CEF CHINA: Electricity Sector Decarbonisation Slows in 2026 

Further to our last newsletter, China’s domestic electricity sector decarbonisation momentum slowed further in May 2026, with a 70% yoy decline in solar installs year-to-date. Against that, China’s going global has accelerated, with cleantech exports surging post trump’s war on Iran as countries seek energy independence.

CEF CHINA MONTHLY: ELECTRICITY MOMENTUM SLOWS IN 5MCY2026

Tim Buckley & Li Ang, Climate Energy Finance

01 July 2026

Previous CEF monthly updates here. 

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

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CEF CHINA: ELECTRICITY SECTOR MOMENTUM SLOWS SO FAR IN 2026 

China’s domestic electricity sector decarbonisation momentum has slowed dramatically in terms of near term variable renewable energy installs. For the month of May 2026, renewable energy capacity adds were down 88% year-on-year (yoy) after the all time record high in May 2025, which reflected a surge as the old renewables policy support ended. While variable renewable energy generation is still up 10.8% yoy YTD in 2026, total power generation in the same time frame was up +5.7% yoy (reflective of a still very robust Chinese economy), driving a +3.6% yoy increase in thermal power generation. EMBER reports China’s monthly cleantech exports (solar, batteries, EVs) have surged 25% since the start of the year to US$25bn per month post Trump’s war on Iran, and Chinese cleantech leaders express clear intent to accelerate their ‘Going Global’ strategies.

China’s economy remains rock solid in the face of Trump’s war on Iran; electricity demand grew +6.9% yoy in the month of May 2026 - Figure 1. 🇨🇳

⚡️Electricity demand grew +5.7% yoy YTD May 2026, +6.9% yoy in the month of May 2026.

☀️Solar generation is now the #2 fuel source at 12.8% of China’s total YTD 2026, and up ⬆️ 21.8% yoy YTD, ahead of wind at 12.2% share at #3 (generation flat yoy YTD 2026). 

🪨Coal power generation still dominated at 55.1% share YTD 2026, and given total demand growth is still exceptionally strong, coal power generation is +3.6% yoy YTD.

🔋 China's government has set a target of increasing the installed capacity of battery storage to 180GW by 2027, although this looks very conservative given China's installed capacity has doubled annually in recent years, reaching 140GW by 2025. In January-May 2026, China's combined EV and energy-storage battery output totaled 863GWh, up 51.9% year-on-year (CNEVPost). Interesting to see the Three Gorges Group's Jimsar 1GW solar plus 200MW/1GWh vanadium flow battery (VFB) energy storage hybrid project in Xinjiang officially enter commercial operation in June 2026.

🚗 ice car sales -20% yoy YTD 2026, having peaked back in 2017. China’s annual ICE car sales halved in the 8 years to 2025. China saw Trump’s oil attack coming and prepared strategically.

The net new capacity installs figures for the month of May 2026 were disappointing, marking a now five month run of results YTD 2026 that are down significantly. For the month of May 2026, total capacity installs were ‘just’ 18.5GW, down a massive 85% yoy. Whilst China continues to add record amounts of new thermal generation capacity (adding 4.4GW in the month of May 2026) to balance out variable renewable energy generation, solar installs of 8.7GW were down 91% yoy, and wind installs were 3.8GW, down 86% yoy - Figure 2. 

Year to date to May 2026, renewable energy capacity installs are 88.7GW, down 64% yoy. Barring a major turnaround in the last 7 months of this calendar year, this puts China in line to report the first decline in China’s renewable energy capacity additions in over a decade. From a climate science perspective, there is nothing redeeming in these figures - net new thermal capacity adds of 32.4GW YTD 2026 are up 85% yoy.

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15TH FIVE YEAR ENERGY SECTOR PLAN TO 2030

China’s National Energy Administration (NEA) and National Development and Reform Commission (NDRC) last week released its 15th Five Year Plan to 2030 for the energy sector. While it targets for China to generate 50% of its electricity by 2030 from zero emissions sources, up from 42% currently, the continued strong economic growth in China couples with the progressive electrification of everything to mean China has made no advances to its previous target for coal use to peak by 2030. Global Energy Monitor tracks China’s continued expansion of its coal-fired power plant fleet, a major headwind to China’s delivery of alignment with the climate science.

Trump’s war on Iran has seen China double down on coal-to-chemicals and coal-to-liquids as it accelerates energy independence as a higher priority than decarbonisation. 

