Natural gas is the only generation technology that may enjoy an increase in capacity factor thanks to anti-smog policies along coastal provinces.

“As coal is restricted in these areas, gas is increasingly being used in combined heat and power plants to provide not just electricity but also heating and steam for municipal and industrial customers,” the report states.

IHS Energy analysis projects that wind, solar, hydro, nuclear, and gas will supply 87% of China’s incremental power demand during 2016-20, with coal accounting for just 5.5% and hit the hardest during this oversupply period.

IHS Energy senior director Xizhou Zhou said: “The government has been trying for almost a year to slow down this continued build out of new coal plants across the country.

“Despite repeated efforts, construction does not seem to have slowed significantly. The drivers for profitability, market share, local economics and other moral hazards are too strong to stop or postpone many of these projects in a meaningful way.”

China’s power sector will gradually stabilise after 2017, according to IHS Markit.

According to the latest IHS Energy report, China’s power companies brought online 149 gigawatts of additional capacity last year, representing more than 40% of the world’s capacity additions, while demand growth was almost flat.

Looking ahead, IHS Energy predicts about 110 GW of further plants will come online during in 2016 alone – and this already assumes some project cancellations and delays.

The pipeline of extra generation capacity remains strong, with many of plants having already started construction or placed equipment and engineering orders.

“The divergence in power demand between China’s domestic sector and heavy industries will become even more pronounced as the country continues its pivot toward a more service-led economy,” Zhou said.

“This means China’s power consumption overall is going to shift into the slow-moving lane for several more years to come.”

 According to the report, a key cause for the slowdown in power consumption is that China has experienced a “hard landing” for its industrial economy. Industrial loads account for roughly 70% of China’s electric power consumption. Of that, more than 80% is from heavy industrial sectors such as steel and aluminum smelting.

 Meanwhile, non-heavy industry sectors still consume more electricity at a fast pace – for example, residential and commercial demand grew by 11.5% during the first three quarters of 2016 – but industrial demand only increased by 3.3%, dragging overall demand growth.