China's strategy to lead in renewable energy

MOSAIC-INDONESIA.COM – As the world’s largest energy consumer and greenhouse gas emitter, China is undergoing to be one of the most ambitious energy transitions in history. Guided by the ambition to peak carbon emissions before 2030 and achieve carbon neutrality by 2060, “The Dragon” is rapidly reshaping its energy system to accommodate a new generation of cleaner power.

According to the World Economic Forum (WEF), China installed a staggering 360 gigawatts (GW) of wind and solar power capacity in 2024 alone. That achievement accounted for more than half of the global additions that year. These installations brought China’s total installed renewable energy capacity to 1.4 terawatts (TW) – roughly one-third of the world’s total of 4.5 TW.

China’s renewable energy generation reached 366 terawatt-hours (TWh), making wind and solar the largest new energy sources in the country. This transformation is also driving the emergence of new technologies and business models, from battery storage and virtual power plants to electric vehicles and “zero-carbon” industrial parks.

Nevertheless, integrating renewables at such speed and scale presents significant challenges. China’s experience offers valuable insights into how countries can manage the technical, economic, and market complexities of the clean energy transition while maintaining grid stability and affordability.

Operational system

A power system must remain balanced: generation must equal consumption at all times. With wind and solar, output fluctuates sharply with weather and daylight. The growth of renewable capacity has outpaced the development of resources, such as storage and flexible generation, that can stabilize the system.

Transmission grids are also under strain. Most of China’s renewable potential lies in the "Shagehuang" (sand, Gobi, and desert) regions of the northwest. Meanwhile, major demand centers are along the eastern coast. This requires long-distance transmission and stronger inter-regional connections. Local distribution networks must also evolve from one-way delivery systems into interactive, two-way platforms integrating rooftop solar, electric vehicles, and flexible loads.

In this new model, power supply no longer simply follows demand. Instead, distribution, generation, grids, demand, and storage must operate in close coordination to maintain reliability.

Economic challenges

Integrating large amounts of renewable energy also adds costs. While the prices of solar and wind generation continue to fall, additional investment is needed for power grids, storage, and backup capacity. Even on-site generation facilities rely on the wider grid for voltage and frequency control, meaning cost-sharing mechanisms are needed to distribute system costs fairly.

A key challenge is ensuring that the low generation cost of renewables lowers the total system cost and consumer prices, rather than increasing them.

Market mechanisms

Electricity relies on various markets, covering not only energy itself but also capacity, flexibility, and environmental value. Incomplete or misaligned mechanisms can hinder investment or fail to properly reward clean energy.

China is refining its market design to address these challenges. The country is developing capacity markets and ancillary service markets to ensure adequate flexibility, expanding green energy and certificate trading to recognize environmental value, and clarifying the roles of new participants like distributed generators, storage operators, and aggregators.

How is China addressing these challenges?

China’s approach combines massive-scale investment, technological innovation, and market reforms to create a cleaner and more resilient power system.

System transformation and enhancement

The country is expanding renewable generation while strengthening its power grid. Gigawatt-scale wind and solar bases are being built in resource-rich regions, alongside distributed generation in cities and industrial parks. In 2024 alone, over US$80 billion was invested in grid infrastructure, including ultra-high voltage (UHV) lines connecting remote power bases with coastal demand centers.

Flexibility has become a top priority. Coal-fired power plants are being retrofitted for flexible operation, new gas and pumped storage facilities are being developed, and AI tools, such as the "Guangming Power" model, support grid forecasting and dispatch. Together, these measures enhance the system’s ability to absorb fluctuations in renewable output.

Building an Integrated National Electricity Market

China aims to facilitate cross-provincial renewable energy consumption and eliminate inter-provincial barriers. It is now advancing a unified national market that enables cross-regional trading and better integrates renewables. This framework includes long-term contracts, spot markets, and ancillary service trading, creating a more complete pricing system.

Renewables now fully participate in market-based transactions, while green energy and certificate trading are growing to attract investment in clean power. These reforms aim to create a transparent, efficient, and flexible market that values both reliability and sustainability.

Strengthening Policies and Business Mechanisms

China has introduced policies to guide new business models like virtual power plants and integrated generation-grid-demand-storage projects. These frameworks define the roles and responsibilities of market participants, ensuring new entities contribute fairly to system stability.

At the same time, the country is building complementary markets, such as capacity markets, and refining ancillary service markets – including those for peak regulation, frequency regulation, and spinning reserve – where various participants (storage, demand response, flexible generation) can trade services that support reliability.

Lessons from China’s Transition

China’s experience shows that large-scale renewable integration requires alignment across policy, planning, markets, and innovation. The WEF notes four key lessons:

1. Set clear, interconnected goals. China’s "dual-carbon" framework links national targets with local and sectoral implementation, ensuring coordinated progress.
2. Plan the grid for the long term. A robust, large-scale grid remains the backbone of a clean energy system. Strategic grid planning and investment in transmission are essential to move renewable power from where it’s produced to where it’s needed.
3. Design markets that reflect real value. Effective markets must reward flexibility, capacity, and environmental performance – not just kilowatt-hours. Instruments like renewable quotas, certificate trading, and pricing reforms can align incentives for all participants.
4. Invest in innovation. Technology is key to balancing economic efficiency, system security, and environmental sustainability – the "energy trilemma" every nation faces.

The path forward

China’s approach combines massive deployment of renewables with deep systemic reform. The concept of integrated generation-grid-demand-storage – linking clean generation, flexible grids, active demand, and storage – illustrates how the next-generation power system can function as a coordinated ecosystem rather than a linear supply chain.

As technology advances and markets mature, China’s evolving model offers a valuable reference for other countries seeking to integrate renewables rapidly and reliably. Global collaboration through experience sharing, harmonized standards, and joint innovation will be crucial to accelerating the clean energy transition worldwide.