China Energy Brief: Issue 2

What Beijing’s latest five-year plan reflects about its energy future

China Energy Brief: Issue 2

Written by Kate Logan, Director of the China Climate Hub

In May, China’s power sector capacity breached 4000 gigawatts (GW) – exceeding the total magnitude of the U.S., EU, Indian, Russian and Japanese power sectors combined. The paradox of this scale, of course, is that China leads the world in clean power installations and is approaching a power sector based primarily on non-fossil sources while still burning the most coal of any country, accounting for over half of the global total.

Beijing recently released its 15th five-year plan for building a new-type energy system, which introduced little by way of flashy new targets for clean energy or emissions control. But asking why officials avoided any surprises, along with a deeper read of the plan, can reveal useful insights about how domestic policymakers are approaching China’s energy transformation. In particular, three points deserve attention from those aiming to understand how Beijing intends to thread the needle between the triple imperatives of economic growth, energy security, and decarbonization.

First, the plan centers the next phase of China’s efforts to safeguard its energy security as it emerges from the Hormuz energy crisis relatively unscathed.

Recent weeks have seen a flurry of media coverage declaring China to be the “winner” from the Strait of Hormuz energy crisis. While some analysts were surprised by China’s relative ability to weather deep shocks to global energy markets, Beijing emerged from the crisis with greater confidence, reaffirming its conviction to double down on energy independence and self-sufficiency. The new plan places energy security at the center while outlining how officials plan to reduce China’s remaining import dependencies. This focus is evident from the opening paragraphs, which foreground compounding security risks while framing energy security and supply adequacy as the prerequisite for economic viability, technological innovation, and decarbonization.

The document outlines a variety of steps for further substituting imported fuels with domestic alternatives, while pledging that “energy imports will be diversified and controllable.” Major components of this strategy include expanding the development of coal-based synthetic fuels; expanding and commercializing green fuels, including by increasing green hydrogen output eightfold by 2030; and deepening electrification of heavy-duty trucking and marine shipping. In the power sector, natural gas, which already plays a minimal role in electricity generation, is to be constructed “rationally” while scaling up domestically produced gas turbines. China will also aim for 35 percent electrification by 2030, five years ahead of a newly proposed global target.

For China’s emissions, the implications of this strategy are likely mixed. On one hand, further minimizing oil and gas use and accelerating electrification will deepen reductions. However, even with the emphasis on green fuels, renewed political support for coal-to-chemicals investments risks unleashing a massive new emissions “bomb” – and one that may become increasingly difficult to track via official statistics.

Second, the plan’s emphasis on enhancing grid flexibility signals Beijing’s concern over high levels of “wasted” renewables, which are a bottleneck for both economic growth and decarbonization.

With newly installed wind and solar capacity growing at record rates in recent years, China’s relatively inflexible grid has struggled to integrate this sudden influx of intermittent power. Just last year, China added 434 gigawatts of wind and solar, a figure nearly one and a half times the size of Japan’s entire power sector. Official data now place renewable energy curtailment at just under the government’s recently-established limit of 10 percent, which was doubled from 5 percent last year. Analysts, however, believe that the actual curtailment figure is substantially higher than official figures suggest. High curtailment is impeding clean power from keeping up with

China’s rapidly growing power demand, which increased by around 5 percent last year, forcing greater coal consumption than it would be otherwise.

The solution – making China’s power sector more flexible – is at the core of the new plan. It includes a new target for the grid’s “regulating capacity” to rise by over 40 percent, which serves as a proxy for the grid’s adaptability. Details about how this will look in practice are vague, however, and the language seems to indicate Beijing’s intention to continue “bundling” coal alongside cleaner sources of generation. But several additional targets for 2030 provide a strong growth incentive for cleaner means of balancing load variation: raising “new energy storage,” which includes batteries, to 300 GW; increasing pumped-storage hydropower to 160 GW; and expanding vehicle-to-grid capacity and virtual power plant capacity to 50 GW each. Some of these targets fall short of industry association benchmarks, but they are more ambitious than the objectives around clean energy installations – reflecting Beijing’s focus on making the existing system work better before adding even more new energy.

Third, the plan reaffirms Beijing’s shift away from control-based targets and toward an “additive” approach that leverages China’s clean technology dominance as the main driver of decarbonization.

For those hoping for firmer signals on how China will limit fossil fuels and cap its emissions, the new plan will disappoint. Although the overall 15th Five-Year Plan pledges to peak oil and coal consumption – and another recent initiative integrates oil and coal use totals into local cadres’ evaluations – the new energy plan provides no additional details about the timing and level of such peaks. This is despite earlier indications in state media that oil consumption will likely peak around 2026 and coal consumption around 2027. On renewables, the plan mostly consolidates existing targets, including 2030 goals for non-fossil energy to account for 25 percent of total energy consumption and for “new energy generation” – i.e., wind and solar – to reach 30 percent of total power generation. An additional, new target for all non-fossil sources to comprise over half of power generation would still leave room for overall emissions to rise.

From Beijing’s perspective, these conservative renewables targets and the absence of hard caps on fossil fuels allow China the flexibility to grow its economy and weather potential geopolitical shocks while remaining on track to peak its emissions before 2030, as Xi pledged in 2020. They also underscore that Beijing’s level of ambition is likely to be driven less by climate commitments than by economic incentives from its leading clean technology industries, as my colleagues Neil Thomas and Guoguang Wu argued in a recent CCA report. Innovation will be an important part of China’s recipe: the plan puts forth new targets for international patent applications to rise by 5 percent and for over 100 “first-of-its-kind” demonstration projects to be launched by 2030. The plan also elevates a May 2025 policy calling for computing power demand to be met with green sources, marking the first time that “computing power” was referenced in a national energy plan.

Observers may debate whether Beijing’s new energy strategy meets the moment, especially whether it balances economic and security interests with the realities of climate change: in 2025, China suffered over $35 billion in economic losses from natural disasters, and Xi recently chaired a Politburo study session on emergency management in the wake of disastrous flooding in China’s Southern regions this year. Even without ambitious targets, however, Beijing would argue that it has already demonstrated the essential role of electrification for bolstering energy security in a volatile world. With an electrification rate significantly higher than those of the United States or Europe, China may also be better positioned to transform a wide range of industrial sectors while reducing both energy costs and carbon emissions.