Forging ahead: China’s electricity transition in action

China’s transition is entering a new phase – one where building a “new electricity system” has become a strategic priority, moving beyond the earlier focus on simply adding clean capacity. While the 11th (2006-2010) and 12th (2011-2015) Energy Five-Year Plans prioritised the rapid expansion of renewable capacity, the 13th Plan (2016-2020) marked a pivotal shift towards system integration. This evolution culminated in the 14th Five-Year Plan (2021-2025), which elevated power system reconfiguration to a national strategic agenda – committing to building a “new electricity system” capable of supporting high levels of renewable energy uptake.

Generation from wind and solar rose by 25% in 2024 to supply 18% of China’s total electricity – twice as much as in 2020 (9%) and up from just 4% in 2015. Several provinces generated over a quarter of their electricity from wind and solar in 2024 – Gansu (36%), Hebei (32%), Heilongjiang (30%), Inner Mongolia (25%), Jilin (33%), Ningxia (25%) and Qinghai (46%) – surpassing the European Union’s 29% share of wind and solar generation in some cases, while 14 provinces exceed the OECD average of 19%. 

This progress can be attributed to a combination of factors: abundant wind and solar resources; greater land availability, especially in the less populated western regions; and, in several cases, access to long-distance transmission infrastructure that enables the export of surplus renewable power to eastern city clusters and manufacturing hubs. Wind and solar capacity has grown exponentially for over a decade, and more than doubled in the three years to 2024, from 635 GW to 1,408 GW.

As renewable shares rise, the need for a more flexible power system – able to accommodate rapidly growing variable output and match supply with demand across the country – has become urgent. This is underscored by the challenge of managing longer-term variability in renewable generation, particularly in hydro-rich provinces such as Sichuan, Qinghai and Yunnan. While hydropower is relatively stable over short timeframes, it is prone to seasonal swings – a challenge worsened by hotter, drier summers in recent years. This has reduced the average capacity factor of China’s hydro dams – the amount of generation per unit of capacity – and also constrained generation during specific periods.

Grid investment is accelerating alongside China’s record-setting renewable boom. In 2024, total investment exceeded 600 billion RMB ($85 billion USD), up from 485 billion RMB (about $70 billion) in 2019.

In recent years, China’s grid strategy has shifted from large-scale capacity expansion towards strengthening local networks, enhancing cross-regional coordination and improving system flexibility. This reflects the fact that much of the foundational work under the West-to-East Power Transmission (西电东送) initiative, particularly the three main transmission corridors linking the energy-rich west to coastal industrial heartlands, is now largely complete.

However, with record-setting wind and solar additions in 2024, integration pressures have returned. National curtailment rates have begun trending upwards, reaching levels not observed for several years. In resource-rich provinces such as Gansu, where over 30% of electricity is now generated from variable wind and solar, grid integration has become challenging – especially given the limited local demand and the need for long-distance transmission lines to eastern demand centres.

While far from the severe curtailment experienced around 2015 – when renewable expansion outpaced grid and market readiness in the north – the recent uptick has prompted a renewed policy response. In 2024, the National Energy Administration (NEA) announced plans in 2024 to fast-track 37 major transmission lines and start another 33 within the year. Large-scale hydro projects, including mega dams on the Yarlung Tsangpo, are also set to drive grid investment – both to connect them with demand centres and to strengthen local networks.

China is rapidly scaling up its energy storage capacity – outpacing the rest of the world. Since 2021, China’s total capacity has more than tripled, reaching over 135 GW by the end of 2024. While pumped hydro has grown steadily, the most dramatic growth has come from “new-type” storage technologies, particularly lithium-ion batteries. In 2024 alone, China commissioned a record 37 GW/91 GWh of battery storage – more than the combined additions of the United States (12 GW/37 GWh) and Europe (12 GW/21 GWh, about two-thirds behind the meter). 

This surge brought China’s new-type energy storage capacity to over 30 GW in 2023 – achieving its 2025 target two years early. By the end of 2024, total capacity exceeded 78 GW, with batteries overtaking pumped hydro as the largest source of storage. At the end of H1 2025, battery capacity had climbed to 95 GW – up 69% year-on-year.

China’s transition is advancing on the demand side, with electricity claiming a growing share of final energy use and displacing fossil fuel use. From 2015 to 2023, electricity’s share of final energy consumption grew by 1 percentage point per year to stand at 32% in 2023 – well above the US (24%) and OECD Europe (24%). Together with clean generation, rapid electrification is key to rewiring the economy for deep, long-term decarbonisation.

Industrial sparks, electric wheels and heating power lead China’s electrification. In 2023, end-use electrification added 73 TWh of new electricity demand, directly replacing fossil-fuel consumption, according to the China Electricity Council (CEC). Industry led the way, replacing coal and other fossil fuels with electric kilns and boilers, adding 34 TWh. Transport followed, with rapid EV adoption and expanded subway and rail systems substituting 22 TWh for oil products. In buildings, roughly 12 TWh of electricity replaced fossil fuels, primarily by substituting loose coal heating in northern China with low-carbon technologies such as heat pumps and geothermal systems. 

