China poised to beat 2030 carbon target: report

This also assumes the industry adds 300GWs of renewable capacity each year.

China is on track to beat its 2030 carbon target, provided power consumption growth does not exceed 4-5% annually over the next five years, according to S&P Global Ratings.

This also assumes the industry will add 300 gigawatts (GW) of renewable capacity each year, similar to its pace during the past few years.

However, S&P expects renewable operators to face some volatility in profitability for the next 12-18 months.

“But slower growth in capital expenditure and the low interest environment should temper the pressure,” S&P added.

Market-based tariffs will push operators to lower prices, which will lead to lower immediate profits but ultimately make the sector more resilient with better price discovery.

Moreover, S&P noted that as coal prices continue to decline and tariffs stabilise, independent power producers (IPPs) can still generate profits as average funding costs for China IPPs have dropped 1-2 percentage points over 2020-2024.

“Given that coal will continue as the key baseload support, IPPs will steadily enhance their thermal power capacity with stricter emission controls,” S&P said.

According to the report, unit coal consumption has decreased from 335 grams per kilowatt-hour (g/kWh) in 2010 to 300 g/kWh in 2024.

“In the coming decade, significant advancements are likely in grid infrastructure, power storage and hydrogen power, and provincial governments will almost certainly roll out more policies that support the renewable sector,” S&P added.