An examination of China’s bulk energy transport decisions: coal lumps or electrons?

The large spatial separation of Chinese coal supply and demand regions requires intensified bulk transportation of coal to balance the coal supply and demand. Two options for Chinese bulk energy transportation are investigated. One is investment into a new dedicated heavy haul transportation railway and the other is investment into large-scale High Voltage Direct Current (HVDC) transmission lines in combination with mine-mouth coal-fired power plants in the North-Central coal-bearing provinces. This paper setup one base case scenario and two policy scenarios with different assumptions of future Chinese energy transport investment policies for coal in Xinjiang and employ the spatial equilibrium model which includes 29 regions of China is presented to analyze the influences of the different scenarios and welfare spillover. Simulation results show that: i) coal by wire will be more beneficial to the optimization of equilibrium in coal supply and demand as well as the direction and volumes of coal flows than coal by rail; ii) the equilibrium supply and demand prices of coal by wire are lower than coal by rail; iii) coal by wire will produce more total social welfare than coal by rail; iv) the coal in Xinjiang will be more attractive with the coal by wire option than the coal by rail option. Therefore, promoting domestic HVDC transmissions would be a significant option for Chinese future steam coal transportation. The conclusion has practical value for investments of domestic energy transportation infrastructure and optimization of China’s energy transport configuration.