China Surges in Clean Energy Investments While Expanding Coal Capacity
China is making significant strides in the clean energy sector while simultaneously increasing its coal capacity. The country has seen a remarkable rise in electric vehicle (EV) sales, which now outpace conventional car sales. This growth is supported by unparalleled investments in renewable energy, primarily in solar and wind power. In recent years, renewables and related industries have contributed a substantial portion to China’s economic growth, setting the stage for a complex energy landscape.
The rapid expansion of clean energy has resulted in challenges, including overcapacity and aggressive price competition. To maintain market stability, Chinese authorities are now contemplating measures to reduce excess production and improve quality in the cleantech sector. As the demand for road transportation fuels peaks, new-energy vehicles, including electric and liquefied natural gas (LNG) powered options, are displacing traditional gasoline and diesel fuels. Major Chinese oil and gas companies have acknowledged this shift, revealing in their first-half earnings reports that new-energy vehicles are suppressing demand for refined petroleum products.
Coal Remains Integral to Energy Strategy
Despite leading the global energy transition, China continues to rely heavily on coal. The country has commissioned the most coal power capacity in nearly a decade, as it seeks to ensure energy security and prevent blackouts experienced in 2022 and 2023. According to the International Energy Agency (IEA), China is the world’s largest energy investor, spending twice as much on energy as the European Union and nearly as much as the EU and United States combined. In 2022, China’s clean energy investments reached $625 billion, nearly double what it was in 2015.
China achieved its target for wind and solar capacity—set for 2030—by 2024, which was six years ahead of schedule. The IEA noted that the record-breaking investment in renewables is being complemented by improvements in grid and storage capabilities, while coal remains part of the energy mix. Expectations indicate that investments in coal will surpass $54 billion by 2025. The IEA emphasized that coal generation will serve as a backup to renewables, reflecting ongoing concerns about electricity security.
Addressing Overcapacity and Market Challenges
As China accelerates its transition to green energy, it is also expanding its EV charging infrastructure and storage projects. Wang Hongzhi, director of China’s National Energy Administration (NEA), expressed confidence that the country will exceed its target of having non-fossil fuel energy account for 20% of total energy consumption by the end of 2025, with ambitions to reach 25% by 2030.
Despite these advancements, the surge in renewable energy has led to structural challenges that China must overcome to sustain its energy transition. The rapid growth of solar and wind installations has resulted in excessive manufacturing capacity, which, coupled with fierce competition, has negatively impacted many companies within the cleantech sector. Major manufacturers of solar panels have particularly felt the strain of price wars.
Recognizing the detrimental effects of overcapacity and low-quality production, Chinese authorities have initiated several measures to mitigate these issues. Following months of attempts to stabilize the cleantech market, the government has committed to a more serious approach in addressing these challenges.
As China navigates this complex energy landscape, it must balance its ambitious clean energy goals with the practicalities of maintaining energy reliability and security. The journey ahead remains critical not only for China but for the global energy transition as well.
