Renewable energy in China

1. Introduction

China has set ambitious renewable energy development targets for the 14th Five-Year Plan period to align with its commitment to peak carbon emissions by 2030 and achieve carbon neutrality by 2060. These objectives aim to usher in a new era of rapid renewable energy expansion and fossil fuel replacement.  

The key goals include: renewable energy will account for over 50% of the increment in primary energy consumption, and the increment of renewable power generation will account for over 50% of the total increment in society’s electricity consumption. Wind and solar power generation will double. The national renewable electricity consumption will reach to a level that will account for about 33% of total electricity consumption. Non-electric renewable energy utilization (geothermal heating, biomass heating, biofuels, and solar thermal) will exceed 60 million tons of standard coal equivalent. 

To enable this growth, China is stepping up efforts to plan and construct a new energy supply-demand system based on large-scale wind and solar power bases, supported by clean and efficient energy-saving coal power around them, and enabled by ultra-high voltage power transmission lines. Location-tailored approaches are adopted. For example, optimizing wind/solar bases in the “Three North” region, coordinated hydro-wind-solar development in the Southwest, prioritizing local wind/solar in Central/Southeast, promoting offshore wind farms along the Eastern coast, and advancing diversified biomass energy. 

Additionally, supportive government policies aim to remove barriers through improved rules on land, financing and wider areas. Market-oriented reforms will be initiated to simplify administration, decentralize power, and drive competitive, subsidy-free renewable growth. Enhancing renewable power consumption guarantees and establishing renewable energy market institutions will also be critical steps. As a major carbon reduction initiative, renewable energy will play a leading role in realizing China’s vision of a sustainable, low-carbon energy future. 

Centralized Development of Wind and Photovoltaic Power Generation  

Continuing along this trajectory, China has placed a significant emphasis on accelerating the development of large-scale wind and solar power generation facilities within desert, Gobi, and arid regions. In January 2022, the "Planning and Layout of Large-scale Wind and Solar Power Generation Bases with a Focus on Desert, Gobi, and Arid Regions" was issued. This directive designates key areas such as the Kubuqi, Ulan Buh, Tengger, and Badain Jaran deserts, along with other desert regions and the Gobi area, as focal points for establishing expansive wind and solar power generation bases. 

The development of these "desert-Gobi-arid regions" large-scale bases is envisioned to be spearheaded and harmonized by a singular entity, while multiple companies collaborate in joint endeavours to drive significant accomplishments. As of April 2023, the initial wave of base projects, amounting to a total capacity of 97.05 million kilowatts, is progressing smoothly. There are dedicated efforts towards seamless grid integration aiming to finalize all construction and grid connections by year's end 1
https://www.gov.cn/lianbo/2023-05/05/content_5754177.htm
. Simultaneously, the construction of the second batch of base projects is currently underway, and the plan for the third batch has been both announced and executed. 

In the realm of offshore wind power base construction, dedicated efforts are being made to optimize the arrangement of nearshore offshore wind projects, alongside the formulation of strategic plans for deep-sea offshore wind initiatives. This approach will facilitate the comprehensive advancement of nearshore endeavours and the illustrative development of deep-sea ventures. The central focus is on the establishment of five major offshore wind power base clusters situated in key regions, namely the Shandong Peninsula, Yangtze River Delta, Southern Fujian, Eastern Guangdong, and the Beibu Gulf. 

Distributed Development of Wind and Solar Power Generation 

Distributed development has emerged as the primary driving force behind the growth of wind and solar power in China, reflecting the Chinese government's commitment to fostering both distributed and centralized approaches. In 2022, the newly installed capacity of distributed photovoltaic power reached an impressive 51.11 million kilowatts, accounting for over 58% of the total new photovoltaic installations for that year 2
https://www.gov.cn/xinwen/2023-02/14/content_5741415.htm
. Facilitating Distributed Development involves two pivotal strategies: promoting the integration of photovoltaic power generation across diverse scenarios and actively advocating the "Photovoltaic+" comprehensive utilization initiative. 

