Shandong retires 555 coal units, cuts
China's Shandong province has retired 555 small coal-fired power units since 2021, removing 17.5 gigawatts of capacity and reducing average coal
Shandong province retired 555 small coal-fired power units between 2021 and 2025, removing 17.5 gigawatts of capacity. This closure of units under 300 megawatts has lowered the average coal consumption per kilowatt-hour from 308 grams of standard coal in 2020 to under 295 grams, according to a report from Eco-Business.
One of China's most populous and industrialized regions, Shandong has long relied on coal for electricity, district heating, and industrial steam. The phase-out of these smaller, less-efficient units is just the beginning of a systematic transition. The province must now answer tougher questions about securing heat supplies and ensuring power system flexibility without this coal capacity.
How Shandong Prepared for the Phase-Out
Shandong's ability to retire so many units stemmed from building alternatives. Between 2021 and 2025, non-fossil energy sources accounted for 93 percent of the province's newly installed power capacity. Their combined capacity now represents around 55 percent of Shandong's total installed capacity, a key figure in its overall stats.
The rapid expansion of low-cost wind and solar power is reshaping the power mix. Growth in electricity demand is increasingly met by clean energy instead of coal.
Simultaneously, Shandong developed cleaner heating sources to replace the steam from retired coal units. The province explored options including nuclear heating, long-distance heat transmission, geothermal energy, biomass, industrial waste heat, and heat pumps. The Haiyang nuclear power station now provides clean heating to around 400,000 residents. China's largest long-distance heat delivery project connects three Shandong cities, heating over 90 million square metres.
The province also carried out extensive retrofits on its remaining coal power fleet between 2021 and 2025.
| Retrofit Type | Capacity Retrofitted (2021-2025) |
|---|---|
| Energy-efficiency and carbon-reduction | 25 gigawatts |
| Heating retrofits | 26 gigawatts |
| Flexibility retrofits | 49 gigawatts |
These retrofits strengthened the efficiency, heating capacity, and system-support capabilities of Shandong's coal-fired power plants.
The Persistent Heat and Flexibility Problem
Despite progress, coal burning still accounts for about 85 percent of space heating and over 95 percent of industrial steam supply in Shandong. Heat, especially industrial steam, cannot be transported quickly over long distances. This makes finding local alternatives a critical and immediate constraint on further coal-power transition.
The problem is compounded by the need for combined heat and power units to keep running to supply heat, even when solar power generation peaks midday. This limits the grid's ability to absorb more renewable energy and slows the transformation of coal power into a flexible balancing tool.
Coal power remains heavily used for peak regulation. It is common for plants to significantly cut output, shut down generators to restart later, or use rotating shutdowns. Research cited in the report shows this increases equipment wear, operational risks, and coal consumption per unit of electricity, raising costs.
Reshaping Coal Power's Role
The next step for Shandong is to have cleaner, more flexible resources progressively take over coal power's functions. The province needs to continue diversifying heat sources and better integrate heating network planning with urban renewal and industrial park redevelopment.
More effective cost-sharing mechanisms are needed to encourage investment in options like heat pumps, biomass, and geothermal energy. Retrofits to uncouple heat and power generation must accelerate. Technologies like electric boilers, hot water storage tanks, and molten salt energy storage could allow plants to meet heating demand while reducing unnecessary electricity output.
Shandong must also enable pumped-storage hydropower, battery storage, demand shifting, managed electric vehicle charging, and inter-regional power transfers to balance the system. How well battery storage and flexible demand respond to solar peaks will determine if coal plants still need to undertake disruptive deep peak regulation. Finally, the report states Shandong needs to improve electricity market price signals and reduce unnecessary administrative intervention, a key factor for its future standings in the energy transition.
