Declining Coal-fired Electricity Generation in China: Lessons for Canada

Canada misunderstands China's electric ambitions - a huge error if we want to export oil and LNG to China while competing in "unconventional energy"

“But, but… COAL!”

This is the standard retort from oil bros to any claim that China is rapidly electrifying its economy. I have heard it a million times. It is not only meaningless; it betrays a fundamental misunderstanding of China’s power sector and its industrial strategy. Why should Canadians care? Because provincial and federal policymakers, much of the business community, and most of the national media share the same flawed view.

In the past, when Canada enjoyed stable trade relations with the United States, no one particularly cared. We sent roughly 75 per cent of our exports south. Our biggest customer insulated us from strategic anxiety. Canada looked inward and downward, not across the Pacific. We became comfortable. Complacent. A parochial nation content to rip and ship our abundant natural resources in exchange for prosperity.

Then Trump 2.0 arrived in the White House. Tariffs followed. Annexation rhetoric followed. Newly minted Prime Minister Mark Carney declared that the era of ever-deeper economic integration with the United States was over. Done. Fini. Canada would diversify toward Europe and Asia.

Fine in theory. Dangerous in practice.

The average Canadian knows very little about Asian energy systems. That ignorance is neatly illustrated by the confusion surrounding China’s electricity sector. Recently we learned that China is building more coal-fired power plants. At the same time, in 2025, for the first time in nearly a decade, thermal power generation actually fell. How can that be?

The dominant narrative in Canada insists that more coal plants mean deeper coal dependence. It assumes China’s massive rollout of wind, solar, batteries, hydro, and nuclear is cosmetic. That assumption is wrong.

China has become the world’s first electrostate.

It is the preeminent manufacturer of electrotech: solar modules, wind turbines, batteries, electric vehicles, heat pumps, digital controls, grid equipment. What China produces in its vast factories it deploys domestically at staggering scale and exports to the rapidly electrifying economies of the Global South. Its energy transition is not rhetorical. It is industrial.

Misunderstanding this shift is becoming economically and strategically dangerous.

Carney has declared that Canada is an emerging energy superpower—conventional through oil and liquefied natural gas, unconventional through critical minerals and technologies yet to be defined. China is cast simultaneously as customer and competitor.

That framing is a strategic blunder.

China’s electrification strategy is designed to reduce fossil fuel consumption structurally. Why expand oil and liquefied natural gas imports indefinitely when you can scale electricity generation at home and electrify transport, buildings, and industry? China may remain a customer this decade. After 2030, that assumption grows increasingly fragile.

And the notion that Canada can compete head-to-head with China in electrotech manufacturing at scale is fantasy. China is years ahead in some sectors, decades in others. We are not as nimble. We are not as coordinated. We are not as prepared.

Correcting that deficiency begins with understanding what coal is actually doing in China’s power system.

Coal’s changing role in China’s power sector

In 2025, China’s electricity demand grew by roughly five per cent. That growth was not met by coal.

Wind and solar generation surged, accounting for the overwhelming majority of net demand growth. Utility-scale solar additions alone approached 275 gigawatts. Wind capacity increased by more than 80 gigawatts. Nuclear continued its steady expansion. Hydropower provided system balance. Meanwhile, thermal generation declined.

Read that again. Demand up. Thermal output down.

This is not a statistical accident. It reflects a deliberate system architecture.

China is indeed building new coal capacity—roughly 78 gigawatts in 2025, the largest annual addition in a decade. Western observers stop there and declare hypocrisy. But capacity is not generation. A plant can exist without running at full tilt. Increasingly, that is precisely the point.

China’s newer coal plants are high-efficiency, flexible units designed to ramp quickly and stabilize a grid dominated by variable renewables. They function as insurance policies. Backup. Reliability reserves.

Crucially, China has established mechanisms to compensate these plants for availability rather than output. In effect, coal is being paid to stand by. This is not the behaviour of a country doubling down on baseload coal dominance. It is the behaviour of a country redesigning its grid around clean electricity while retaining dispatchable capacity as a buffer.

The Global North often treats China’s energy policy as crude and contradictory. In reality, it is system-level planning at enormous scale. Renewables first. Coal as a reliability service.

This is not the energy story most Canadians have been told.

The demand side: electrifying an economy

Supply-side transformation matters because demand is being reshaped in parallel.

China is electrifying transport at extraordinary speed. Electric vehicles dominate new sales. Charging infrastructure spans megacities and highways alike. Electrified mobility is becoming default behaviour.

Buildings are next. Heat pumps, smart appliances, digital energy management systems, and advanced controls are proliferating. Electricity is not merely flowing; it is being optimized in real time.

Industry, the hardest sector to electrify, is advancing as well. Electric arc furnaces, electrified process heat, digitally optimized motors, and automation are spreading through heavy industry. Where direct electrification remains difficult, electricity enables alternatives—hydrogen production, synthetic fuels, advanced materials manufacturing.

This is not about climate virtue. It is about efficiency and competitiveness.

As David Willick of Schneider Electric explains in the video interview above, combustion systems convert roughly 20 per cent of fuel energy into useful work. Electrified systems routinely exceed 90 per cent efficiency. The difference is staggering. Add digitalization and automation—real-time monitoring, optimization, and control—and the gains compound.

Electrification lowers operating costs. Digitalization increases precision. Automation improves reliability. Together they reshape industrial economics.

China understands this at a structural level. Canada does not.

Why this matters for Canada

The real strategic threat is not that China continues to build coal plants. It is that China is constructing the most electrified, efficient, and integrated industrial economy on Earth.

Electrified economies are less exposed to volatile fuel imports. They extract more economic value per unit of energy. They innovate faster along learning curves. They dominate supply chains.

Canada’s debate remains anchored in combustion exports. We assume oil and liquefied natural gas demand will persist indefinitely. We assume critical minerals will secure our place in future supply chains.

Perhaps. But perhaps not at the scale we imagine.

If China reduces fossil fuel imports structurally through electrification, export markets shrink. If China’s electrotech manufacturers continue to outcompete Western firms on cost and scale, Canada’s aspiration to become an electrotech powerhouse faces harsh reality.

This is not an argument for copying China’s political model. It is an argument for recognizing its economic trajectory and the subsequent risk to Canada’s energy superpower strategy.

Canada possesses real advantages: abundant low-carbon electricity, rich critical mineral deposits, engineering expertise, democratic institutions, and access to allied markets. But advantages unused atrophy.

Carney’s pivot away from automatic American integration demands strategic clarity. Diversification toward Asia requires understanding Asia’s economic direction. China is not merely a hydrocarbon customer. It is a rapidly electrifying electrostate that is reshaping global industry.

We cannot craft strategy around caricatures.

Beyond the coal caricature

“But, but… coal!”

Coal is no longer the decisive metric of China’s energy future. Its role is changing from primary engine to strategic backup. The more consequential story is electrification at scale: generation, consumption, manufacturing, export.

Canada’s perception of China lags reality. That gap creates risk. Trade strategy, industrial policy, and energy planning built on outdated assumptions will fail.

China is reducing fossil fuel dependence not by rhetoric but by design. It is building an economy where electricity does the work that combustion once did and does it more efficiently.

If Canada intends to compete in that world, or even to trade effectively within it, we must begin by understanding it. And that understanding starts by letting go of simplistic arguments about China and coal.