Advancing High-quality Development of New Energy in China
China is the largest energy producer, consumer and importer in the world. In recent years, China has taken solid steps to build a clean, low-carbon, safe and efficient energy system, promoted the leap-forward development of renewable energy, and achieved many historic achievements. China’s new energy installed capacity ranks first in the world, with a steadily rising share in the total power generation and rapidly dropping costs. New energy power generation has entered a new stage of grid parity without government subsidies. In 2022, the installed non-fossil capacity for power generation in China exceeded 50%, and the consumption of clean energy reached 26%.
New energy, mainly renewable energy, is green and low-carbon, and is an important part of China’s diverse energy supply system, which is crucial for ensuring energy security, improving energy mix, protecting the environment, coping with climate change and achieving sustainable social and economic development. During the 14th Five-Year Plan (2021-2025) period, China’s energy sector will enter a new stage of high-quality development, with the vision to achieve the carbon peak and carbon neutrality (Two Carbon Goals) and ensure national energy security. And the key lies in green and low-carbon energy transition. To do so, it is particularly important to stick to the principle of building the new before discarding the old to enhance the high-quality development of new energy and more importantly to consolidate the basis of secure and reliable alternatives of traditional energy.
I.The increasing strength and contribution of new energy
In the history of human civilization, the cycle of discarding the old and building the new always repeats itself. As an important driver for the human social productivity and civilization process, energy has also experienced a similar pattern of shift and revolution of discarding the old and building the new. Traditional fossil energy is high carbon, non-renewable and environment damaging. On the other hand, new energy, such as wind and photovoltaic (PV) power generation, are recyclable and renewable, widely distributed, clean, green and low carbon. Therefore, new energy has become a major strategic direction for transforming the global energy landscape, tackling climate change, and ensuring energy security.
Taken consideration of the need of safe energy supply and equitable energy access, new energy must be built and well secured and reliable before exit of traditional energy. First and foremost, new energy must be developed on a sufficient scale and with adequate production capacity, transmission networks and supporting facilities. At the same time, through large-scale development, economies of scale could be achieved, costs reduced, and consumption expanded. The ultimate outcome is to build a modern energy system with new energy as the core. In the past 10 years, the installed solar and wind capacity worldwide has grown at an average annual rate of 20%, and generating more than 10% of the total electricity output. At the same time, the tariffs of solar and onshore wind electricity have dropped by about 90% and 70% respectively.
China has achieved remarkable progress in new energy development, with the installed capacity ranking first in the world, the share of power generation steadily increasing, and the cost rapidly decreasing. New energy development has entered the stage of grid parity and no subsidies. In 2021, the total utilization of renewable energy in China was about 750 million tons of standard coal, accounting for 14.2% of the total primary energy consumption. Among them, the power generation of renewable energy was 2.48 trillion kWh, accounting for 29.8% of the total electricity consumption; the annual power generation of new energy exceeded 1 trillion kWh, and the share of wind and PV power generation in the total electricity consumption exceeded 10% for the first time, reaching 11.8%. By the end of 2021, the cumulative installed capacity of renewable energy in China exceeded 1 billion kilowatts, reaching 1.063 billion kilowatts, accounting for 44.8% of the total, in which the cumulative installed capacity of hydro, wind and PV exceeded 300 million kilowatts, reaching 391 million kilowatts, 328 million kilowatts and 306 million kilowatts respectively, ranking first in the world for 17 years, 12 years and 7 years respectively; the installed capacity of biomass is 37.98 million kilowatts, ranking first in the world for 4 consecutive years.
