CEF CHINA MONTHLY: ELECTRICITY SECTOR MOMENTUM IN 2MCY2026

Authored by Tim Buckley, Climate Energy Finance 

Previous CEF monthly updates here. 

Got questions or feedback? Please reach out: tim@climateenergyfinance.org     

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China's electricity growth was +5.5% year-on-year (yoy) in the Jan-Feb '2026 period, showing the Chinese economy remains in robust expansion mode despite Trump's ongoing tariff wars and military attacks on global oil supplies. Renewable energy held a 33% share including hydro (24% from wind + solar).

In the first two months of 2026 China installed 44.7GW of new renewable energy capacity, 68% of total new capacity adds – 32.5GW of solar, 11.0GW of wind and 1.2GW of hydro-electricity. Depressingly, China commissioned a record 20.0GW of new thermal power capacity (coal and gas) in just 2 months. 

This clearly reflects China’s continued prioritisation of energy independence – a long term strategy to progressively electrify everything so as to reduce China’s dependence on imported oil – a strategy that has left China relatively well placed to weather the US war on Iran and the massive ongoing disruption in the Strait of Hormuz. 

China now buys more than 80% of Iranian crude, which continues to make its way to Chinese ports despite the turmoil. It stockpiled when oil was cheap and available, so its strategic oil reserves are many multiples of that of countries like Australia, showing again the merits of strategic foresight and planning again. It imposed export bans on refined petroleum products and fertilisers. Most significantly, it has built the world's most formidable domestic clean energy base.

Renewable energy and cleantech industries of the future remain clear sectors of priority in the 15 Five Year Plan (FYP), but the pace of development has moderated somewhat since the all-time peak seen in May 2025 (due to a change in the Feed in Tariffs structure) and as EV incentivisation programs run their course. 

The 15th FYP featured the topic of "Accelerating the green transition across all sectors" as a whole separate section in the budget papers. China aims to: "Acting on the principle that lucid waters and lush mountains are invaluable assets, we will improve fiscal policies concerning resources and the environment to drive coordinated progress in cutting carbon emissions, reducing pollution, pursuing green development, and boosting economic growth. We will actively and prudently work toward peaking carbon emissions and achieving carbon neutrality."

A progressive electrification and decarbonisation of everything is driving energy security and energy independence – Figure 1.

⚡ Total electricity generation (including distributed energy) was ⬆️5.5% yoy to 1,693TWh in the first 2 months of 2026.

☀️ solar generation was ⏫18.1% yoy to 191TWh, giving a 11.3% share of total.

🌬️ wind generation was ⏫10.0% yoy to 212TWh, giving a 12.5% share of total.

🚰 hydro generation was ⬆️6.3% yoy to 157TWh, giving a 9.3% share of total.

☢️ nuclear generation was ⬆️1.3% yoy to 76TWh, giving a 4.5% share of total.

🪨 Thermal power generation was ⬆️2.6% yoy to 1,023TWh, representing a still way too dominant 60.4% share of total.

Strong electricity demand growth is consistent with the economic growth reports that in the first two months, the total value added of industrial enterprises in China grew by a robust ⬆️6.3% yoy, while services sector grew ⬆️5.2% yoy.

In the first two months, the total value of China’s imports and exports of goods was Rmb7,732bn, up ⏫ 18% yoy. Export value was Rmb4,618bn, up ⏫ 19%, and the value of imports was Rmb3,114bn, up ⏫ 17% yoy. As the US isolates and continues its trade wars, China continues to massively expand its trade with other nations. More balance in China's massive trade surplus is solely needed.

Climate Energy Finance's new report shows that outbound foreign direct investment (OFDI) from China in all cleantech related sectors is booming: "Raw Power: China locks-in global dominance of critical minerals and metals with >US$120bn outbound investment surge”. China’s ‘going global’ strategy is about securing the entire value chains in zero-emissions industries, but it is also increasingly involving a credible boost for its partner economies, with lessons for Australia.

New energy vehicles (NEV) production fell ⏬ 14% yoy to 1.6 million vehicles in the first 2 months of 2026, but that's from a base of almost ⏫ 50% growth in Jan-Feb'2025. Battery output grew a whopping ⏫ 49% yoy, driven by energy storage boom, whilst crude steel production was ⬇️4% yoy, after a 1.5% drop in 2025. However, China’s NEV exports remain a bright spot, with shipments more than doubling year on year in the first two months of 2026.

