China's thermal power sector should transform its role in the country's power mix, as new energy sources gradually become the primary driver of power generation, said Li Zeyu, a researcher from Fenwei Digital Information Technology Co., Ltd., during a recent conference held on December 25.

Li underscored new challenges faced by thermal power providers and directions for their role-shifting, when she gave an insightful keynote speech during the Coal Market Outlook 2026 & Sxcoal Annual Conference hosted by Fenwei in Nanning, Guangxi.

Li forecasted that during the 15th "Five-Year Plan" period (2026-2030), China's energy consumption will primarily be met by non-fossil energy sources. This signals a profound transformation in the energy system.

In China's latest Nationally Determined Contribution (NDC) submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in November 2025, the country proposed a package of targets, including reducing greenhouse gas emissions by 7-10% by 2035 and increasing the share of non-fossil energy consumption to over 30%, she noted.

As such, she emphasized that coal-fired power sector should transform its role from a "ballast" ensuring power security, toward a "regulator" in the country's power mix, as new energy sources enter the accelerated transition phase.

Li identified three major challenges faced by the coal-fired power enterprises as they seek to change.  

Firstly, coal-fired power plants have to adapt to the shift of pricing mode, from planned pricing to market-based pricing, as high volatility of renewable energy underscores the importance of spot power markets.

Secondly, the thermal coal market may take direct hit from weak demand, which was mainly driven by the ongoing energy restructuring.

Thirdly, coal enterprises are facing higher requirements, collectively imposed by environmental policy constraints, technological innovation demands, and ripple effects from global market shifts.

When discussing breakthrough strategies for coal enterprises, Li also proposed four key directions.

First, they should transform from mere resource extractors to integrated energy system service providers, developing new business models such as coal-power joint ventures, virtual power plants, and energy storage.

Second, they should gain an insight in electricity market rules, participate in market transactions, and advocate for fair and reasonable market mechanisms.

Third, they should shift toward a dual focus on "fuel and raw material", advance intelligent coal mine construction, extend industrial chains, and enhance product value-added.

Fourth, they should transition from heavy asset investment to lean operations, optimize investment structures, and concentrate on improving the operational efficiency and value of existing assets.

In addition, Li also underscored the market innovation amid power market reforms, noting that market is shifting the focus from marginal costs toward capacity mechanisms and long-term contracts that better reflect the full system value.

New mechanisms like green electricity, green certificates, and carbon markets are continuously expanding the domains of electricity markets, she added.

With the establishment of spot electricity markets and the "day-ahead + intraday" market structure, coal enterprises need to respond more flexibly to market price fluctuations and enhance their market competitiveness, she stressed.