China's power use in the fourth quarter is expected to exceed the third quarter, with total consumption for 2025 projected to rise by about 5% on the year to 10,400 TWh, according to a forecast released by the China Electricity Council (CEC).

However, the 5% year-on-year increase marks the second downward correction from the approximately 6% growth forecasted in early 2025 reports, following an adjustment to 5-6% in its semi-annual review.

Despite breaking the 1,000 TWh threshold in both July and August due to high temperatures, this spike in power consumption did not significantly translate to overall growth.

In Q3, China's power use growth showed a marked slowdown after reaching an 8.6% high in July, with the average growth for the quarter dropping to just 6.03%. This was notably lower than the year-ago 7.7%, and 6.77% seen in the same period in 2023, according to data released by the National Energy Administration (NEA).

The slowdown can be attributed to two main factors. Firstly, as the power base grows, China's power use growth is experiencing diminishing returns. Newly added power capacity is insufficient against the backdrop of slower economic growth and export headwinds, resulting in a narrowing year-on-year increase.

Secondly, the country is undergoing an economic transition. While power use in emerging industries continues to rise, it has not been able to fully offset the declines from traditional sectors.

It is worth mentioning that the residential power use was underperforming during the period, despite record-breaking consumption in July and August. This was especially evident in September, when average temperatures were higher than in previous years, yet residential power demand did not follow the expected trend. Similarly, power consumption in the tertiary sector remained weak.

In Q3, average monthly power use in the residential sector grew by just 5.93%, a significant drop from 19.13% in 2024, while the tertiary industry saw an 8.07% increase, down from 10.57% last year. These declines reflect a lack of willingness and ability to consume energy among Chinese residents.

The average monthly growth rate of China's Consumer Price Index (CPI) in Q3 was -0.23%, while the growth in total retail sales of consumer goods also slowed, indicating sluggish domestic demand.

Uncertainty in resident income expectations, pressure in the labor market, and the diminishing Pigou effect from the ongoing adjustments in the real estate sector are all factors contributing to this trend. Moreover, energy-saving behaviors and the shift toward online consumption models also played a role in moderating demand.

In response to these trends, China has introduced measures to stimulate domestic demand.

However, the narrower growth in power consumption is seen as part of a normal economic transition, affected by both weather conditions and government policies. Despite the short-term slowdown, industry insiders remain optimistic about the long-term growth trajectory, believing that power use will continue to rise as the economic structure adjusts.

The newly installed power capacity in 2025 is expected to surpass 500 GW, setting a record high, with the combined capacity from wind and solar power likely exceeding 400 GW. Under China's "dual carbon" target, new energy sources continue to develop rapidly.

By year-end, China's total power capacity is estimated to reach approximately 3.9 TW, reflecting a 16.5% year-on-year increase. Of this, wind and solar power combined will account for over 1.8 TW or about 46.5% of total capacity. Thermal power will contribute 1.55 TW, with coal-fired power making up about 1.27 TW.

Thermal coal supply and demand remain balanced, providing a stable foundation for meeting power needs during the winter peak demand period. However, there will be some regional tightness in supply, particularly in northern and eastern China during the peak.