Henry Sauderson highlights the continued rapid investment in all new low emissions solutions. Pumped hydro storage (PHS) will be a major part of China’s plans for energy storage, and unlike batteries, there was a numerical target included in the next five-year plan outline. China plans to add around 100GW of new PHS capacity over the next five years, versus ~59 GW in operation today, according to the five-year plan outline. If achieved, that would take capacity far beyond the previous 120GW target. Offshore wind capacity is forecast to double in the next five years to ~100GW, and nuclear capacity to rise to ~110GW vs the 63.7GW installed by February 2026.

Whilst western commentators often make the claim that China is leveraging environmental, social and governance (ESG) shortcuts in its relentless drive for strong GDP growth, the reality is that China has made enormous progress in many areas. It was telling to see that China is planning its first major tightening of national air quality standards since 2012, as it seeks to extend a largely successful anti-pollution campaign that’s reshaped its economy. Bloomberg reports that new limits on a range of pollutants will be phased in from March and strengthened further in 2031, reflecting efforts to reduce the health costs of pollution, according to documents posted online by the country’s Ministry of Ecology and Environment. This was followed in March 2026 with The Ecological and Environmental Code at the closing session of the National People’s Congress to consolidate legislation covering air quality, low-carbon development and penalties for corporate polluters.

Finally, we highlight the Centre for Research on Energy and Clean Air (CREA)’s new report: “Reclaiming credibility in China’s steel industry: Climate ambition, financial resilience, and market trust”. Declining demand, rather than a structural shift to green steelmaking, drove emissions reductions in China’s steel industry in 2025. Crude steel production fell below 1 billion tonnes (-4.4% yoy) for the first time since 2020, substantially larger than the reductions expected from the policy target.

Reviving green steel ambitions demands a structural shift away from carbon-intensive blast furnace-basic oxygen furnace (BF-BOF). Raising the electric arc furnace (EAF) share to 15–20% by 2030 could reduce BF-BOF steel production by 80–120Mta. CREA flags that China’s steel sector decarbonisation could significantly outperform national benchmarks. Under a prioritised EAF transition and increased scrap steel recycling, steel sector emissions, which peaked in 2020, could go on to fall to nearly 37% below peak levels by 2035, greatly outpacing China’s updated Nationally Determined Contribution (NDC) target of a 7–10% drop for economy-wide net emissions. We need greater green steel demand pull and partnerships with key customer groups e.g. the Chinese auto sector, but it is very early days in terms of substantive progress. Progress on the EU CBAM is happening, and with that we need to see great momentum building talk towards “A path to an Asian CBAM.”

>>> See Climate Energy Finance’s recent op eds on China’s decarbonisation leadership and its strategic positioning in the current global energy crisis, including lessons for Australia:

• Associate Professor Marina Zhang, UTS-ACRI, in The Interpreter, from her foreword to CEF’s Raw Power report, cited above: China’s $120bn minerals blitz – and what Australia stands to lose

• Tim Buckley in Climate and Capital Media: While the US goes to war for oil, China rolls out clean energy roadmap

• Tim Buckley and AM Jonson in The Energy: Lessons for Australia from the global energy crisis

• Matt Pollard in Renew Economy: In the case of critical minerals, China did not take our lunch – we left it on the table

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1 China National Energy Administration, The National Energy Administration released national electricity statistics for January-February 2026, 25 March 2026

2 Ministry of Finance National Budget report, 5 March 2026

3 EMBER, China Electricity data

4 National Bureau of Statistics of China, National Economy Got off to a Robust and Promising Start in the First Two Months, 16 March 2026

5 Benchmark Mineral Intelligence, Charles Lester, March 2026

6 Henry Sauderson of Volt Insight, China is betting big on energy storage — in the form of water, 7 March 2026

7 Bloomberg, China to Tighten Air Quality Rules That Have Helped Slash Smog, 25 February 2026

8 Bloomberg, China’s New Law Signals Xi Won’t Curb Environmental Ambitions, 13 March 2026

9 Dialogue Earth, Can China’s carmakers drive momentum towards greener steel? 26 March 2026

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