2022 saw even faster growth of renewable energy in China, with big strides in the construction of large-scale wind and PV bases in Gobi Deserts and other arid regions. The installed capacity of renewable energy in the whole year was 152 million kilowatts, accounting for 76.2% of the newly-added installed capacity, becoming the main body of newly-added capacity. By the end of 2022, the installed capacity of renewable energy has exceeded that of coal, with the share of the total installed capacity reaching to 47.3%. The annual power generation of the installed capacity of renewable energy is 2.7 trillion kWh, accounting for 81% of the newly-increased power generation and 31.6% of the electricity consumption of the whole society. Among them, the annual output of wind power and PV exceeded 1 trillion kWh for the first time, which is close to the urban and rural electricity consumption. Renewable energy plays an increasingly important role in ensuring energy supply.
However, it must be noted that, compared with the huge total energy demand, new energy is still underdeveloped and under-utilized in China. Wind power and PV generation still depends on the weather, characterized by low density, intermittence, instability, and short effective working hours of the generation units, which will seriously affect the output under extreme weather conditions. Therefore, to achieve the goal of increasing the total installed wind and PV capacity to more than 1.2 billion kilowatts by 2030, it is imperative to innovate the way of new energy development and utilization, accelerate large-scale development, and increase the share of renewable energy installed capacity. In 2025, the total consumption of renewable energy will reach about 1 billion tons of standard coal, accounting for about 18% of primary energy consumption. The annual power generation of renewable energy will be about 3.3 trillion kWh, and the power generation from wind and solar sources will double.
The high-quality development of China’s new energy industry has made important contributions to coping with climate change, promoting green development and improving people’s well-being. In 2022, China’s renewable energy power generation was equivalent to reducing CO₂emissions by about 2.26 billion tons, and its exported wind and solar power products can help to reduce CO₂by about 570 million tons for other countries. The total CO₂reduction is 2.83 billion tons, accounting for about 41% of the global CO₂reduction by renewable energy in the same period. China actively promotes the clean utilization of biomass energy such as organic waste in urban and rural areas and improves the living environment; explores the PV-enabled sand control model combining desert control, PV power generation and cultivation and animal husbandry, and promotes ecological restoration through PV development. This helps to realize the coordinated and complementary development of renewable energy and ecological improvement. China has made advances in extending power grids to areas without electricity access, and effectively improved the production and living conditions in more than 210 state-level poverty-stricken counties. China has built independent power supply projects of renewable energy, providing green electricity for over one million people without electricity access. Since 2012, 31 large-scale hydropower stations have been built in poverty-stricken areas, contributing to local economic development and poverty alleviation of immigrants. PV poverty alleviation project has benefited 4.15 million poor households, generated 18 billion yuan of power generation income every year, and creating 1.25 million public welfare jobs. PV poverty alleviation is an elite project of industrial poverty alleviation and one of the top ten targeted poverty alleviation projects in China.
II.Further increase of new energy increment
The key indicator of the effectiveness of new energy development is the share of new energy in energy supply and consumption. In other words, new energy must be an effective substitute for traditional energy. In 2022, China’s renewable energy power generation accounts for more than 31% of the total electricity consumption, in which wind and PV exceed 1 trillion kWh, accounting for 13.8% of the total electricity consumption. This means that thermal power is still the mainstay of power supply. To promote the high-quality development of new energy, it is necessary to change the role of new energy from a supplement to a dominant increment in energy and electricity consumption, and raise its share rapidly. According to the plan of the Chinese government, during the 14th Five-Year Plan period, the increment of renewable energy power generation will exceed 50% of the total electricity consumption increment, and the ratios of total renewable energy power and non-hydropower consumption will reach to 33% and 18% respectively, and the utilization rate will remain at a reasonable level.
