China’s Clean Energy Boom Still Rests on Coal, Oil, and Gas
- China has built a world-leading clean energy sector, but fossil fuels still underpin energy security.
- Coal remains the backbone of China’s power system and industry, while oil and natural gas are critical for transport, petrochemicals, and grid stability.
- China’s clean-energy dominance is reinforced by its near-monopoly over rare earth mining and processing.
Over the past decade, China’s renewable energy and related clean technologies have emerged as the fastest-growing sectors of the economy, significantly outpacing the overall economy. Last year, China’s clean energy investments hit a record 7.2 trillion yuan ($1 trillion), with the sector accounting for over 11% of GDP and growing three times faster than the overall economy. Indeed, China’s "new three" namely solar, batteries, and electric vehicles contributed over 90% of the rise in the country’s overall investments. China continues to be particularly dominant in solar and wind energy technologies, with the nation installing 315 GW of solar and 119 GW of wind, exceeding the rest of the world combined. Still, fossil fuels remain critical to China's energy security and industrial base, providing over 80% of primary energy and over 60% of electricity production.
Coal is the ornerstone of China’s energy sector, providing over 50% of electricity generation and roughly 60-70% of total primary energy consumption. China consumes over 4 billion tons of coal annually, accounting for more than 50% of the entire world's coal consumption. In 2023, data indicated that China's coal consumption continued to rise, with imports reaching a record 474 million tons. This makes China the world's largest coal consumer and importer.
Despite massive investments in renewables, coal continues to play an outsized role in fueling the economy, ensuring energy security and powers industrial sectors like steel, with new coal-fired power projects continuing to be built at a rapid clip. Construction of new coal-powered plants hit a 10-year high in 2024, with the country initiating development of 94.5 gigawatts (GW) of new coal-power capacity and also resumed building of 3.3 GW that was previously suspended. The heavy reliance on coal has led to significant air pollution and carbon emissions, despite China’s President Xi Jinping pledging to "strictly control" coal expansion and "phase down" consumption.
And oil, too, remains critical to China’s energy security and industrial growth, representing roughly one-fifth of its energy mix and powering transport and petrochemical sectors. China consumes approximately 16.3 to 16.4 million barrels per day (b/d) of oil, making it the world's second-largest consumer. As of 2024, the country imported roughly 11.1 million b/d of crude oil to meet this demand, representing about 74% of its consumption.
Projections for 2025 suggest total oil demand averaged around 16.74 million b/d. Russia, Saudi Arabia, and Iraq are China’s key suppliers of crude, with imports from Russia exceeding 2 million barrels per day (bpd), representing roughly 20% or more of China's total imports. Around 900,000 bpd of Russian oil is delivered via pipeline, with the rest coming by sea, often using a "shadow fleet" to bypass Western sanctions.
Not surprisingly, China is also aggressively expanding domestic oil production, with output reaching a record high of 4.3 million b/d in 2025 from 3.8 million b/d in 2020, thanks to intensified exploration, particularly in offshore and unconventional reserves. Offshore oil production is a major driver of China’s domestic oil production, accounting for over 60% of new output for five consecutive years in large part due to increased investment by state-owned companies, including CNOOC, CNPC, Sinopec.
The push is part of the 2019-2025 "Seven-Year Action Plan" which focused on increasing upstream, domestic production to ensure energy security, even with the parallel push for green energy and electric vehicles. However, the high cost of extracting from mature fields means domestic output cannot keep pace with demand, leaving a large gap that must be filled by imports.
Meanwhile, natural gas acts as a critical "bridge fuel" in China's energy transition, helping to reduce reliance on coal, improve air quality and balance intermittent renewable energy. As the world’s third-largest consumer of natural gas, China is growing its natural gas usage for industrial, residential, and power generation, with projections indicating that gas will play a major role in achieving carbon neutrality.
China's natural gas consumption hit ~428 billion cubic meters (bcm) in 2024, marking a steady increase from 330 bcm in 2020. China relies on a mix of domestic production and imports, with demand driven largely by the industrial and city-gas sector. China's imports of Liquefied Natural Gas (LNG) imports are projected to rebound in the current year, with projections of up to a 10% Y/Y increase to nearly 76 million metric tons, following a ~10% decline in 2025 due to high domestic production and weaker demand. China is the world's largest importer of LNG, with Australia, Qatar, and Russia supplying the bulk of imports. China also imports large amounts of gas via pipeline, primarily from Russia and Turkmenistan via the Power of Siberia (Russia) and the Central Asia-China Gas Pipeline.