A strong Carbon Brief and separate CREA review, including highlighting the critical need for China to drive energy efficiency a lot, lot harder.

June 2026 also saw the NDRC release its "Notice on Launching a Three-Year Action Plan for Energy Conservation and Carbon Reduction Transformation in Key Industries".

CEF trusts China continues to set targets that are expected to be significantly exceeded. We hope so, the world can't afford for China to increase coal usage, given China already produces and consumes more than half the world’s total coal, even as it produces and consumes half the world’s steel.

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CHINA’S CLEANTECH EXPORTS SURGE

As mentioned above, EMBER’s monthly China Cleantech Exports tracker shows that China exported a record US$25bn per month in April and May 2026 of solar, batteries, EV, wind and heating equipment. The first three months of 2026 was running at ~US$20bn per month, showing that China’s cleantech exports received a massive boost from Trump’s war on Iran as nations globally responded to hyperinflationary fossil fuel import prices and threats to security of supply by accelerating deployments of domestic zero emissions energy solutions - Figure 3.

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AUSTRALIA’S AUSTRADE, RECAP AND SEC DELEGATION TO CHINA

CEFs meetings in China last week with cleantech leaders ranging from XCMG to BYD Trucks, China State Grid, Xiaomi and Sigenergy all report a concerted focus on “Going Global’ as a top priority, both via cleantech exports and by establishing overseas manufacturing bases to reduce geopolitical risks to exports. CEF joined an Australian delegation jointly led by Austrade, RECAP and the SEC, which started at the Fourth China International Supply Chain Expo (CISCE). CEF’s review is available here.

Important to note the new 2026 Lowy Institute Poll shows that a clear majority of Australians see China as more of an economic partner than a security threat, marking a significant shift in sentiment toward the Asian superpower, even as the US’s standing collapses under Trump. Only 31% of Australians trust Washington to act responsibly in the world, a new low. A real time geopolitical re-alignment towards Australia’s #1 trade partner.

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MINING AND FREIGHT ELECTRIC VEHICLES

China is the world leader in deploying electric trucks, with EVs holding a ~20% share of new trucks sales over the last year. 

June 2026 saw the Chinese government set a new sales target for new energy heavy trucks. A plan by the Ministry of Transport calls for NEVs, which include plug-in hybrid electric vehicles (PHEVs), battery-electric vehicles (BEVs) and other zero-emission vehicles, to account for 40% of total heavy-duty truck sales in the country by 2030. This includes plans to establish an integrated transportation charging and battery swap network (Just Auto, Michael Barnard).

Electric trucks make up about 4% of new vehicles across the European Union and about 1% in the UK, although this looks set to accelerate following the June 2026 announcement of a tie-up between UK energy supplier Octopus Energy Group and Chinese battery manufacturer CATL, with a focus on building out a European network of battery-swapping hubs for trucks. CATL has built out a network of 1,600 charging stations across China in the last five years.

We note SANY Australia announced this week their largest-ever to-date single export order globally of EV trucks. SANY estimates each truck reduces costs by ~ US$26,000 pa and cut ~100t of CO₂ pa.

CEF visited the XCMG Group’s largest mining equipment manufacturing facility last week, as well as the adjacent XCMG / BYD 30GWh pa truck battery manufacturing factory. Amazing to see first hand the massive aspirations of the #1 truck OEM in China (#3 in the world, for now!). XCMG’s 2025 revenue reached Rmb90bn, ⏫ 897% since 2019! 2025 Net profit was Rmb4.9bn. XCMG’s R&D investment in 2025 was Rmb10.2bn (A$2bn) and XCMG holds 12,715 patents including 4,798 domestic & 366 international invention patents. XCMG’s 15th FYP for Mining Equipment Strategic Plan targets to treble mining machinery sales to US$6bn pa by 2030, lifting international sales share to 60% (from 40% in 2025), with new energy vehicles rising to a 50% share by 2030. XCMG will deliver its first 240 tonne payload mining EV to Fortescue in early 2027 with the full US$1bn order due for commercial delivery over 2028-2030. CEF’s write-up and photos are available here.

>>> CEF was in the Chinese media CGTN discussing Australia-China collaborations and opportunities, alongside RECAP’s John Grimes and Ming Yang Smart Energy.

>>> CEF’s Oped in China Daily: “China’s exports offer cost-effective path to energy security”

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