In the realm of promoting the integration of photovoltaic power generation across various scenarios, key initiatives include the Urban Rooftop Photovoltaic Action. This initiative aims to expand the coverage of distributed photovoltaic installations on urban building rooftops. Furthermore, the robust promotion of the "Thousand Households Basking in Light" Action and the "Thousand Villages Harnessing Wind" Action is driving substantial progress in rural wind and solar power infrastructure development at the county level. 

Concurrently, China is actively advancing the "Photovoltaic+" comprehensive utilization agenda, which highlights the synergistic development of photovoltaic power generation in conjunction with agriculture, transportation, and information industries. Pioneering initiatives such as agri-photovoltaics aim to optimize land resources by seamlessly integrating farming practices with photovoltaic power generation. These initiatives also encompass the establishment of new energy vehicle charging stations, the strategic deployment of photovoltaics along high-speed rail lines, and the seamless integration of photovoltaic power generation within 5G base stations and data centres. 

Integrated Development of Hydropower, Wind, and Solar Resources 

To ensure a stable and dependable power supply, China is actively engaged in the integrated development of hydropower, wind, and solar resources, with hydropower playing a pivotal role in this approach. The nation has meticulously outlined plans for 13 major hydropower bases, encompassing significant river systems such as the Jinsha River, Yalong River, Dadu River, Lancang River, Nu River, and others. China is firmly committed to advancing the construction of expansive hydropower bases while simultaneously optimising and modernising existing large-scale hydropower stations. 

Furthermore, the comprehensive integration of hydropower, wind, and solar resources involves a  range of measures, including the implementation of grid-source integration, the establishment of robust transmission channels, increasing transmission capacity during periods of elevated water levels, and facilitating hydropower distribution during phases of abundant water resources. This comprehensive strategy underscores China's dedication to ensuring the seamless and efficient utilization of its diverse renewable energy assets. 

3. New Regulations for Photovoltaic Project Management: Station Development and Land Management 

In recent years, China's photovoltaic industry has undergone significant changes in its development landscape. Photovoltaic power generation has transitioned into a new era of subsidy-free growth, marking the end of financial subsidies from the central government. The nation has shifted away from a scale-focused approach and introduced a planning and priority guidance mechanism. Under this framework, each province, region or city coordinates project construction scales and allocations, devising annual development and construction plans that leverage market dynamics to determine project investors and construction magnitudes. The expansion of photovoltaic power generation now hinges on effective grid connection and absorption, emphasising the importance of enhanced synchronization between the power grid and photovoltaic sources. Moreover, the sector faces increased scrutiny in line with China's heightened commitment to ecological and environmental preservation, as well as elevated safety standards. 

In response to these shifts, the National Energy Administration (NEA) unveiled the newly revised "Management Measures for the Development and Construction of Photovoltaic Power Stations" in December 2022. These Measures delegate the authority to local energy authorities for determining project lists and construction plans for photovoltaic power stations. Projects with guaranteed grid connection are generally selected through competitive allocation overseen by provincial-level energy authorities, while market-oriented grid-connection projects adhere to pertinent national and provincial regulations. The Measures also introduce a system of record management for photovoltaic power stations, with recorded capacity predominantly based on alternating current-side capacity. Furthermore, photovoltaic power station projects must secure an electricity business license within six months following grid connection. 

Regarding the construction of large-scale photovoltaic power bases in China, land availability has consistently stood as a pivotal factor influencing the development of photovoltaic projects. To provide clarity on permissible land types for photovoltaic power projects and requisite land procedures, the Chinese Ministry of Natural Resources, in collaboration with the National Forestry and Grassland Administration and the NEA, issued the "Notice on Supporting the Development of the Photovoltaic Power Generation Industry and Regulating Land Management" on March 20, 2023 (Notice). This Notice introduces a classification-based approach to land management for photovoltaic power projects. 

