Why did thermal power decline as total electricity generation grew?

  • In the first three quarters of 2026, China’s thermal power generation fell 0.9% year on year; by comparison, it fell 0.3% for the full year of 2025 and rose 1.8% for the full year of 2024. Hydropower grew 3% year on year over the same period, suppressing thermal power growth.
  • Citi notes that thermal generation adjusts as electricity demand rises or falls, so when growth in total electricity generation slows, thermal power growth typically slows more markedly. Thermal power accounts for around 66% of China’s electricity generation and has recorded compound annual generation growth of approximately 4% over the past decade, making it an important driver of coal demand.

What does the decline in hydropower in September mean for thermal power going forward?

  • China’s hydropower generation rose 3% year on year in the first three quarters of 2026, but fell 18% year on year in September alone. Citi believes this may be an early signal of relatively weak hydropower over the next 9 to 12 months.
  • Hydropower accounts for around 15% of China’s electricity generation, and Citi considers it a power source capable of significantly changing the generation mix in the short term. All else being equal, lower hydropower output can make room for thermal generation, while a recovery in thermal power helps coal demand.
  • Precipitation in key river basins determines hydropower generation, and China’s rainy season usually runs from May to September. Over the past decade, the four months from June to September have contributed an average of 44% of annual thermal power generation, so changes in hydropower affect demand for thermal generation during an important electricity consumption season.

What long-term competition does thermal power face?

  • In the first three quarters of 2026, nuclear, wind and solar power generation rose 4.2%, 5.2% and 32% year on year, respectively.
  • Citi believes that although these power sources are smaller in scale than hydropower, their growth will displace demand for coal-fired generation over the long term. Thus, temporary support for thermal power from weaker hydropower can coexist with the continued expansion of other power sources.