China’s Renewable Energy Drive Hampered by Rising Coal Production

By Haley Zaremba - Feb 13, 2024

• Despite leading the world in new clean energy capacity additions, China's reliance on coal to meet energy demand is hindering progress towards decarbonization.
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• Concerns arise as China's manufacturing-driven economy leads to overproduction, potentially flooding global markets with discounted products and undermining fair competition.
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• The hope is that the spike in emissions from coal-fueled manufacturing will be temporary, with clean energy production eventually offsetting the carbon footprint generated during manufacturing.

China is far outpacing the rest of the world in terms of new clean energy capacity additions, but it’s powering all that expansion with the dirtiest fossil fuel. As China’s clean energy production potential balloons, the nation’s carbon efficiency is moving backwards. The world desperately needs all that new clean energy in order to achieve global decarbonization goals, but it also needs China to pump the brakes on its energy demand growth, and especially its still-rising coal production capacity. And that’s not happening.

China’s domestic energy consumption rose by a whopping 6.7% over the last year, according to figures from the China Electricity Council trade group. Already, China is consuming more energy per capita than the European Union. But unlike in rich Western countries, all that energy isn’t going toward improving residents’ standard of living. Whereas 38% of grid energy in the United States goes to homes, only about 15% of Chinese energy is being consumed by households. Instead, it’s going toward producing stuff. Lots and lots of stuff. 

China’s economy is changing. Decades of breakneck economic growth and domestic infrastructural expansion are slowing down in a major way as China's buildout nears a point of saturation. And in response to the seismic shift in the nation’s demand patterns, Xi Jinping is doubling down on expanding manufacturing capacity. 

As a result, concern is growing in international circles that China is vastly overproducing and will soon be burdened with overcapacity of a laundry list of products. “China Is Making Too Much Stuff—and Other Countries Are Worried,” stated a recent Wall Street Journal headline. The primary concern is that China will likely angle to push a glut of solar panels, electric cars, and other products onto the global market at steep discounts, resulting in a flooded market with illegal use of predatory pricing. 

Although China’s pace of renewable energy additions has been blistering, it’s just no match for the country’s rate of manufacturing and its associated insatiable energy demand. “What we’re seeing is a race between renewable energy installations and power demand, with the fate of the planet in the balance,” writes Bloomberg. Over the last year, the increase in electricity consumption in China alone was as much as all of the power generated in Germany over the same time period.

As a result, China has leaned heavily on its already massive coal sector to meet demand. “Thermal power increased by 6.1% from a year earlier, a faster pace than the economy as a whole,” said Bloomberg, “a clear signal that China’s carbon efficiency is going backward.” In 2023, China alone accounted for 96% of new coal power construction worldwide. Altogether, data from Global Energy Monitor (GEM) indicates that Beijing added as much as 191 gigawatts of coal-fired power generation over the past five years. 

It’s ironic that all that coal is fueling a green energy boom, but that trend is likely to continue as long as China’s rate of clean energy buildout stays this high. The hope is that this spike in emissions for the sake of clean energy will be a dirty blip on the long timeline of decarbonization. The solar panels produced using coal power this year will produce clean energy for years to come, hopefully offsetting far more carbon dioxide emissions than went into its manufacturing. 

Once all of China’s new clean energy capacity is online and the sector’s rapid buildout wanes, the hope is that energy demand will wane accordingly, eliminating the need to include fossil fuels, and especially coal, in the energy mix. It’s difficult to predict just how long or short that blip will be, however, as China’s economy continues to go through a sea change. 

By Haley Zaremba for Oilprice.com