China’s fossil fuel-based power generation is projected to fall by 1.2% in 2025, marking the first annual decline in a decade, driven by record renewable capacity additions. The shift is reshaping global energy demand and commodity markets.
- Fossil fuel power output in China projected to decline 1.2% in 2025—the first drop in ten years.
- Solar capacity additions in 2025 rose 38% year-on-year, accounting for 41% of new power capacity.
- Coal-fired generation fell 2.4% in the first nine months of 2025.
- Crude oil (CL=F) and natural gas (NG=F) prices show sustained downward pressure globally.
- Energy ETF XLE dropped 3.7% in early December, reflecting investor concerns over fossil fuel demand.
- China’s carbon neutrality goal by 2060 is accelerating the transition away from fossil fuels.
China’s fossil fuel power output is expected to dip by 1.2% in 2025, the first decline in ten years, according to updated energy data, signaling a pivotal shift in the world’s largest energy consumer’s power mix. This reversal follows a decade of steady growth, now being undercut by an accelerated rollout of solar and wind capacity, which expanded by 38% year-on-year in the first half of 2025. The decline reflects policy-driven decarbonization targets and investments in grid modernization, with solar power alone accounting for 41% of new generating capacity added in 2025. Coal-fired generation fell by 2.4% in the first three quarters, while natural gas use in power generation plateaued, indicating a structural pivot rather than a cyclical dip. These trends are consistent with China’s pledge to peak carbon emissions before 2030 and achieve carbon neutrality by 2060. The shift is already impacting global commodity prices: crude oil (CL=F) traded at a 6.3% discount to historical averages, natural gas (NG=F) futures in Asia declined 8.1%, and gold (GC=F) saw modest upward pressure as investors reassess energy sector risk. Energy stocks, particularly in the XLE index, fell 3.7% in early December trading, with coal producers like Shenhua Energy and China Coal Energy underperforming. This structural change is accelerating the repositioning of global energy markets, with implications for LNG exporters, coal importers, and renewable technology manufacturers. Countries reliant on fossil fuel exports to China face long-term demand uncertainty, while clean energy firms benefit from increased policy support and infrastructure investment.