China’s energy sector is getting cleaner and dirtier at the same time. The country added record capacity in wind, solar, and energy storage last year. Yet fossil fuel power generation also hit a new high. Economic growth and energy transitions don’t always sit well together.
Despite aggressive investments in renewables, China’s power sector recorded a 1.5 per cent increase in thermal power output, primarily from coal, in its energy mix last year, according to official data. The increase in fossil fuel output reflects pressures from rising electricity demand, which has outpaced GDP growth for the fifth straight year.
One driver of this is artificial intelligence. AI is highly energy intensive and gets more so as models become more complex and widely deployed. Broader adoption of automation across industries, from logistics to manufacturing, is also increasing energy demand. The expansion of 5G networks, data centres and cloud computing to support this shift soaks up electricity. These energy-intensive sectors have become increasingly important for China as it builds up its position vis-à-vis its main strategic rival, the US.