The Challenges With China's Transition From Coal, To Natural Gas & Renewable Energy

The Challenges With China’s Transition From Coal, To Natural Gas & Renewable Energy

China is currently going through, and will continue to go through an energy transition period over the next few decades.

It currently relies on coal for a large % of it’s energy needs, and there are some clear barriers and challenges in the way for a transition to natural gas and renewable energy sources.

In this guide, we take a closer look at that transition, including the challenges involved.


Summary – China’s Challenges In Transitioning Away From Coal As An Energy Source

  • China currently relies heavily on coal for energy, and will continue to do so into the short term future
  • About 70% of China’s CO2 emissions come from coal, and about 14% from oil
  • China is also one of the largest users of natural gas (behind the US and Russia)
  • China leads the world in renewable energy investment, and installed wind and solar power capacity
  • But, China already has a significant investment in coal power plants, and their installed capacity for coal isn’t expected to peak before 2025
  • Along with a power grid that is currently set up for coal power plants (and now renewables for example), the Chinese transition to natural gas and certainly renewables is made difficult by challenges such as (including but not limited to) the financial profits in coal power, subsidies and protection of coal power, lax regulations on coal power, penalties that might not be harsh enough for businesses using coal power, a lack of technology to give renewable energy a performance and cost advantage over coal, a lack of infrastructure and investment to properly integrate renewables to the Chinese power grid, the potentially disadvantageous short term social and economic impact of closing down coal power plants, the impact of renewables on disposable income of citizens, the geographic locations of solar farms and other renewable setups, and renewable energy making some environmental issues worse when concentrated in a particular area.
  • There are also other challenges which you can read in the guide below
  • In terms of the transport sector, some sources also point out the logistical challenge in switching from gasoline and diesel powered cars to hybrid and electric cars when done at scale. The lithium batteries in particular can require a lot of resources to produce, can be hard to recycle (due to a range of reasons), and require the mining of metals which may face scarcity issues in the future.
  • So, overall, there are many challenges in transitioning to cleaner electricity production and cleaner transport not only for China, but the world (but obviously some are specific to China with the way their power mix, governments, energy sector, transport sector, and country is set up)

*Note – If a country is still to use predominantly fossil fuels in the short term, natural gas is preferred over coal because natural gas emits 50 to 60 percent less carbon during the combustion process ( Switching to renewable energy is obviously in many cases even better from an emissions standpoint than fossil fuels as a clean energy source.


China’s Reliance On Coal, & Subsequent CO2 Emissions

China has heavily relied on coal in the past for it’s economic development.

As a result, China’s emissions from coal consumption have only grown over time.


In the year 2000, China had:

  • 3.4 Giga tonnes of C02 emissions – which was 13.9% of global C02 emissions
  • 2.4 Gt came from coal, 0.649 from oil, 0.0598 from gas, 0.297 from cement, and 0 from gas flaring

In the year 2016, China had:

  • 10.2 Gigatonnes of C02 Emissions – which was 29.2% of global C02 emissions
  • Coal was responsible for 7.17Gt, Oil 1.38Gt, Gas 0.395Gt, Cement 1.2Gt and 0 from Gas Flaring

Coal has constituted an average of 69.9 percent of China’s energy consumption between 1985 and 2016.

As of 2016, China still consumes more coals that the rest of the world combined.

Roughly 70 percent of China’s CO2 emissions – which is more than those from all European, African, and Latin American countries combined – results from coal consumption. An additional 14 percent of its CO2 emissions come from oil



China’s Transition From Coal, To Natural Gas, & Renewable Energy

China has made investments to try to transfer from coal, to natural gas and renewables.

China also plans to expand nuclear power capacity.


  • As of 2017, China was the world’s third largest consumer of natural gas after the US and Russia.
  • China is also the third largest purchaser of liquified natural gas (LNG) from the US
  • In order to boost alternative energy usage, Beijing pledged to install “340 gigawatts (GW) of hydropower capacity, 210 GW of wind and 110 GW of solar by 2020.”
  • China plans a 16.5 percent annual increase in nuclear power capacity between 2015 and 2020
  • It is estimated that China will need to increase its target for non-fossil fuel consumption from its current target of 15 percent to 26 percent by 2020 to meet Paris Agreement targets



  • At present, China also leads the world in terms of wind and solar power capacity
  • As of 2017, renewables were generating 5.3% of China’s electricity supply



  • China is already the leading investor in renewable energy in the world, planning to invest another $360 billion by 2020



  • China says it will be the world’s biggest investor in renewables and has pledged $400 billion by 2030.



