China leaves room for coal growth in new five-year energy plan

China is leaving room for coal consumption to grow in the coming years, as energy security continues to outweigh climate concerns in the world's largest energy market, Bloomberg reported.

"We will always prioritise energy security," Wang Hongzhi, head of the National Energy Administration (NEA), said at a briefing on Friday introducing the country's new five-year energy plan. He credited the strategy with helping China withstand supply disruptions caused by the Iran war.

The new plan strengthens coal's role as a backup for the energy system. It calls for expanding coal resources across five existing production hubs while allowing production capacity to grow in central and eastern China. Officials also approved further expansion of the coal-to-chemicals industry.

Construction of new coal-fired power plants has accelerated since widespread electricity shortages in 2021 and 2022 prompted Beijing to reinforce coal's role as a reliable complement to intermittent renewable energy. China added 95 gigawatts (GW) of new thermal power capacity last year, the highest level since at least 2008, while applications for new permits in the first quarter of 2026 exceeded last year's record pace.

China's coal-to-chemicals industry has also expanded rapidly in recent years, partly because the powerful coal mining sector has sought to diversify demand as renewable energy gains market share in electricity generation. The sector received a further boost after the Iran war drove up prices of competing feedstocks such as naphtha and liquefied petroleum gas.

Although the new plan includes some constraints on fossil fuel expansion, analysts view them as relatively weak. The approach continues China's reliance on rapid clean energy deployment to reduce emissions, rather than imposing stricter top-down controls.

The roadmap reaffirmed a target first set out in China's broader five-year plan released in March, calling for coal consumption to peak during the plan period. That is a less ambitious goal than President Xi Jinping's earlier pledge to reduce coal use. The government has also yet to announce a timeline for completing its dual carbon control system, which is expected to include an economy-wide emissions cap.

While China remains committed to lowering emissions and achieving carbon neutrality over the long term, officials have signaled that the transition will be gradual.

The target of sourcing 50% of electricity from clean energy still allows fossil fuel-based power generation to rise by about 10% during the plan period, according to the Centre for Research on Energy and Clean Air (CREA). The new carbon intensity target also leaves considerable room for fossil fuel use, despite emissions from the power sector already declining last year.

"The headline targets are relatively conservative and should be read more as policy floors than as major new ambition," Qi Qin, a China analyst at CREA, was quoted as saying by Bloomberg.

Storage options

Coal development should be limited to the minimum level required, NEA Deputy Director Wan Jinsong said at the briefing. The plan also calls for coal-fired power plants to shift from serving as baseload generation to providing greater flexibility to support renewable energy.

At the same time, China plans to expand other technologies that can improve grid flexibility.

The country will "vigorously develop new energy storage and other flexibility capabilities, and minimise dependence on fossil fuels as much as possible," Wan said.

The plan raises China's pumped hydro storage target to around 160 GW, up from 66 GW at the end of last year, while battery storage capacity is expected to increase to 300 GW from 136 GW.

"Flexibility is moving from a supporting function to core energy infrastructure," Kevin Tu, managing director of Agora Energy China, was quoted as saying by Bloomberg.

Editing by Reiner Simanjuntak