As the most accessible electrification opportunities have been tapped, China is shifting towards emerging levers for tackling more complex end uses. Electricity substitution in 2023 was well below the 2019 level (over 200 TWh), mainly because much of the low-hanging fruit had already been captured, such as phasing out loose coal in residential heating and electrifying basic industrial applications, especially low- to medium-temperature heating in textiles, food and light manufacturing.

Now, attention is turning to harder-to-abate sectors such as steel, cement and chemicals. Here, green hydrogen is gaining momentum. In 2024, the global renewable-based hydrogen sector added over 70,000 tonnes/year of production capacity, up 42% from the previous year. China accounted for more than 60% of this growth, lifting its renewable-based hydrogen production capacity to just over 125,000 tonnes/year – up from virtually zero just a few years ago.

Heat pumps have emerged as a key solution due to their high energy efficiency. These systems typically consume three-to-five times less energy than conventional electric or fossil-fuel heating. China has quickly become the world’s largest heat pump market, accounting for roughly one-quarter of global sales between 2021 and 2023. This momentum continued in 2024, with Chinese sales over 20% higher than the United States – the second-largest market – and more than 50% above Europe.

China’s accelerating shift to renewables is driving structural change in the power sector, with coal generation now nearing its peak. In 2024, clean electricity sources – led by wind and solar – met 84% of China’s new power demand, up sharply from just 16% during 1991-2000, 22% during 2001-2010, and 47% during 2011–2020.

If current trends continue – and, as the next chapter shows, they are highly likely to – the era of “more renewable, more coal” is ending. This challenges the view advanced in some quarters that China’s progress is merely “energy addition” – stacking renewables atop a still-growing coal base. 

Some analyses suggest that the turning point could arrive this year: early 2025 data supports this. Wind and solar generation combined was 27% higher in H1 2025 than H1 2024, with wind up 16% and solar 43%. This contributed to a 2% decline in thermal generation from H1 2024 to H1 2025. While uncertainties remain over economic restructuring and exports, coal power could peak in coming years, depending on economic growth, hydro availability and export demand – likely followed by a short, uneven plateau before structural decline.

On the demand-side, electrification is pushing fossil fuel use towards a peak across key sectors. In buildings, coal has largely been displaced by electricity, primarily through the widespread adoption of electric heaters. In industry, electricity overtook coal in 2023 to become the largest final energy source. In both sectors, fossil gas use has grown modestly – particularly in northern China’s centralised heating networks and at industrial sites – but volatile gas prices, distribution challenges and concerns over import dependence are likely to limit its further expansion. In transport, petroleum remains the dominant fuel, yet early signs of plateauing – and even decline – are emerging as electric vehicle deployments accelerate.

Together, these shifts are driving a plateau in direct fossil fuel use across the Chinese economy, reversing the steep growth trend of 4.7% per year seen in the decade to 2015. Final fossil fuel consumption (excluding non-energy use) touched a high of 49 exajoules (EJ) in 2015 and subsequently declined by 1.7% (0.2% per year) to 2023. Meanwhile electricity use has risen steadily, reaching nearly 29 EJ in 2023 – underscoring electricity’s rising centrality in China’s evolving energy system.

With fossil fuel peaking on the horizon, the key question is whether China can sustain this momentum. Early 2025 data suggests yes.

In the first half of 2025, wind and solar additions were more than double those in the same period of 2024. For comparison, the 213 GW of new solar exceeded total US solar capacity at the end of 2024 (176 GW), while the 52 GW of new wind was nearly equal to all wind capacity in Latin America and the Caribbean (55 GW). This surge pushed China’s combined installed capacity to surpass coal for the first time, while – as noted above – fossil generation fell. 

Although declines in fossil generation have occurred in other six-month periods over the past decade, H1 2025 stands out: it did not coincide with unusually high hydro generation, nor was it driven by an economic shock like the global financial crisis or Covid-19 lockdowns. With industrial production up 6.4% and broader economic activity stable, electricity demand rose 3.7% – yet fossil generation declined, consistent with, though not definitive proof of, a structural shift. 

Demonstrating the central role of wind and solar power in pushing out fossil generation, combined generation from wind and solar (2,073 TWh) overtook generation from hydro, nuclear, and bioenergy combined (1,936 TWh) in the 12 months to June 2025. Just four years previously, over the 12 months to June 2021, wind and solar generated only half as much electricity (867 TWh) as these other clean sources combined (1,764 TWh).

While the wind and solar capacity boom in H1 2025 was partly driven by companies rushing to install before a June reduction in policy support – and grid bottlenecks and integration pressures have increased – signs point to sustained momentum in the transition.

In the first half of 2025, investment in key national energy projects – including offshore wind and grid upgrades – rose by 22% year-on-year, and new-type energy storage jumped 69%. The pipeline of large-scale wind and solar now exceeds 1 TW – over twice the EU’s combined installed capacity. Beyond capacity expansion, market reforms are also advancing: China is on track to launch a unified national power market by the end of 2025, with efforts to normalise cross-regional trading, ensure full renewable participation and strengthen regulatory oversight. 

This raises a deeper question: What explains China’s ability to maintain such a strong and sustained commitment to the transition? The answer defies simple explanation. While economic benefits like investment and job creation clearly play a role, they do not fully account for the depth of this commitment. More fundamental strategic considerations are at work – and these are the focus of the next chapter.