Beijing—China’s coal-fired electricity generation experienced a surprising downturn in the first quarter of 2025, perhaps signaling a meaningful shift in the world’s largest coal-consuming nation. This decline,more than just a seasonal fluctuation,suggests a structural change in china’s energy landscape.

Coal generation decreased by approximately 4.7% year-over-year,outpacing the overall grid electricity supply decline of just 1.3%. Though, electricity demand actually increased by 1%, raising questions about the underlying factors at play.

The modest decline in grid electricity supply was primarily confined to january and February, months characterized by warmer-than-average temperatures that softened heating requirements. This suggests that the reduction in coal-generated electricity was not primarily driven by a widespread drop in economic activity or power use, but rather by underlying transformations in China’s energy supply.

Steel Sector Stability Amidst Energy Transition

Interestingly, coal usage within China’s steel sector edged upward by around 2%, driven by stable crude steel production. This stability in steel production, often a reliable indicator of industrial economic activity, suggests that China’s broader economic fundamentals remained solid, even as coal-fired electricity generation declined.

China’s steel industry saw a notable increase in exports during the first quarter of 2025, rising approximately 6% year-over-year to reach 27.4 million tonnes. This robust export performance occurred despite ongoing global trade tensions and heightened tariff barriers, particularly from Western markets. The strong export figures indicate resilience within the industry, reflecting competitive pricing and continued global demand for Chinese steel products.

Concurrently, China’s steel sector is undergoing a gradual but meaningful shift toward electric arc furnace (EAF) technology, which uses China’s 260 to 280 million tons of domestic scrap metal rather than traditional iron ore and coal-intensive blast furnaces. The sustained strength in steel exports, coupled with a strategic transition toward cleaner EAF production, underscores a more lasting trajectory for China’s steel sector, even amid external economic pressures and internal policy constraints.

The steel story aligns with official Chinese assertions of 5.4% growth for Q1. While some suggest china’s economy is struggling, the underlying statistics of increased electricity and steel demand suggest otherwise.

The Rise of Distributed Solar: A Hidden Revolution

To understand the apparent paradox of declining coal-generated electricity alongside growing electricity demand, it is crucial to examine the explosive growth of distributed, behind-the-meter solar photovoltaic (PV) systems.

According to China’s National Energy Administration (NEA), the country added roughly 120 gigawatts (GW) of new distributed solar capacity in 2024 alone, reaching approximately 370 GW of cumulative installed capacity by the year’s end. This growth trend continued aggressively into the first half of 2025, as developers rushed to commission installations before scheduled tariff reforms took effect. China’s behind-the-meter solar capacity is likely to exceed 430 GW by mid-2025, adding an enormous amount of hidden, decentralized electricity generation capacity that isn’t fully reflected in official generation statistics.

As David fishman of the Lantau Group, a Shanghai-based china energy expert, discussed, China implemented a Whole County Rooftop Solar Promotion Program. Developers had to bid on an entire county’s rooftop solar at once, committing to putting solar on 50% of government buildings, 40% of public institutions, 30% of commercial and industrial rooftops, and 20% of rural homes. That’s paid off massively in the densely populated southeast of the country where demand is highest and free space is lowest.

The Invisible Terawatt-Hours

Industry analysis from Ember and Climate Energy Finance indicates that this rapid proliferation of distributed solar has significant implications. Unlike traditional grid-connected utility-scale plants, distributed solar generation is often omitted or severely undercounted in official generation statistics produced by entities like China’s National Bureau of Statistics (NBS). As a result, tens of terawatt-hours (TWh) of electricity generated by these rooftop systems are effectively invisible when interpreting China’s national grid-supplied electricity data.

This has profound implications: the reported 1.3% decline in grid electricity generation does not represent true reduced consumption, but rather a substitution effect—electricity generated behind the meter directly displacing grid-supplied power.

in the first quarter of 2024,behind-the-meter solar generation likely totaled around 80 TWh. By the first quarter of 2025, given significant capacity growth and better solar conditions, quarterly generation from behind-the-meter systems could have risen to between 100 and 120 TWh—an increase of perhaps 30 to 40 TWh compared to early 2024. Given that China’s reported 1.3% drop in grid-delivered electricity in early 2025 equates to roughly 30 TWh less generation, it’s reasonable to conclude that this hidden solar growth alone might account for much, if not all, of the decline.

In practical terms, rooftop solar capacity additions have invisibly flattened the growth in China’s grid electricity demand, effectively masking what would otherwise have been modestly growing consumption.

A Structural Conversion

China’s dramatic shift toward distributed solar is not just a statistical curiosity; it represents a major structural transformation in the world’s largest electricity market. According to analysis from the China Electricity Council (CEC), renewables like wind and solar accounted for the vast majority of incremental electricity demand growth in recent years, a trend that is only accelerating.The rapid expansion of rooftop solar is directly displacing traditional fossil-fuel generation, especially coal, reducing both emissions and dependence on centralized fossil infrastructure.

This decentralization of generation, while complicating data interpretation, substantially advances China’s transition away from coal.

Peaking Coal and a Sustainable Trajectory

Looking ahead,there is strong evidence to suggest that china’s coal-fired electricity generation has now peaked after seeing very modest 0.2% growth in 2024 due to an extended heat wave combined with weaker than expected hydroelectric, entering a permanent decline trajectory. A combination of continued aggressive renewable installations—both large-scale and distributed—as well as policy mandates to peak coal consumption and emissions by mid-decade, reinforces this conclusion.

The international Energy Agency (IEA) has noted similar structural shifts globally, but China’s scale and speed are uniquely impactful. China’s policymakers remain committed to aspiring renewable capacity targets, efficiency improvements, and structural energy reforms, positioning the country for sustained coal generation declines year over year from now onward.

Implications and the Future Outlook

This quiet and partly hidden shift to behind-the-meter solar has far-reaching implications. It suggests that China’s recent electricity data must be interpreted carefully. A small dip in reported grid demand is no longer indicative solely of economic softness; it might equally reflect success in energy transition, masked by decentralized renewable generation.

Over the coming years, this hidden solar generation—though challenging for statisticians and grid planners—will likely accelerate coal’s decline, reshaping both China’s energy landscape and the global climate outlook. The first quarter of 2025, therefore, will likely be remembered not merely as a momentary blip, but as the pivot point toward China’s enduring transition away from coal.