Beijing — China’s mostly coal-based thermal power generation is set to fall in 2025 for the first time in a decade, some analysts estimate, though they caution that extreme weather or stronger than expected industrial growth could upend that forecast.
That would be a positive signal for the decarbonisation of China’s power sector, which makes up some 60% of its emissions. The country plans for its overall carbon emissions to peak before 2030 and to fall to a net zero before 2060.
China is expected to meet or exceed 2024’s record increase in renewable energy capacity as developers rush to meet the targets of its 14th five-year plan by the end of this year, which some analysts say creates the conditions for renewables to meet all new power demand this year.
The rapid build-out led three out of four analysts who spoke with Reuters to forecast a plateau or fall in thermal power output, as renewables meet the continuing growth in overall electricity demand, estimated at 6% to 7.5% by four analysts and an industry group. Last year’s growth was 6.8%.
The last time thermal power output fell year-on-year was in 2015, when overall energy demand growth slowed amid a stock market crash and slowing economic growth.
But analysts caution that another summer of extreme heat could drive a fresh increase in coal use.
Last year, power demand overshot forecasts after a blistering heat wave that drove power demand for air conditioners.
Limited transmission capacity could also cap renewables consumption.
Although analysts from LSEG, the Centre for Research on Energy and Clean Air, and a U.S. bank forecast a plateau or decline in thermal power output this year, Rystad Energy expects 1-2% growth. The China Coal Industry Association also forecast a 4.5% increase, highlighting the uncertainty in forecasting.
INDUSTRIAL DEMAND
Power demand will almost certainly continue expanding faster than China’s economy, forecast to grow 4.5% this year.
That’s been the case since 2020 as China’s economic growth has become more energy intensive. Faster growth in energy-intensive manufacturing has also made up for weaker growth in services and consumer sectors, according to Centre for Research on Energy and Clean Air lead analyst Lauri Myllyvirta.
Analysts also point to EVs, artificial intelligence and the electrification of industry to explain the widening gap between power demand and GDP growth.
Close to 65% of China’s power demand comes from industry, said Yicong Zhu, vice president for renewables and energy at Rystad Energy.
Services and advanced manufacturing – including renewable energy equipment and semiconductors – will become the main drivers of demand growth, said Peng Chengyao, director for Greater China power and renewables at S&P Global Commodity Insights.
While industrial power demand growth has slowed since summer 2024, according to Myllyvirta, it could accelerate again if China’s stimulus efforts drive a revival in property investment.
“The big question now is whether the government’s stimulus efforts will lead to another period of rapid growth in heavy industry, especially if construction volumes rebound,” he said.
Reporting by Colleen Howe Editing by Mark Potter – Reuters
