China is the world’s largest energy consumer and producer, creating immense logistical and environmental pressures on its supply system. Driven by the world’s largest population and a massive industrial base, the sheer scale of energy demand constantly strains domestic resources and infrastructure. Supplying this need involves navigating complex domestic and international challenges, from securing foreign oil to managing power distribution across a vast landscape. The country’s economic stability and future growth are linked to its ability to overcome these energy hurdles.
Resource Dependency and Energy Security
China’s goal of energy self-sufficiency is challenged by heavy reliance on global markets for oil and natural gas. Despite being the world’s largest coal producer, the country became a net importer of all three major fossil fuels (oil, natural gas, and coal) after 2009. Oil is the primary vulnerability, with import dependency reaching approximately 72% in 2024, exposing the economy to geopolitical risks and price volatility.
A large portion of imported crude oil (around 80%) must pass through the narrow Strait of Malacca, a critical maritime chokepoint. This geographic vulnerability, known as the “Malacca Dilemma,” presents a security concern regarding potential disruptions. To mitigate this risk, China has aggressively diversified its supply routes and built strategic reserves. Efforts include constructing overland pipelines from Central Asia and Myanmar, which bypass vulnerable sea lanes. The government has also invested heavily in strategic petroleum reserves (SPR) to provide a buffer against temporary supply disruptions. Domestic coal reserves provide the most significant security buffer, ensuring the country’s overall energy self-sufficiency rate remains high, near 85%.
Environmental Costs and Decarbonization Pressures
Vast coal reserves provide domestic security but impose a significant environmental cost, creating pressure for rapid decarbonization. Coal remains the largest energy source, accounting for 54% of primary consumption and 60% of electricity generation. This dominance makes China the world’s largest emitter of carbon dioxide and a major source of severe air pollution, including smog.
The commitment to peaking carbon emissions before 2030 and achieving carbon neutrality by 2060 requires a structural shift away from coal dependency. The aggressive development of wind and solar power, where China leads globally in deployment, is a direct response to these climate goals. However, the transition is complicated because many coal plants are relatively new, averaging only 11 years of operation. Premature closure could result in stranded assets and pose a threat to grid stability. Policymakers must balance the energy stability coal guarantees with the push for cleaner power. This involves managing the social and economic impact of phasing out coal, which supports substantial local employment, while integrating intermittent renewable sources into the national grid.
Geographical Imbalance and Transmission Needs
A fundamental physical challenge is the geographical mismatch between energy production and consumption. Most energy resources—including coal deposits, hydropower sites, and optimal locations for wind and solar farms—are concentrated in the less-populated West and North. Conversely, the highest energy demand is clustered in the industrial and population centers along the Eastern and Southern coastal regions.
Bridging this vast distance requires a massive effort to build ultra-high-voltage (UHV) transmission infrastructure. UHV lines (operating at 1,000 kV AC or 800 kV DC and above) are necessary to transmit large volumes of electricity over thousands of kilometers with manageable losses. China has invested heavily in these projects, creating a continental-scale “power bridge” connecting resource-rich areas like Inner Mongolia and Xinjiang to eastern load centers. This long-distance system is crucial for integrating intermittent renewable sources located far from cities. The scale of the UHV grid is a unique solution, but reliably managing the variable nature of wind and solar power across enormous distances creates challenges for grid stability.
Operational Constraints from Water Scarcity
Energy production is heavily constrained by the uneven distribution of water across China. Thermal power generation, primarily from coal plants, requires vast volumes of water for cooling, accounting for approximately 12% of total national water withdrawals. This creates a direct conflict with local water security, especially in the arid regions where many power plants are located.
Water stress is acute in the northern provinces, which hold only 25% of renewable water resources but contain over half of the thermal power capacity and most coal production. In these regions, energy production competes directly with agriculture for limited supplies, intensifying conflicts during drought. Hydropower, a major clean energy source, is also highly water-intensive due to reservoir evaporation, and its capacity is immediately impacted by drought conditions. The power sector’s vulnerability is significant, with an estimated 45% of freshwater-reliant facilities located in high water stress areas. This challenge necessitates using less water-intensive cooling technologies and a careful policy approach to siting new power plants. Water scarcity acts as a physical limit on China’s ability to expand power generation capacity, regardless of the fuel source.