Recent tensions in trade between China and the US have interrupted a three-month ceasefire marked by significant tariff adjustments. The market momentarily felt a sense of relief. Oil prices showed signs of revival, although global GDP concerns lingered. Meanwhile, climate activists expressed unease over the potential for increased electricity consumption as Chinese industry revives, possibly at the expense of wind and solar energy integration.
On Monday, both nations unveiled temporary agreements. By Wednesday, shipping containers from China to the US will see a notable uptick. This surge—around 277% in 90-day trading—illustrates the impact of the trade dynamics between the world’s two largest economies. Such increases in trade inevitably stimulate manufacturing, consequently elevating electricity demand and the use of stable energy sources.
According to climate think tank Ember, reported by Gavin Maguire from Reuters, China’s wind and solar contributions reached 39% of total electricity supply, marking a record high—an 18% increase from early 2024. A significant factor contributing to this achievement was the temporary reduction in manufacturing activity. Yet, this dynamic is expected to change in the coming months.
Data released last month indicated a slight drop in thermal power generation, which heavily relies on coal and natural gas, thanks to the strong output from hydroelectric, wind, and solar sources. China’s National Bureau of Statistics reported a 1.3% decline in electricity demand in March, although it did see a 1.8% rise in some areas.
With the new trade agreements in place, Maguire suggests that economic growth tied to industrial activity will necessitate a reliance on traditional energy sources like coal, gas, and nuclear. Interestingly, the capacity of wind and solar energy is now surpassing that of thermal energy, but this does little to improve overall energy production.
In late April, China’s energy regulator announced that the installed capacity of wind and solar had exceeded that of coal and gas, accounting for over 50% of the total domestic capacity. Despite this, it only fulfilled 22.5% of first-quarter energy consumption. Many experts point to issues like grid inefficiencies that need updates, but the hard truth remains: stable energy generation from coal and gas tends to dominate, especially when rapid demand arises.
The expected rebound in coal and gas usage—following the trade deal—presents a challenge for climate advocates. Analysts from Ember argue that while China has made strides toward low-carbon energy, transitioning from coal at 80% of the energy mix in the mid-2000s to around 54.8% now, the interplay between stable energy sources and manufacturing is crucial. They forecast that wind and solar will meet impending electricity demands over the next five years, but might be overlooking the ongoing importance of coal and gas.
As summer approaches, electricity demand peaks, coinciding with a resurgence in manufacturing growth. This scenario could lead to an increased share of hydrocarbons in energy generation, casting doubt on ambitions for a fully renewable grid powered by wind and solar energy.
