China’s solar capacity is set to surpass its coal capacity for the first time this year, marking a significant shift in the country’s energy landscape. According to the China Electricity Council, by the end of 2026, wind and solar power will account for nearly half of China’s power capacity. Including hydro and nuclear power, clean energy will constitute nearly two-thirds of the total power capacity, while coal will make up a third.
Capacity refers to the maximum amount of electricity a power plant can produce. Coal plants typically operate closer to their maximum capacity than wind or solar plants. Therefore, despite the decline in coal capacity, coal still accounts for about half of all power produced in China. However, this is beginning to change.
For years, China has been building renewable power and fossil power in tandem. However, solar and wind are no longer just supplementing coal; they are displacing it. Even as China continues to build new coal plants, the average plant is burning less coal. Competing with cheap solar and wind, a large share of coal plants are now operating at a loss. Under the latest government guidelines, coal will begin to serve a more limited role, acting as “peaker” plants to meet sudden spikes in power demand or gaps in the supply of wind and solar.
Perversely, the impending decline of coal has spurred a rush to build new plants. Facing the prospect that Chinese leaders will further limit the use of coal, developers submitted a record number of proposals to build or reactivate coal power plants last year, according to a new analysis.
Lauri Myllyvirta, an analyst at the Centre for Research on Energy and Clean Air, believes that China is now at a crossroads. “You have to either put brakes on coal power plant construction and start closing down older coal power plants, or you have to slow down the clean energy expansion,” he said in an interview with Yale Environment 360. “That’s the choice that China’s policymakers are likely going to have to make within the next year or two.”
For the agriculture sector, this shift towards renewable energy has several implications. Firstly, the increased use of renewable energy can lead to more sustainable and environmentally friendly agricultural practices. Renewable energy can power agricultural operations, reducing the sector’s carbon footprint. Additionally, the excess energy generated by renewable sources can be used for activities such as water pumping, irrigation, and grain drying, improving overall efficiency and productivity.
Moreover, the decline in coal use and the shift towards renewable energy can have a positive impact on the environment, leading to improved air quality and reduced greenhouse gas emissions. This, in turn, can benefit the agriculture sector by reducing the negative impacts of climate change, such as droughts, floods, and extreme weather events, which can damage crops and livestock.
For investors, the shift towards renewable energy in China presents both opportunities and challenges. On one hand, the rapid growth of the renewable energy sector offers significant investment opportunities. The Chinese government’s commitment to increasing the share of renewable energy in the power mix is expected to drive demand for renewable energy technologies, creating opportunities for investors in this sector.
On the other hand, the decline in coal use and the uncertainty surrounding the future of coal power plants pose risks for investors in the fossil fuel sector. As coal plants become less profitable and are increasingly used as peaker plants, investors in this sector may face significant losses. Furthermore, the Chinese government’s potential decision to limit the use of coal could further exacerbate these risks.
In conclusion, China’s shift towards renewable energy is a significant development with far-reaching implications for the agriculture sector and investors. While this shift presents opportunities for sustainable and environmentally friendly agricultural practices and investment opportunities in the renewable energy sector, it also poses challenges and risks for the fossil fuel sector. As China’s policymakers grapple with the choice between continuing to build coal power plants and slowing down the clean energy expansion, the future of the country’s energy landscape, and its implications for the agriculture sector and investors, remain uncertain.