China’s Renewable Energy Sector Explained
In August, China’s State Council Information Office released a white paper called “China's Energy Transition,” which, as the name suggests, highlighted China’s transition from primarily a fossil fuel economy to primarily a clean energy economy. The white paper also confirmed that China is on track to hit its ambitious climate target of reaching peak emissions by 2030, and carbon neutrality by 2060. The transformation of China’s energy sector will have global significance in the fight against climate change, so let’s figure out how China has become the world leader in renewable energy.
China’s Energy Sector Today
Between 2014 and 2023, global renewable energy increased from 13.6% to 18.5%, and according to the International Energy Authority, just under half of that increase has been in China alone. China’s renewable production has also been increasing in recent years - in 2022, for example, China installed as many new solar panels as the rest of the world combined. China is now the world leader in solar, wind and hydroelectric power, and their nuclear capacity is second only to the United States. To put this in perspective, China has installed as much new clean energy onto their grid in the first half of this year as the UK added to their grid from all sources throughout the entirety of 2023.
The swift rate of expansion seems to have even caught the Chinese government by surprise: in 2020 they pledged to reach 1,200 gigawatts of renewable capacity by 2030. Since this would mean a doubling of the 2020 capacity, this target was considered ambitious. Yet, at current trends, this target will be met next year.
Coal is still the single largest source of energy in the Chinese marketplace, but this looks set to soon be a thing of the past: solar and wind combined already outstrip coal in terms of energy share, and solar is set to become China’s largest single source of energy in 2026. So, how has China transformed itself from an economy reliant on coal to a world leader in renewable capacity?
China’s Energy Transformation
In 2006, China officially passed the US as the world’s largest polluter. The previous decades had seen breakneck economic growth, with China becoming the factory of the world, and millions lifted out of poverty as the Chinese economy expanded. However, rapid economic development has caused a spike in water, air, and soil pollution. The Chinese leadership in the mid-2000s was determined to wean the Chinese economy off the fossil fuels that had powered China’s economic transformation, but they also wanted to avoid sacrificing the economic prosperity newly won by millions of Chinese.
China set about creating dozens of green financing instruments ranging from loans and bonds to equity funds in order to help fund renewable development and research. Importantly, however, the central government kept a close eye on how these funds were being spent by the companies they were given out to: the Central Bank required companies and organizations to report back on their successes or to explain failures. So, if you had been granted a loan to decrease the pollution at your factory by 50%, then you had to prove to the Central Bank that you had indeed achieved a 50% reduction in pollution in a certain amount of time.
In the 2010s China also trialed something called a green finance pilot zone. This was a designated area of development where best practices in financing and developing green technology could be trialed, and, if found to be successful, could then be rolled out to the rest of the country.
Perhaps a good example of how the energy partnership powering the Chinese renewable sector works is the Whole County PV program set up by the National Energy Administration (NEA) in 2021. The NEA had noticed that remote rural areas in China were not being well served by the new push towards renewable energy. Therefore, the NEA set up a program in which local communities could come together to invest in renewable energy (primarily solar panels) for their area, and then have an option to sell back unused energy to the national grid. By the end of its first full year in 2022, 676 counties all across the country had signed up to the Whole County PV program.
China’s success in promoting its renewable sector has come about because of a willingness on behalf of the government to work with individual communities and companies to help facilitate and finance innovation and development. There has also been a firm focus on control of supply chains: 80% of solar panels are now produced in China, but this has only come about because China has taken strategic control over all aspects of the supply chain - from initial mining to the final product.
The Next Challenge
China’s energy transformation has been remarkable, but there is still a long way to go if China wishes to achieve its target of carbon neutrality by 2060. The main barrier to this goal remains the Chinese energy sector’s continued reliance on coal, which still forms a substantial chunk of China’s energy makeup. 50% of global coal power stations remain in China, and there have been a raft of new licensees for coal in recent years - although this may have been the coal sector applying for as many new licensees as possible before a ban came in (so far in 2024 there have been no new licenses granted.) Coal as an overall percentage of energy has, apart from a small spike after the pandemic, been dropping for years, but it probably has to drop faster.
In the renewable sector itself, one of the big challenges highlighted by industry insiders like Gao Jifan of Trina Solar continues to be energy storage capacity. This has been a concern about the industry for years, but there appears to be some progress: a recent pilot program in Zhejiang province by China Energy Storage Alliance seems to have met some success in solving storage and capacity problems.
Another external concern for the industry is the increasingly aggressive trade policy of the United States. The average cost of solar power projects has dropped by 80% in the last decade. This has encouraged poorer countries across the Global South to invest more in solar, and with the majority of solar panels produced in China this has meant buying from the Chinese market. The US is unhappy about this and has already this year targeted the Chinese solar power sector in the domestic US market. An expansion of US measures against Chinese solar power may have adverse effects on the global transition to clean energy.
China has set itself an ambitious goal of achieving peak emissions by 2030 and carbon neutrality by 2060. The White Paper released in August demonstrates that the first of those goals (peak emissions) is well within reach. However, there are many challenges ahead if China is to achieve the second of those goals. Given the speed of China’s energy transition and the amount of innovation and growth in the energy sector, it seems entirely possible that carbon neutrality before 2060 will become a reality.
Further Reading
How China Became the World’s Leader on Renewable Energy
Cyrus Janssen - China Just Built Something That Will Change the World
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An excellent and informative piece and for me, as a member of the Qld Greens, very helpful in furthering the cause. People in Australia constantly voice the accusation "Look at China, they create more GHG emissions than any other country", apparently overlooking a population of 1.4 billion. I've tried to argue for years that the average Chinese generates half the GHG emissions of the average Australian and that we are in no position to cast stones at China. But it falls on deaf ears
In fact our current Govt is one of the worst offenders. They went to the election promising urgent and serious climate action but have continued to licence and subsidise more new fossil fuel projects. It's a pity Australia was left out of the video.
As you said in an earlier YouTube piece Jingjing, we can change the Govt but we can't change the policies whereas in China you can't change the Govt but you can change the policies. The annual Conference of Parties is always impressive.