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China's Clean Energy Transition Enters 'Building While Breaking' Phase as Fossil Fuel Demand Begins to Plateau

China is entering a new phase of its energy transition where clean electricity is beginning to replace fossil fuels across various sectors. In 2025, clean power met all of China's growth in electricity demand, causing thermal generation, primarily coal-based, to fall by 0.7% despite a 5% jump in total demand. This shift is occurring in 17 of the 26 provincial-level regions tracked by the energy think tank Ember, which together account for more than half of the nation's thermal capacity. The transition is moving beyond power plants into industrial and transport sectors. Electricity now supplies approximately 75% of final energy demand in light manufacturing, while fossil fuel use has declined significantly in sectors such as food and beverage manufacturing and textiles. In the transport sector, electric trucks now account for 26% of new sales, and passenger EVs reached 67% of new sales by June 2026. To balance the grid, China's battery storage capacity grew by 84% in 2025, overtaking pumped hydro as the primary source of installed energy storage. The administration's 15th Five-Year Plan also prioritizes the construction of clean energy bases, with regions like Inner Mongolia developing large-scale wind and solar projects to create a national modern energy economy demonstration zone.

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