More than half of the global growth in last year’s electricity demand came from China, a recent International Energy Agency (IEA) report found. This growth was driven by a combination of factors, but the largest contributor was industry. This sector accounts for about 60 per cent of China’s electricity demand.
One-third of China’s industrial demand growth has come from producing the “new three” – solar photovoltaic (PV) panels, batteries and electric vehicles (EVs). In the next three years, growing air-conditioning ownership, demand for EV charging, data centres and the rollout of 5G are also expected to push up electricity consumption, the IEA found.
All this has implications for carbon emissions. Although the share of coal power in China’s electricity generation has been declining since 2007, growth in renewable energy has not kept pace with that of electricity demand. Put simply, renewables have been adding to rather than replacing coal power capacity.
In response to this, China has recently unveiled a policy requiring some companies in energy-intensive industries to use renewable power for a portion of their consumption. Below, we examine how the new three came to contribute so strongly to electricity consumption growth, and how companies have been attempting to comply and engage with the new policy.
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Record-breaking growth in wind and solar power highlight China’s leading role in the renewables sector. But, until late 2024, exceptionally high power-demand growth meant that even this record increase in clean energy couldn’t cover all demand growth.
Lauri Myllyvirta, lead analyst, Centre for Research on Energy and Clean Air
Electricity demand growth exceeds GDP growth
China’s electricity demand has been growing faster than its GDP since 2020. Growth was particularly high in 2023 and 2024, when it averaged 7 per cent per year, against GDP growth of about 5 per cent.
Between 2020-2023, power use in traditional energy-intensive sectors, such as nonferrous metals and building materials, grew faster than the value they added to the economy. The rapidly expanding new three industries are similarly electricity-hungry. Add in the broader shift toward electrifying transport and other industrial processes, and the result is a grid whose load is increasing well ahead of overall economic growth.
China stands out among major economies in this regard, observes Zou Yining, a research associate at Agora Energy China. While the economy has grown in the US, power demand has remained relatively stable over the past 20 years, though the boost from emerging industries such as battery production and data centres is forecast to increase consumption by 2 per cent a year from 2024-2026. Meanwhile, Germany’s electricity consumption has been falling since 2021 despite modest economic growth.
“In the first three quarters of last year, cleantech manufacturing saw higher electricity demand growth than industry as a whole” in China, said Zou Yining. “PV manufacturing used 36.2 per cent more power than the same period in the previous year. For wind turbine manufacturing, the increase was 19.6 per cent.”
From 2020 to 2024, EV, PV module and battery manufacturing output rose nine-fold, four-fold and 12-fold respectively, according to data from the Centre for Research on Energy and Clean Air (CREA) seen by Dialogue Earth. Industrial output as a whole rose 24 per cent, or 1.2-fold.
“This shows how the importance of those three sectors has increased, and their importance for economic growth,” said Lauri Myllyvirta, CREA’s lead analyst. “In comparison, output of steel and cement fell, while output of nonferrous metals and [non-EV] cars grew by about 30 per cent.”
The electricity consumption of new types of infrastructure, such as AI data centres, also continues to develop rapidly. In 2024, the electricity consumed by internet data services such as big data, cloud storage, cloud computing and AI increased by 31 per cent, according to China Electricity Council (CEC) figures reported in the media. Meanwhile, the EV charging and switching service industry saw 51 per cent year-on-year growth. By 2030, China’s data centres may account for nearly 6 per cent of China’s electricity demand, according to the CEC.
Problems replacing coal
The rollout and integration of renewables into the grid has been slower than expected. Data from the National Bureau of Statistics, collated by Dialogue Earth, shows that from 2021 to 2024, China’s electricity supply was still largely supported by coal-fired power, with its percentage of total generation ranging between 55 per cent to 61 per cent during that period.
Yang Fuqiang, a senior advisor at Peking University’s Institute of Energy, said that although the power grid remains key in the development of renewable energy, there are obstacles to overcome.
As state-owned enterprises, power grid companies are more concerned about economic efficiencies and power supply security, and they see coal as the most reliable power source. The variable nature of some renewable energy means associated technology and operations will need to adapt when connecting to the grid, so as not to pose challenges to its security and stability.
Yao Zhe, global policy advisor for Greenpeace, says that China’s power-system carbon emissions will peak when all new electricity demand is met by renewable energy.
Coal fuelled 54.8 per cent of China’s power generation last year, compared to about 35 per cent for renewables, CEC data shows. Coal-generating capacity and output are falling as a share of the overall mix, with its share of generation for 2024 down 16 percentage points on 2014, for example, while wind and solar power rose by 15 percentage points, said Zou Yining. “This shows that renewables have made progress in helping meet increasing demand and ensuring supply,” she added.
Renewables continue to grow strongly. In 2024, China installed 356 gigawatts (GW) of wind and solar capacity – 4.5 times as much as were added in the EU, and roughly equivalent to the total installed wind and solar capacity in the US.
But coal too has been expanding. Data from CREA shows work started on 94.5 GW of coal power capacity in 2024, with another 3.3 GW of previously paused projects being restarted. China now has more coal power under construction than at any point since 2015. Moreover, it approved 66.7 GW of coal power projects in 2024, which means many more plants coming online in the next two to three years, further solidifying the fuel’s place in the power mix.
