Despite China’s aggressive push towards renewable energy, coal power is still expanding to ensure a stable energy supply, operational flexibility, and heat production. A government action plan released on July 7th indicates that decarbonization upgrades to China’s coal power plants will accelerate shortly. The plan emphasizes that “coal power still has a role to play in ensuring electricity supplies for a certain period.”
China has been leading the world in renewable energy expansion for years, accounting for around 63% of the global increase in wind and solar capacity in 2023, and 40% of cumulative installed capacity. The International Energy Agency (IEA) projects that by 2030, China’s installed renewable capacity will reach nearly 3,200 gigawatts (GW), 2.5 times higher than in 2022. However, this rapid growth in renewables has not stopped the expansion of coal power. A report by Global Energy Monitor revealed that since 2022, China has approved 200 GW of new coal power. In 2023, China’s coal consumption grew at a rate that surpassed the global average, drawing significant international concern.
Three key challenges underpin this reliance on coal. First, other energy sources are not yet sufficient to meet the growing power demand. Second, there is a lack of clean energy sources that can provide the necessary operational flexibility. Third, technology for generating heat from clean energy sources is not developing quickly enough.
This article will delve into these issues and explore potential solutions, with a focus on Shandong province. Shandong, located in northeastern China, has the country’s largest installed solar capacity, second-largest coal power capacity, and highest electricity demand. Additionally, it has the greatest need for heat in both its residential and industrial sectors, which is currently met primarily by coal-fired combined heat and power plants.
Meeting China’s Soaring Electricity Demand
In 2023, China consumed a staggering 9,220 terawatt hours (TWh) of electricity—6.7% more than in 2022. This figure is nearly double that of the United States (4,267 TWh) and 3.5 times greater than the European Union (2,696 TWh), according to data from European think-tank Ember. Shandong province alone used 797 TWh, which is 1.5 times Germany’s entire electricity consumption (514 TWh).
While electricity usage in the U.S. and developed EU nations has remained steady or even declined, China’s demand continues to surge, growing at an average annual rate of 5.7% between 2013 and 2023. In comparison, the U.S. saw a modest 0.4% annual increase, while the EU as a whole experienced a 0.7% decrease, and Germany saw a 1.5% drop.
In the first half of 2023, China’s electricity consumption grew by 8.1% year-on-year, with a projected 6.5% increase for the full year, according to the China Electricity Council. This expected rise in demand surpasses Germany’s total current electricity usage.
Despite substantial investments in renewable, nuclear, and gas power, these sources have not been able to keep pace with China’s soaring demand. In 2023, China added 314 GW of new, non-coal capacity—accounting for over 85% of all new installations—yet it still wasn’t enough. Wind and solar power contributed nearly 300 GW, but the country also had to add 40 GW of coal power to help meet the growing demand, resulting in a 290 TWh increase in coal-generated electricity, which accounted for half of the overall demand growth.
Tackling Peak Demand: The Challenge of Flexibility
By mid-2023, wind and solar power made up about 40% of China’s installed generating capacity and around 20% of its electricity output. These figures have more than doubled over the past five years. However, the intermittent nature of renewable energy requires additional grid flexibility to manage fluctuations caused by varying weather conditions. In Shandong, the rapid expansion of solar energy has transformed the grid from a stable, centralized system to one that is distributed and more volatile, demanding more active management.
Unlike the U.S. and EU, China has relatively few gas-fired power plants, which can quickly adjust output to meet peak demand while emitting less CO2 than coal plants. In 2023, gas power accounted for just 5% of China’s installed capacity, compared to 42% in the U.S., 36% in the UK, and 14% in Germany.
Germany, for example, has 82 GW of solar power backed by 34 GW of gas capacity. In contrast, Shandong has 60 GW of solar but only 0.6 GW of gas capacity, leaving the province heavily reliant on its 100 GW of coal power to provide the necessary flexibility. These coal plants are frequently cycled on and off, sometimes dozens of times a month, to meet fluctuating demand.
China is accelerating the deployment of batteries and pumped-storage hydropower to enhance grid flexibility, but these technologies currently face limitations. Batteries have restricted storage capacities, and pumped-storage hydropower involves long construction timelines. As a result, coal will continue to play a critical role in providing flexibility for the foreseeable future.
Recognizing this, China’s National Development and Reform Commission released guidelines in January 2023 to improve peak regulation and storage capacity, as well as smarter dispatch mechanisms. A key focus is upgrading the flexibility of coal power plants, with all modifications to the existing fleet slated for completion by 2027.
The Road Ahead
China’s energy landscape is a complex balancing act between rapid renewable expansion and the continued necessity of coal. While the country leads the world in renewable energy growth, it faces significant challenges in meeting its ever-increasing power demand, maintaining grid stability, and transitioning away from coal for heating and flexibility.
As China navigates these challenges, its energy policies and technological advancements will be closely watched by the international community. The decisions made today will shape China’s energy future and its role in the global effort to combat climate change.