China's energy landscape is poised for a significant structural shift in 2026 as the nation inaugurates its 15th Five-Year Plan (2026-30), a pivotal period for achieving its 2030 carbon peak goal.

According to a new report from global research firm Wood Mackenzie, the year will be defined by a transition toward market-driven pricing, a strategic recalibration of renewable installations and the evolving role of coal as a balancing resource.

Power demand is expected to maintain robust growth, with a projected year-on-year increase of 5.6 percent. For the first time, China's total power generation is set to exceed the 10,000 terawatt-hour milestone, it said.

Within this massive output, renewable energy is expected to account for 39 percent of total generation, while the country's total installed capacity is forecast to grow by 14 percent.

According to the global research firm, the year 2026 marks a crucial "policy reset" year, with industry leaders focusing on clarifying policy frameworks to reinvigorate the energy sector's momentum, establishing moves toward full marketization.

Following the record-breaking installations of 2025, the pace of new renewable capacity is expected to moderate. Wood Mackenzie projects combined wind and solar additions to pull back to 318 gigawatts in 2026.

The pace of China's low-carbon transition accelerated sharply last year. Consequently, renewable generation reached approximately 4 trillion kilowatt-hours, surpassing the total electricity demand of the 27 European Union member states, said Xing Yiteng, deputy director-general of the department of development and planning at the National Energy Administration.

The year 2025 marked the most successful period for energy security and supply since the start of the 14th Five-Year Plan (2021-25), Xing said.

The energy storage sector also saw explosive growth as Beijing seeks to stabilize its increasingly volatile grid. By the end of last year, installed capacity of new energy storage in the country surged 84 percent compared to the end of 2024. Nationwide, the installed capacity of new energy storage systems that had been built and put into operation reached 136 million kilowatts, marking a more than 40-fold increase compared to the end of the 13th Five-Year Plan period (2016-20), said the NEA.

However, as China's photovoltaic industry is poised to enter a higher phase of quality-oriented growth, driven by a strategic transition from price-based competition to a paradigm in which leading enterprises leverage their core advantages in technology and scale to maintain global competitiveness, Wood Mackenzie expects installation of solar and onshore wind capacity to decline.

Offshore wind capacity, on the other hand, is set to double, fueled by a healthy pipeline of projects already under construction or approved, the consultancy said. Despite some of the headwinds, China maintains a formidable project reserve of over 1,200 GW in wind and solar, sufficient to meet demand for the next three years, it said.

Wood Mackenzie also said grid constraints and environmental approval limits might push developers from standalone projects toward integrated solutions, such as combining industrial solar with energy storage. The report highlighted a paradoxical trend in coal power. Net new coal capacity will likely hit a record high in 2026 as projects approved since 2021 reach completion.

However, this is expected to be coal-fired power generation's "last hurrah" in terms of capacity expansion. Between 2027 and 2030, new additions are projected to shrink at a negative compound annual growth rate of 38 percent, it said.

"Coal is undergoing a fundamental transformation," said Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University.

"It is shifting from being the primary power source to becoming a flexible, peak-shaving and balancing resource that ensures the stability of a grid increasingly dominated by volatile renewables."

While energy storage capacity is projected to grow 30 percent in 2026, the industry faces a deepening contradiction between rapid scale expansion and weak profitability. Establishing a sustainable, market-based profit model will be a top priority for 2026 to encourage private capital participation, Wood Mackenzie said.