China’s Difficulties, Complexities & Challenges With A Transition Away From Coal

There are several factors which will slow the transition away from coal.

China’s difficulties, complexities and challenges it needs to address in moving to cleaner energy in the future include but aren’t limited to:

  • China still consumes (at this point) more coal than the rest of the world combined
  • China’s electricity grid currently runs mainly on coal
  • China’s installed coal capacity isn’t expected to peak before 2025
  • Much of China’s recent increase in coal consumption has been in line with economic growth objectives
  • The last 15 years’ development strategies can still influence today’s power system (so, planning for 15 years time needs to start happening now)
  • Coal power plants that haven’t reached the end of their useful life end up becoming stranded investments the quicker natural gas and renewable energy are used
  • Energy supply and cost/price problems lead to energy shortages for business and citizens – so there’s a delicate balance that needs to be smoothed out over time
  • The profit margin for coal is good, and elites are making much of this profit
  • Subsidization and protectionism are helping the coal industry
  • Several major industries are heavily reliant on coal power
  • The regulations on new investment in dirty energy and coal may not be strictly enough enforced
  • It can be cheaper to pay dirty energy and pollution fines than invest in energy and emission friendly energy solutions
  • Technology for renewable energy isn’t as economically efficient as it could be to compete in some ways
  • Current power infrastructure isn’t designed specifically for renewable variable energy, and can also lead to power loss from power already generated
  • New energy price reforms would reduce disposable income for citizens, and lead to unemployment for those employed in the coal energy sector
  • Governments would lose tax revenue they are currently getting from coal power pants
  • There could be an education gap for skilled and knowledgeable workers to transition from coal power plants to cleaner energy
  • Some renewable energy depends on suitable geographical positioning (which isn’t always available), and large areas of land for installation
  • There can actually be some negative environmental consequences of moving to renewable energy, such as degraded land
  • Both electric cars and traditional cars in China currently have similar CO2 and small particulate matter emissions
  • The lithium ion batteries used to power EVs require a huge amount of energy to produce
  • There currently isn’t adequate distribution capacity even to move quicker from coal to natural gas
  • There can be a lack of communication between government, industry/business and citizens – which can lead to frustration and implementation problems
  • There can be a cultural opposition to moving away from coal and already running energy systems
  • The overall transition can be complex and take time


Some of these challenges and difficulties expressed in more detail are: 


Specifically in transport:

  • China’s electricity grid runs mainly on coal – this is an issue for electric vehicles
  • When accounting for emissions from electrical consumption, … both electric cars and traditional cars in China have similar “CO2 emissions and PM2.5 levels per kilometer driven.”
  • Furthermore, the lithium-ion batteries used to power EVs require enormous amounts of energy to produce, up to twice as much as is needed for manufacturing a standard combustion vehicle.



