make it very attractive to China to switch away from coal.  If you add China's push to EVs, it seems very likely that China's emissions will start to fall within the next couple of years.  I'm not sure whether they peaked in 2019, but it's possible they did.  Even if China's emissions are higher in 2021 than 2019, that will likely be the peak, and emissions will fall sharply thereafter.  China's trend growth is slowing, it has a serious pollution problem, and the economics of renewables and EVs/PHEVs just keep on getting better.