CEF CHINA: ELECTRICITY SECTOR 1HCY2026 UPDATE

Further to our last newsletter, China’s domestic electricity sector decarbonisation momentum continues, but at a slower pace after the record 2025.

CEF CHINA MONTHLY: ELECTRICITY MOMENTUM SLOWS IN 1HCY2026

Tim Buckley & Li Ang, Climate Energy Finance

28 July 2026

Previous CEF monthly updates here. 

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

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CHINA’S DOMESTIC ELECTRICITY SECTOR DECARBONISATION MOMENTUM MODERATES

Despite the reported 2QCY2026 GDP slowdown to 'just' +4.3% yoy growth, China’s economy remains solid in the face of Trump’s war on Iran; electricity demand grew +4.9% yoy in the month of June 2026 - Figure 1. 🇨🇳

⚡️Total electricity demand grew +5.5% yoy YTD June 2026, +4.9% yoy in the month of June 2026.

☀️ Solar generation is now #2 fuel source at 13.4% of China’s total 1HCY2026, and up ⏫ 22.6% yoy YTD, ahead of wind at 11.5% share, with wind generation up just +0.6% yoy YTD.

🪨 Coal power generation still dominated at 54.2% share in 1HCY2026, and given total demand growth is still strong, coal power is +3.1% yoy YTD (+0.8% yoy for the month of June 2026).

The pace of capacity expansion has slowed in 1HCY2026 relative to the frenetic rate of 1HCY2025 - Figure 2. 

China added 38.4GW of net new thermal capacity in the first half, an unsustainable +49% yoy. The thermal capacity utilisation rate fell to a record low 43.2% in 1HCY2026 (down from 44.5% in 1HCY2025), but this is cold comfort. Thermal progressively losing market share is not the solution; we need zero emissions generation to grow more than the total electricity demand grows, each and every year, as it did for the first time in CY2025 (-0.8% yoy).

China added 72.1GW of new solar in 1HCY2026, 66% less than in 1HCY2025, although the pace of decline slowed to -13% yoy in the month of June 2026.

China added 38.6GW of new wind in 1HCY2026, 25% less than in 1HCY2025. June 2026 saw 13.6GW of new wind added in the month, suggesting a more balanced wind-solar ratio is underway after the solar boom of 2025. Including 6GW of new hydro capacity, total renewables capacity added in 1HCY2026 was 116.7GW, 74% of total capacity added (76% including nuclear).

🔋 China's government has set a target of increasing the installed capacity of battery storage to 300GW by 2030, although this looks very conservative given China's installed capacity has doubled annually in recent years, reaching 140GW by 2025. Ember has released a new China BESS report examining battery trends.

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OTHER CHINA ENERGY SECTOR DEVELOPMENTS OVER JUNE/JULY 2026

EV SALES

🚗 2 million electric vehicles were sold globally in the month of June 2026 (+7% yoy), bringing YTD 2026 global EV sales to 9.6 million. China NEV sales were 1.0m, -11% YoY in the month of June 2026. China’s vehicle manufacturers continue to accelerate their EV export pivot even as the domestic market remains down 14% YTD (Benchmark Mineral Intelligence) relative to the overall auto market down -20.2% yoy YTD.

July 2026 saw Hainan province in China announce in its "Beautiful Hainan 15th Five-Year Plan" that it will stop selling new internal combustion engine (ICE) vehicles by 2030, SCMP reports. This makes Hainan the first province in China to announce such a measure. This decision provides an insight into future national policies.

🚚 For heavy duty trucks, 1HCY2026 saw a record high share of 55% of total sales - Figure 3.

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15th FIVE YEAR ACTION PLAN FOR CARBON PEAK TARGETING

July 2026 saw the State Council issue the 15th Five-Year Action Plan for Carbon Peak Targeting, to “achieve carbon peaking, and accelerate the comprehensive green transformation of economic and social development.”

This plan sets out numerous targets and policies, including accelerating the adjustment of the energy structure to “vigorously promote the development of non-fossil energy.” Continued development of HVDC transmission grid capacity is targeted, as is a more nationally integrated electricity system.

Grid firming capacity is a key target, with PHS of 160GW, 300GW of BESS and 50GW of VPPs by 2030 targeted.

The target aims to ensure all new electricity generation is sourced from zero emissions capacity, and coal capacity additions are rationally controlled to change coal power into a supporting role.

The plan aims to deepen the green and low-carbon transformation in all key areas, including giving a full focus to the supporting role of the carbon market, and deepen international cooperation.

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15th FIVE YEAR PLAN FOR BUILDING A BEAUTIFUL CHINA

June 2026 saw the State Council issue the 15th Five-Year Plan for Building a Beautiful China, stating: “We will coordinate industrial restructuring, pollution control, ecological protection, and climate change response, and synergistically promote carbon reduction, pollution reduction, greening, and growth. We will continue to deepen the battle against pollution and optimize the ecosystem, accelerate the comprehensive green transformation of economic and social development”. By 2035, “net greenhouse gas emissions across the entire economy will decrease by 7-10% from the peak, and efforts will be made to do even better.” This covers all GHG emissions (non-CO₂ greenhouse gases are finally moving into the focus), plus soil, water and air pollution. The plan targets a 3% reduction in carbon emissions per unit of product across sectors covered by China's national ETS by 2030, not big ambition, but a start. 

CREA’s Belinda Schäpe discusses.

July 2026 saw the FT report that China’s air pollution levels have more than halved since the peak of 2013, to be now just under the national target of 30 micrograms per cubic metre by 2030. But at this level, it remains still six times higher than World Health Organization guideline.

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RECORD HIGH CHINA CLEANTECH EXPORTS IN JUNE 2026 - US$26.7BN

The biggest beneficiary of Trump's war on Iran is China. China's cleantech exports in 2QCY2026 ran at US$25bn per month, up by 25% from the record ~US$20bn per month in the 1QCY2026 and US$16-18bn per month in the 1HCY2025. The month of June 2026 was a record high US$26.7bn.

While this is a boost to China's leadership in zero emissions industries of the future, it is also a boost to the nations importing high quality, low cost EVs, solar panels, batteries, ground heat pumps and wind turbines so they can build energy independence and reduce their addiction to fossil fuel imports, permanently. And the majority of these exports are going to the Global South, so even as the US is abrogating its global leadership responsibilities, China is building its standing even as it supports other nations to deliver on their Paris Agreement commitments. The "World -1", for now.

China's exports of batteries and EVs are booming, while grid exports are building, solar in value terms is down vs the highs of 2-3 years ago (as unit prices keep dropping i.e. exporting deflation) - Figure 4.

🏭 Bloomberg reports shipments of lithium batteries and wind turbines increased by ⏫ 38% yoy and ⏫ 36% yoy, respectively, over January-June 2026.

⚡️China exported 2.39 TWh of electricity to ASEAN in 1HCY2026, +42.9% yoy, SCMP reports.

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EU-CHINA ENERGY AND CLIMATE ENGAGEMENT

Belinda Schäpe at CREA highlights the encouraging signals for EU-China energy and climate engagement as EU Energy Commissioner Dan Jørgensen met China's National Energy Administration Director Wang Hongzhi in Beijing to discuss energy transition policies, electrification, and bilateral cooperation, as confirmed by China’s NEA. 

To CEF, as we shift to cooperation on the Paris Agreement in the new “world -1” paradigm, it is critical that the EU and China collaborate to show true global climate leadership.

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