  • Despite declining in relative terms, China’s coal installed capacity is not expected to peak before 2025
  • Despite China’s investment in renewable energy, China still consumes as much coal as the rest of the world combined
  • In 2016, the bulk of Chinese electricity was produced by thermal power plants, mainly coal, which accounted for 65 percent (or 3,906 terawatt hours) of the country’s total power generation
  • The industry still represented 71 percent of energy consumption in 2016, which translated into a structural hurdle to the advancement of reforms in China’s energy mix. Renewable energies, on the other hand, accounted for 25 percent of total power generation, with hydropower at 20 percent, wind power 4 percent, and solar power 1 percent.
  • … in absolute terms, installed capacity for coal is supposed to increase almost 17 percent, from 942.6 GW in 2016 to 1,100 GW in 2020.
  • The current power system is still influenced by the last 15 years’ development strategies, which – successfully – aimed for security of electricity supply to power the rapidly expanding economy.
  • There is an over capacity of coal power plants – which are essentially stranded investments
  • Because of the huge investment by the Chinese government in renewables, it’s pushed the prices for them down
  • First difficulty (market forces) – But, the profit margin of coal-fire power increased in the last years, due to low prices of coal and to a relatively stable grid purchasing price – this is a market force which helps coal
  • Second difficulty (market forces) – Energy prices in China are probably lower than they should be due to subsidiation and protectionism. Industries are also heavily reliant on coal with the current infrastructure set up and it’s difficult for them to transition to new sources.
  • Third difficulty (market forces) – due to decentralisation of environmental impact assessments of new power plants, relaxation on regulations to prevent new investments in dirty energy has increased
  • Fourth difficulty (market forces) – it has been cheaper in many cases to pay extra fees due to pollution or breaking environmental regulations than to implement energy-efficient solutions
  • Fifth difficulty (tech breakthroughs) – Technology impacts these renewable sources’ efficiency, operation and maintenance costs, and eventually, market prices. Mainly it is the infrastructure to take on new equipment.  Electricity dispatching and absorption for example is an issue because current infrastructure for power transactions doesn’t take into account the variable nature of large scale power generation from wind and solar. Xinjiang, for instance, lost 38 percent of the energy produced by wind power in 2016. Nationally, 17 percent of all wind-power generation was curtailed in 2016 and has been increasing since 2014. Moreover, China’s energy transmission lines still do not support the transference of electricity without losing a considerable amount of energy, whereas industries rely on coal, rather than electricity, to maintain their daily operation. Finally, more technological improvements are urged for cleaner coal production
  • Sixth (social welfare) – any price reform for new energy sources would reduce disposable income. Further to that, closing down existing coal power plants contributes high unemployment through loss of jobs of those who work there, and deteriorating life quality through short term loss of ability to heat homes in winter. Second, governments lose revenue from industrial taxes from decreased use of coal power plants. A relatively rapid green transition, where there is a lack of infrastructure to support the smooth substitution of energy sources alongside an education gap that does not prepare the workforce with skills required in a green economy – has negative effects.
  • Seventh (environmental resilience) – positive outcomes of a green transition are reduced air pollution, rural lands will suffer less from water contamination, and natural landscapes can endure longer. Therefore, of the four main constraints to energy reform in China, environmental resilience poses weaker barriers to the deployment of renewable energies. However, there are two repercussions worth mentioning: geographical suitability and interrelationships among environmental issues. Renewable energies depend on good geographical positioning, where the potential to generate energy outpaces the costs for installation and operation. In China, this translated into a concentration of power plants in specific areas — wind and solar power, for instance, are more advantageous in grasslands and deserts, respectively — that already suffer from soil degradation, erosion, and water scarcity, such as Xinjiang and Inner Mongolia. This leads to the second repercussion with respect to the interrelationships between environmental problems. Even though renewable energies have reversible impacts on the environment, their scale of production and installation in a concentrated area aggravates the above-mentioned problems. Consequently, because renewable sources of energy depend on bigger and bigger areas of already degraded lands to scale its production, there is a physical hazard to China’s green transition.
  • Investment in clean energy is still important, but the transition will be slower and more complex, and will take time



  • Some coal fired boiler to gas conversion programs have been put off until 2020 – when additional gas import capacity from Russia will be ready
  • A large-scale transition needs adequate gas distribution capacity
  • Households plus a number of industrial businesses will need to switch from coal to gas for heating and electricity
  • If Beijing doesn’t take care to increase the supply of coal and put a lid on fast-rising prices – there will be more shortages
  • Hebei (where coal use was at 86.6 percent in 2015, versus a national average of 63 percent) has its problems with insufficient gas distribution infrastructure
  • Last year, the local authorities converted more than 2.5 million households to gas and electricity heating from coal
  • Lack of communication between the government and the industry in the transition can also be an issue



  • Nationally, solar only generates about 2 per cent of China’s electricity and wind power a little more than 3 per cent, but much more is planned
  • China says it will be the world’s biggest investor in renewables and has pledged $400 billion by 2030.
  • the problem is much of the electricity is not getting onto the grid. It is being squeezed out by coal, which provides three-quarters of the nation’s energy needs.
  • Coal is cheap, and China is self-sufficient. And that has created a dependency
  • Coal is firmly entrenched and much of China’s business and political elites are making billions from it
  • Some say the coal culture will be a challenge to change, and top decision-makers down do not regard solar as a viable alternative yet
  • A lot of employment, a lot of incomes, a lot of GDP growth is relying on the coal industry. In the provinces the local officials prefer coal
  • Many of the massive showcase renewable projects in the outer provinces are too far away from the energy-hungry cities and industrial centres of the east, and transmission lines and the grid haven’t been upgraded to utilise the power
  • the situation is improving, but 20 per cent of renewable power that is generated is being lost.
  • In western parts large amounts of energy produced by solar and wind is wasted and not integrated into the grid, that brings a lot of losses for the companies operating the renewables
  • The other issue is cost. Renewable energy is still expensive compared to coal
  • it is only a matter of time before technological breakthroughs bring lower prices perhaps in 5 years from 2018
  • Then it will be a low-cost, clean and stable fuel of the future. In the last decade it’s already dropped from $5.00 to 40 cents a watt.
  • How effective energy reforms are, and how fast the coal culture can change – will both affect the transition









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