The existing power system has insufficient adaptability to large-scale and high-proportion new energy connection and consumption, which undermines the effective supply capacity of new energy. Therefore, it is important to ensure local consumption, speed up the construction of delivery channels, and explore multi-channel energy storage. It is necessary to intensify efforts to plan and build a new energy supply and consumption system based on large-scale wind and solar power bases, supported by clean, efficient, advanced and energy-saving coal-fired power around them, and enabled by stable, safe and reliable ultra-high voltage transmission and transformation lines, so as to achieve both large-scale development and high-level consumption, and ensure stable and reliable power supply. At the same time, the adjustment ability and flexibility of power systems must be enhanced comprehensively, and the ability of distribution networks to accept distributed new energy strengthened. Power grid enterprises should play their role as platforms and hubs in building new power systems. Efforts must be made to actively access and absorb new energy, press ahead with such projects as flexible transformation of coal-fired power units, hydropower expansion, pumped storage, solar thermal power generation and hydrogen production from green electricity, and enhance the adaptability of new power systems to high proportion of new energy. The intelligent level of distribution networks should be improved, focusing on enhancing the ability of distribution networks to access distributed new energy. The direct utilization of new energy power generation terminals should be enhanced, the diversified non-electric utilization of new energy scaled up, and the large-scale utilization of new energy for hydrogen production promoted. Through these efforts, the level of new energy utilization will be improved.
In addition, efforts must be made to steadily include new energy in electricity market transactions. Support should be given to direct transactions between new energy projects and users and encourage the signing of long-term purchase and sale agreements. In the pilot areas of spot electricity market, new energy projects are encouraged to participate in electricity market transactions in the form of contract for differences. The responsibility weighting system of renewable energy power consumption should be improved. The responsibility weighting of medium and long-term renewable energy consumption in all provinces, autonomous regions and municipalities should be set scientifically and reasonably. The connection must be made between the responsibility weighting system of renewable energy consumption and the cap on total energy consumption, in which new renewable energy is not included. The renewable energy consumption responsibility evaluation system and reward and punishment mechanism should be established and improved. So should be the power supply compensation mechanism of peak shaving and frequency modulation and the recovery mechanism of energy storage cost.
III.Energy transition supported by multi-source complementarity
Energy transition has a long way to go and won’t be completed overnight. For a long time to come, the fundamental direction of green and low-carbon energy transition is the cleanliness of traditional energy, large scale use of clean energy, and comprehensive development of multiple energy sources. Meanwhile, traditional energy and new energy should complement each other, giving full play to their respective advantages, and forming a safe, stable and reliable energy supply system.
First, integration of “wind, solar, hydro, thermal and storage” and “production, grids, load and storage”. The use of clean energy such as wind and solar power should be prioritized. Hydropower and coal power should play their adjustive roles. Energy storage facilities should be established. Complementarity should be enhanced between wind and solar power and hydro and thermal power. Production, grids, load and storage should be coordinated. The flexible adjustment ability of the power system should be strengthened. These measures are not only conducive to leveraging the advantages of rich areas with new energy, but also realizing large-scale consumption of clean power.
Second, integrated development of sectors of new energy and construction, transport and industry should be accelerated. In industrial enterprises and industrial parks with suitable conditions, new energy projects such as distributed PV and decentralized wind power should be further promoted. Green industrial micro grids and integrated projects of production, grids, load and storage should be built to promote the complementary and efficient utilization of multiple energy sources. Projects of direct supply of new energy power should be piloted to increase the share of new energy power used by terminals. Integration of solar energy and buildings should be deepened. The integrated application technology system of PV and construction should be improved and the production-oriented consumer groups of PV power should be expanded. By 2025, the PV coverage rate of new buildings in public institutions is targeted to reach 50%, while public institutions are encouraged to install PV or solar thermal utilization facilities in existing buildings. The promotion and application of integrated development projects such as “new energy+transport” should also speed up. Distributive development and nearby utilization of new energy such as “PV+” should be carried out in slopes, service areas, gas stations and other areas along the highway to promote the development of electric vehicle industry and increase the proportion of green hydrogen used in industrial and mining areas, port areas, vessels and ships and key industrial parks.
