Friday morning commuters in Beijing witnessed another round of air quality alerts, even as the country sets records for renewable energy production this summer. According to a new analysis published this week by the Beijing-based Institute for Energy Economics and Financial Analysis (IEEFA), long-term power purchase contracts for coal-fired plants are guaranteeing those facilities buyers, regardless of fluctuating grid demand. This policy dynamic is crowding out renewable energy, particularly at times of peak solar and wind generation.

The report highlights that despite China adding over 150 GW of wind and solar capacity since January, much of this clean energy is being curtailed—left unused—during midday and windy evenings. In southwest provinces like Yunnan, local grid operators have instructed solar farms to shut down for up to 20% of daylight hours in July due to insufficient demand and inflexible coal contracts, a scenario confirmed by data from the State Grid Corporation of China.

Coal generation rose another 3% in July compared to the same period last year, according to National Energy Administration figures. Analysts attribute this rebound to the “guaranteed dispatch” mechanism: under multi-year agreements, grid companies must prioritize coal output to ensure plant profitability, even as hydropower and renewables set all-time generation highs. This mechanism has been in place for over a decade, but its tension with China’s 2030 carbon peaking and 2060 neutrality targets has sharpened in 2026’s record-breaking summer.

With the world’s largest installed base of renewables, China’s clean energy ambitions are clear on paper. However, the persistence of legacy coal contracts is undermining measurable progress towards SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action). Policy researchers, including Li Jing at Tsinghua University, are calling for a rapid phase-down of guaranteed coal offtake—arguing that without such reforms, the anticipated emissions reductions for 2026 will fall short.

As the summer heat peaks and electricity demand soars in urban centers, pressure is mounting on the National Development and Reform Commission to announce policy adjustments later this season. Industry leaders warn that unless grid reforms prioritize flexibility and real-time balancing, much of China’s record renewable investment will continue to go to waste.