Energy Insider: Coal Consumption to Peak ‘Around 2028,’ China to Build More Virtual Power Plants

[para. 1] China is focusing on expanding its climate and energy strategies, emphasizing projects such as virtual power plants (VPPs), predictions on coal consumption peaking, growing energy demands due to AI development, and the launch of a hydrogen corridor by Sinopec. These highlights reflect the nation’s push toward modernizing its energy system and transitioning to sustainable energy sources.

[para. 2] One major focus is the development of virtual power plants (VPPs) to improve the grid’s ability to integrate wind and solar energy while reinforcing energy security. VPPs, unlike traditional power plants, do not generate electricity physically but use digital technologies to balance and optimize power loads from various resources like energy storage, EV charging stations, and air conditioning systems. By 2027, China plans to build over 20 gigawatts (GW) of VPPs and introduce policies for market integration. By 2030, the total capacity of VPPs is expected to exceed 50 GW, with new business models and applications emerging. These steps, outlined in national policy, align with China’s 2024-2027 plan to modernize its power system [para. 3][para. 4].

[para. 5] On coal consumption, China's usage—the world’s highest— is projected to peak around 2028. It will then remain steady for five to ten years and decrease starting around 2035 due to the continued expansion of wind, solar, and hydro resources. The next decade signifies a transitional phase as the coal sector may halt its growth and potentially shrink. Nevertheless, coal accounted for 53.2% of the nation’s energy mix in 2022 and remains a major contributor to emissions despite the rapid growth of renewables in recent years [para. 6][para. 7].

[para. 8] Meanwhile, China’s artificial intelligence (AI) ambitions are driving up power demand. By 2030, data centers are expected to consume 240 terawatt-hours (TWh) of electricity, marking a dramatic 170% growth from 2024. This electricity consumption will be larger and faster-growing than that of the U.S. and Europe, with per capita data center energy use expected to triple in China by 2030. While China’s use will surpass Europe’s, it will still trail significantly behind the U.S. This growth reflects China’s intent to integrate AI across various industries, such as electric vehicles, smartphones, and robotics, causing increased pressure on the national power grid. To address this, China is constructing large data centers in its western regions under the east-to-west computing resource transfer project [para. 9][para. 10].

[para. 11] Additionally, Sinopec, a state-owned energy giant, recently initiated a hydrogen corridor in Southwest China, providing infrastructure to support low-carbon transportation for fuel-cell-powered heavy vehicles. The corridor, spanning 1,150 kilometers, connects Chongqing to the port of Qinzhou in the Guangxi Zhuang autonomous region and features four hydrogen refueling stations. This project aims to promote green transportation in China and foster sustainable collaboration with ASEAN countries, as Guangxi acts as China’s gateway to its ASEAN trading partners. The hydrogen corridor is also expected to contribute to the green development of China’s Belt and Road Initiative in the region [para. 12][para. 13].

[para. 14] In summary, these developments underscore China’s broader goals of transitioning toward sustainable energy systems, reducing reliance on coal, addressing rising energy demands from AI, and fostering low-carbon transportation. Each initiative reflects a strategic alignment with national policies and global environmental commitments [para. 15].