That said, China is poised to maintain its dominance in the global clean energy sector not only due to heavy investments and technological leadership but also due to its rare earths hegemony.
China maintains a commanding, near-monopolistic hold on the global rare earth elements (REEs) supply chain, controlling approximately 60-70% of mining and over 90% of processing and refining. Neodymium and dysprosium are essential for high-strength permanent magnets in electric motors, significantly increasing power density and efficiency.
Permanent magnets (using neodymium, dysprosium, and praseodymium) are used in wind turbines to improve performance, particularly for offshore, direct-drive turbines that require no gearbox. While not used directly in PV modules, REEs like yttrium, lanthanum, and cerium are used in specialized solar inverters, sensors and converter components.
By Alex Kimani for Oilprice.com
Solar Set to Surpass Coal in China, But There’s a Catch
- China is set to see solar capacity overtake coal for the first time this year, with wind and solar expected to make up about half of total installed power capacity by end-2026.
- Despite rapid renewables growth, additions are slowing after a shift to market-based pricing, and Rystad Energy forecasts China will drive a global decline in new solar capacity in 2026 even as renewables overtake coal in total power generation.
- Coal is far from phased out: Carbon Brief reports a record surge in new coal plant proposals, risking long-term coal lock-in even as many existing plants run at low utilization.
China’s solar generating capacity is poised to exceed coal for the time this year, the China Electricity Council said in a report this week.
The country, long dependent on coal, should get about half of its installed generating capacity from solar and wind by the end of 2026, whereas coal’s use is expected to fall to about one-third of the total.
More specifically, the electricity council puts total coal capacity at about 1,333 gigawatts by Dec. 31. Solar ended 2025 at 1,200 GW and has averaged 270 GW of growth each year for the past three years.
The Los Angeles Times reports the country is expected to build out more than 400 GW of new generation in 2026 to keep up with electricity demand, with most of the new capacity to come from wind and solar, which combined would account for about 300 GW.
These figures seem to indicate that China is transitioning away from coal. But that would be a wrong assumption. The first number to look at is the 300 GW of renewables. It is smaller than last year, when solar alone accounted for 315 gigawatts of new capacity in China.
The reason has to do with a change to China’s power regulatory regime. Local developers wanted to get their projects operational before the change came into effect last June 1. After that date, the country shifted its renewable energy pricing from government-set feed-in tariffs to a market-based auction system. The idea was that by forcing new wind and solar projects to compete in the power market, it would encourage efficiency and lower prices.
According to Rystad Energy, in 2026 China is forecast to commission 235 GW of solar and 98 GW of wind capacity, reducing global renewable power generation capacity from 703 GW in 2025 to 650 GW in 2026.
In other words, China will be largely responsible for the forecast reduction in new global solar capacity, which reached a record 703 GW in 2025, largely driven by new solar capacity coming online in China during the first half of the year.
However, total renewable sources, not just solar, are expected to reach 11,900 terawatt-hours in 2026, overtaking coal as the largest source of power generation — a position it has held for decades.
Again, quoting Rystad Energy, coal contributed to almost 40% of the energy mix in 2000, and given that practically all the new demand is being met with renewable sources, coal generation has plateaued.
Here comes the catch. This week Carbon Brief reported that proposals to build coal-fired power plants in China reached a record high in China.
The report by the Centre for Research on Energy and Clean Air and Global Energy Monitor says that in 2025, developers submitted new or reactivated proposals to build a total of 161 gigawatts (GW) of new coal-fired power plants.
The new proposals come even as China’s buildout of renewable energy pushed down coal-power generation and carbon dioxide (CO2) emissions in 2025, meaning many coal plants are already running at just half of their maximum capacity.
The co-authors argue that while clean-energy growth may limit emissions from coal power in the short term, the surge in proposals could lock in new coal assets, “weaken…incentives” for power-system reform and help keep coal capacity online in spite of China’s climate goals.
According to Carbon Brief, the country is continuing to add significant coal-power capacity, with a record 95 GW added to the grid last year and another 291 GW in the pipeline.
Around two-thirds of coal-powered capacity proposed in China since 2014 has either been commissioned or is set to be built.
This is the reverse of what is happening outside of China, where roughly two-thirds of proposed coal capacity never makes it to construction.
Coal may be down in China, but it’s not yet out.
By Andrew Topf for Oilprice.com
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