Intertemporal optimization of the coal production capacity in China in terms of uncertain demand, economy, environment, and energy security

Qing Yang, Lei Zhang, Shaohui Zou and Jinsuo Zhang

Energy Policy, 2020, vol. 139, issue C

Abstract: As coal is the main energy source in China, coal overcapacity and undercapacity have negative impacts on the economy, environment, and energy security. To reveal the optimal production capacity (OPC), an intertemporal optimization model under uncertainty is established by a combined Dynamic Programming - Influence Factor - Scenario Analysis - Monte Carlo method (DP–IF–SA-MC). The OPCs in 1990–2025 are solved to minimize the expected cost to the economy and environment driven by the production capacity (PC) under energy security. In addition, we define, and calculate the PC deviation (PCD), or the deviation of the actual PC (APC) from the OPC. The results show that compared with the APC, the OPC has advantages of more stable development, more timely adjustment, and lower cost, and it provides cost savings of 302.857 billion yuan in 1990–2017. According to PCD, China's coal industry existed under the risk of overcapacity in 1990–1999 and 2009–2017 and undercapacity in 2000–2008, and it can experience overcapacity for most of the time without capacity reduction policies. In future, the optimal management of the PC should be based on the OPC and PCD over the next 5–10 years rather than the current capacity utilization rate, and focus on overcapacity management in the long run.

Keywords: Coal; Production capacity; Intertemporal optimization; Demand uncertainty; Deviation degree (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:139:y:2020:i:c:s0301421520301178

DOI: 10.1016/j.enpol.2020.111360

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