“Record-breaking growth in wind and solar power highlight China’s leading role in the renewables sector,” said Myllyvirta. “But, until late 2024, exceptionally high power-demand growth meant that even this record increase in clean energy couldn’t cover all demand growth.”
CREA statistics show that since the start of the year, the growth of clean energy has been able to meet the new electricity demand. Whether this momentum will last, however, remains uncertain.
A recent 2025-2027 new-coal-power action plan from the National Development and Reform Commission and the National Energy Administration calls for firming up coal’s role as baseline power generation and back-up supply. This is alongside promoting efficiency and emissions improvements while bolstering planning and construction of new coal power.
There is still scope for expanding coal power during the 15th Five Year Plan period (2026-2030), Xia Peng, a senior researcher with the Energy Strategy and Planning Centre at the State Grid’s Energy Institute, told China Energy News. “Given trends in supply and demand, a number of coal power plants will be built to ensure socioeconomic development and supply security,” he said.
However, the IEA predicts that coal’s share in China’s total generation will fall from almost 60 per cent in 2024 to 50 per cent in 2027 as renewable and nuclear energy sources increase. During this transition, the fossil fuel’s role will shift to primarily supporting system adequacy amidst the challenges of integrating variable renewable energy.
Forcing power users to go green?
Once electricity is on the grid, it can’t be identified by source. So companies often buy green electricity or Green Electricity Certificates to prove they have bought renewable.
“Green Electricity Certificates can be thought of as a market-driven alternative to renewable energy subsidies – a way to monetise their environmental benefits,” explained Zou Yining. “Companies buy the certificates and in effect fund the environmental benefits of renewable energy.”
State-owned energy companies, such as China Energy Investment Group and the State Power Investment Corporation, often purchase Green Electricity Certificates to offset carbon emissions. Large internet companies such as Alibaba buy them to achieve their carbon peaking and carbon neutrality goals.
In March, the Chinese government for the first time required some businesses to make use of green electricity. Companies in energy-intensive sectors – steel, nonferrous metals, petrochemicals, chemicals – will be required to use renewable energy for a percentage of their power use as set by their local government. By 2030, they must match the national average target for use of renewable electricity.
Those requirements may not be too tough to meet. China has been putting in place targets for renewable-electricity consumption since 2019. Reviewing government documents on 2024 targets for provincial-level jurisdictions, Dialogue Earth found the average to be about 35 per cent. Disregarding hydropower, that falls to about 20 per cent.
Zou told Dialogue Earth that the targets are set at provincial government level and tend to be reasonable and attainable.
She explained that there is an oversupply of Green Electricity Certificates partly because those targets haven’t yet been passed on to specific energy-intensive sectors or firms. This means there is little demand for the certificates except from companies covered by the carbon market, or which
h need to satisfy overseas customers. Addressing this challenge will require stronger legislative and policy frameworks to improve the accountability and enforceability of GECs, along with a more integrated approach that links the certificates with green electricity trading and the carbon market to boost overall market efficiency.
“The new policy specifies sectors and has binding targets. This means local governments will push companies to make more use of green electricity,” Zou said.
A better way
Yang Fuqiang said the best way to promote use of green electricity in businesses is to supply electricity locally and directly. For instance, any large tracts of unused land near industrial zones can be used to build renewable-energy power stations and energy storage. “That makes for quicker, easier and cheaper use of renewable electricity,” he said.
Chinese firms are already working on doing this, both at home and abroad. The Ordos Zero-Carbon Industrial Zone in Inner Mongolia is home to many leading clean-energy firms, including Envision Energy and Longi Silicon. The zone has built a 385-megawatt wind-solar-storage facility, and its companies get almost 70 per cent of their power from green sources.
In January, stainless steel firm Tsingshan Holding Group installed the first wind turbine at Weda Bay Industrial Park in Indonesia. Tsingshan is understood to be planning 7 GW of wind and solar power generation across Weda Bay and Morowali industrial zones – enough to power local production of raw materials used in cathodes for lithium batteries with renewable electricity.
Another quick and easy way to build green electricity supplies locally is via rooftop distributed solar power, which is already popular in China. As an incentive, some energy firms have been offering companies free installation of PV panels.
A manager of a Shenyang-based manufacturing company producing parts for Mercedes-Benz and BMW vehicles told Dialogue Earth that the firm has four production lines and makes about 10 million components a year, consuming 30 gigawatt-hours (GWh) of electricity in the process. They told Dialogue Earth that in 2017, a local energy firm installed over 10,000 square metres of solar panels on the factory roof for free.
“We signed a 20-year contract with them and get electricity at 85 per cent of the grid price. That provides 30 per cent of the electricity we need for production, and covers our office lighting,” said the manager, who declined to be named.
That kind of free installation is very common in China, they explained.
“From 2025, Mercedes-Benz wants all its components made with 100 per cent renewable electricity,” they said. “Every year, we’ll also need to buy 7 GWh of international energy certificates through its headquarters in EU to make up the gap.”
While there is limited data around such free installations, according to the National Energy Administration, by the end of 2024, the installed capacity of distributed PV power generation reached 370 million kilowatts, or 42 per cent of installed capacity, representing 121 times that seen in end-2013. Of this, industrial and commercial installed capacity accounted for 229 million kilowatts. Dialogue Earth has also previously examined the rollout of rooftop solar on the country’s public buildings.
This article was originally published on Dialogue Earth under a Creative Commons licence.
