[Episode #271] – China Update 2026

China’s coal landscape shifted dramatically in 2025, with 78 GW of new capacity coming online – the largest annual addition in a decade. This surge reflects projects permitted during earlier power shortages, now reaching commissioning. Unlike in the United States, Chinese coal plants operate at roughly 51 % utilization, serving primarily as flexible capacity rather than baseload generation. The massive pipeline of another 291 GW under construction or proposed underscores a strategic focus on ensuring grid reliability amid an inflexible transmission system.

At the same time, clean‑energy deployment accelerated, allowing wind, solar, nuclear and hydro to meet all net demand growth. Coal‑generated electricity fell about 1 % in 2025, even as overall power consumption rose 5 %. Capacity‑payment mechanisms guarantee revenue for idle coal units, shifting costs to provincial ratepayers and creating a financial incentive to continue building plants that may never run fully. This paradox explains why China’s total CO₂ emissions have plateaued despite expanding coal capacity, as the added plants are largely underutilized and offset by rapid renewable expansion.

The policy implications are profound. China’s 2030 nationally determined contribution leaves little room for additional coal generation, meaning new plants risk becoming stranded assets as the grid modernises and storage scales up. Grid reforms and a shift toward market‑based dispatch are expected to curtail further capacity approvals, while retirement of older, less efficient units should accelerate. Stakeholders must watch how capacity payments evolve and whether provincial authorities will tighten permitting to align infrastructure with China’s long‑term decarbonisation goals.