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| A ban on new power stations will cut exports of coal to China. Dado Galdier |
Amid weak economic growth and tepid demand for electricity, Beijing is expected to "suspend" all new thermal power plants until the start of 2018.
The ban is set to be unveiled as part of its 13th Five Year Plan for the energy sector, which is due to be made public shortly according to the state media.
"Once wind, solar and hydro [power plants] are built they will always be cheaper than coal," said Tim Buckley, a director at the Sydney-based Institute for Energy Economics and Financial Analysis.
In each of the last five years China has installed more renewable energy capacity than any other country. This was done in the belief power demand would grow at almost the same pace as the overall economy.
Over-supply
But in the year to May power consumption grew at just 0.9 per cent, compared to GDP growth of 6.7 per cent in the first quarter.
This has left China with an over-supply of power.
"Why would China buy and burn expensive imported coal when they can generate renewable energy for nothing?" said Mr Buckley.
At present much of the country's renewable energy is being wasted, but upgrades to the grid and a central government directive to prioritise renewable energy should see it continue to take market share from coal.
Official figures show 15 per cent of wind generation was not used during 2015 and this increased to 26 per cent over the first quarter of the year.
"Australia should be prepared for further falls to China's coal imports and in the price of coal," said Lin Boqiang, an energy economist at Xiamen University.
China's coal imports fell by 30 per cent last year to 204 million tonnes, the lowest level since 2011.
The price of thermal coal, which along with coking coal is Australia's second largest export, has halved in value over the last five years to around $US50 a tonne.
Weak demand
At the same time the utilisation rate of China's coal-fired power stations was just 48 per cent in the first quarter of the year, down from above 60 per cent in 2011.
This is expected to fall further as State Grid, the government-owned distributor and retailer, prioritises renewable energy over coal-fired generation.
The suspension of new coal-fired plants will be reviewed in early 2018, but is unlikely to be lifted according Mr Lin from Xiamen University.
"The main reason for the suspension is the weak power demand," he said via phone.
He said a drop off in government infrastructure projects had led to a fall in power consumption from heavy industry.
The formal ban on new coal-fired power stations was reported by the Economic Information Daily, which sits under the official Xinhua news agency.
Coal's share of electricity generation is expected to fall below 60 per cent by 2020, after peaking at 79 per cent between 2009 and 2011.
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