The scope of land for photovoltaic power projects encompasses land for photovoltaic arrays, which includes land for photovoltaic panels and collector lines using direct-buried cable laying methods. It also includes land for supporting facilities, such as substations, operation management centers, collector lines, on-site and off-site roads, etc., categorized according to the “Control Indicators for Land Use of Photovoltaic Power Plant Projects”. These segments are managed based on specific land-use characteristics. The Notice explicitly prohibits the utilization of arable land for photovoltaic arrays and establishes distinct requirements for land utilization involving non-arable agricultural land, forest land, shrub land, and grassland outside of primary grassland areas. Photovoltaic array land must not alter surface conditions and is subject to land record management procedures. In cases where construction land is needed for photovoltaic power project land, relevant land acquisition protocols can be followed in accordance with land acquisition regulations. Lease arrangements and other methods are also permissible for obtaining photovoltaic array land. Furthermore, for supporting facilities, land management aligns with construction land regulations, necessitating appropriate approval procedures. 

Given the extensive and intricate nature of land usage for photovoltaic projects, stakeholders involved in new energy ventures must diligently attend to land-related matters throughout the development process and expeditiously address relevant land procedures to ensure compliance with legal requirements. 

4. Financial and Policy Support for Renewable Energy Development 

Enhancing Green Financial Products and Services 

China has taken significant strides in promoting green financial products and services within the realm of renewable energy. As a testament to this commitment, renewable energy projects have been encompassed within the pilot support framework for infrastructure Real Estate Investment Trust Funds (REITs). The National Development and Reform Commission (NDRC) issued the "Notice on Further Enhancing the Pilot Initiatives of Real Estate Investment Trust Funds (REITs) in the Infrastructure Sector," in July 2021, which outlines the prerequisites for REITs pilot projects, identifying nine pilot industries, including energy infrastructure. This comprehensive scope encompasses clean energy initiatives like wind power, photovoltaic power, hydroelectric power, natural gas power, biomass power, nuclear power, ultra-high-voltage transmission projects, incremental distribution networks, microgrids, charging infrastructure projects, and distributed heating and cooling projects. Both the NDRC and the NEA are actively streamlining procedures and regulations for renewable energy REITs projects, with the aim at expediting project listings and increasing support. 

Furthermore, the People’s Bank of China introduced the "Green Finance Evaluation Scheme for Banking Financial Institutions" on July 1 2021. This scheme evaluates the green loans and green bond activities of financial institutions, integrating the evaluation outcomes into the central bank's assessments of these institutions. Notably, state-owned and commercial banks have introduced a range of renewable energy loans and bond products. For example, China Construction Bank and Bank of China offer renewable energy subsidy-backed loans, while the Agricultural Development Bank extends funds from the Agricultural Development Infrastructure Fund to photovoltaic projects. According to data from the People’s Bank of China, the balance of green loans denominated in both Chinese and foreign currencies reached 27.05 trillion yuan by the close of the second quarter of 2023, with the balance of loans within the clean energy sector attaining 6.8 trillion yuan 3
https://www.gov.cn/lianbo/bumen/202307/content_6895461.htm

The NEA is also placing strong emphasis on enhancing the assurance of renewable energy development components, with intentions to encompass wind power, photovoltaic, and pumped storage projects that qualify for policy-based developmental financial instruments. 

Optimizing the Allocation of Fiscal Resources 

The "Implementation Plan for Promoting the High-Quality Development of New Energy in the New Era," jointly released by the NDRC and the NEA in May 2022, underscores the importance of enhanced collaboration between central and local governments. It advocates for adhering to a revenue-prioritization approach when utilizing the renewable energy development fund and advocates for leveraging existing funding channels to support new energy ventures. Furthermore, the plan proposes incorporating eligible public welfare construction endeavours within the new energy sector under local government bond support. 

Moreover, the "14th Five-Year Plan for Renewable Energy Development," unveiled in 2021, proposes specialized financial policies to champion green and low-carbon advancement. This involves integrating financing for renewable energy initiatives into local government subsidy and incentive programs, alongside the establishment of a funding support mechanism for distributed renewable energy at the end-user level. 

Enhancing Financial Support Measures 

The Implementation Plan further encourages financial institutions to tailor financing solutions for existing renewable energy projects based on their distinct characteristics and risk evaluations. Additionally, it advocates for innovative approaches like green asset-backed (commercial) paper and factoring. The plan underscores the pivotal role of grid enterprises in underpinning renewable energy growth and urges their active participation in financing activities to ensure the sustained viability of these projects. 

Portrait ofVera Zhang
Vera Zhang
Senior Associate
Beijing