Third, new energy should be introduced to deeply integrated into the way of production and living. Pilot green power trading should be carried out to prioritize green power in transaction, grid dispatching and price formation, and provide market participants with sound, friendly and easy-to-use green power trading services. The certification, labeling and publicity announcement system for green consumption of new energy should be built and improved. The green power certificate system should be improved to promote green power certificate transaction and strengthen the effective connection with the carbon emission trading market. Certification acceptance should also be enhanced to guide enterprises to use new energy and other green electricity to manufacture products and provide services. Users should also be encouraged to buy products made with new energy such as green electricity.
The Chinese Government has made it clear that it will improve the regulation system of total energy consumption and intensity, and further improve energy utilization efficiency and reduce CO₂emission intensity. In the meantime, the shift should be made scientifically and orderly from dual control of energy consumption to dual control of total carbon emissions and intensity to optimize regulation methods, strengthen capacity building and supporting systems for dual control of carbon emissions, and create conditions for the establishment and implementation of dual control of carbon emissions. It is necessary to speed up the research and development, dissemination and application of advanced technologies for energy conservation and carbon reduction, encourage green and low-carbon production methods and lifestyles, and promote high-quality, green, low carbon economic development.
IV.Actively promote the building of a modern energy system
Energy is an important material foundation and driving force of modern society. A complete energy system has been formed centering on energy production and consumption, including industry, market, technology, manufacturing, policies and regulations, which is an important part of modern economic and social system. Building a modern energy system is a complex and systematic project, involving green industry, green market, green finance, green consumption, green laws and policies to achieve clean, low-carbon, safe and efficient energy supply and demand. To this end, China needs to make efforts in the following five areas.
The first is to enhance the security and stability of the energy industrial and supply chains and accelerate the building of a new energy industry system. Capacity building of comprehensive energy safeguards should be enhanced for strategic security, operational security and emergency security. By 2025, China’s comprehensive production capacity will reach above 4.6 billion tons of standard coal, which will better meet the needs of economic and social development and people’s growing energy consumption for a better life.
The second is to promote the green and low-carbon transformation of energy production and consumption patterns and accelerate the building of a modern energy market system. The key is to increase the supply capacity of clean and low-carbon energy and reduce carbon emissions in the energy industrial chain. A green and low carbon energy consumption pattern should be developed. By 2025, the share of non-fossil energy consumption is expected to reach to about 20%.
The third is to improve the modernization level of the energy industrial chain and accelerate the building of an energy innovation system. Scientific and technological innovation should play a leading and strategic supporting role to enhance energy innovation capability, accelerate the digitalized and intelligent upgrading of the new energy industry, substantially improve the efficiency of the energy system, improve the overall advancement and modernization level of the energy industry, foundation and the industrial chain.
The fourth is to enhance the efficiency of energy governance and accelerate the formulation of policies and regulations that adapt to green and clean energy transition and development. Reform to streamline administration and delegate power, improve regulation, and upgrade services in the new energy sector should be deepened to improve project review and approval efficiency, optimize the grid connection process of new energy projects, improve the public service system related to new energy, and strengthen in-process and ex post supervision. A modern energy market should be built at a faster pace to facilitate green and low-carbon energy transition in a market based way. Additionally, fiscal and financial policies should be complemented to support new energy development.
The fifth is to deepen international cooperation and accelerate the building of a global new energy partnership. As the world’s largest renewable energy market and equipment manufacturer, China continues to deepen international cooperation in the field of renewable energy. China has a global footprint in hydropower, and supplies more than 70% of the world’s PV components. The extensive application of renewable energy in the Chinese market has facilitated and promoted the cost reduction of renewable energy, furthered the development and utilization of renewable energy across the world, and accelerated global green energy transition. In recent years, China’s investment in renewable energy projects in countries and regions along the “Belt and Road” has shown a sustained growth trend, helping underdeveloped countries and regions disseminate and apply advanced green energy technologies, and contributing China’s wisdom and strength to high quality and green Belt and Road cooperation.
Lv Jianzhong is Deputy Director and Secretary-General of the Academic Committee of the China National Petroleum Corporation Research Center of China Top Think Tanks.