2021-05-31-GIZ-China_Energy_Transition_Status_Report_2021_89页_11mb

China Energy Transition Status Report 2021 Summary

Core Content

The China Energy Transition Status Report 2021, published by the Sino-German Energy Transition Project, provides an overview of China's progress in its energy transition and outlines key challenges and future directions. The report is a collaborative effort between the German Federal Ministry for Economic Affairs and Energy (BMWi) and the China National Energy Administration (NEA), implemented by GIZ, dena, Agora Energiewende, and Chinese institutions such as the Electric Power Planning and Engineering Institute (EPPEI) and the China Academy of Sciences Institute of Applied Ecology (CAS IAE).

The report emphasizes that while China's energy transition has gained momentum, it is still in a complex and evolving phase. The 2060 carbon neutrality goal, announced by President Xi Jinping in 2020, is a pivotal moment that has reinforced the shift towards low-carbon, sustainable development. However, the transition is not without its obstacles, particularly in policy implementation, market mechanisms, and the continued reliance on coal.

Main Views and Key Information

1. Energy Transition Policy Overview

• 2020 was a significant year for China's energy and climate policy, marking the end of the 13th Five-Year Plan and the announcement of the 2060 carbon neutrality goal.
• The report highlights that while the 13th Five-Year Plan targets were largely met, some key indicators were not fully achieved, indicating the need for further progress.
• The 14th Five-Year Plan (2021–2025) sets the framework for future energy policy, aiming to align with China's climate goals.

2. Key Energy Transition Statistics in 2020

• Wind and solar energy accounted for 11% of total electricity generation in 2020, with significant growth in installations.
• Wind installations reached over 72 GW, and solar PV installations exceeded expectations despite reduced subsidies.
• Renewable energy curtailment dropped to 3% for wind and 2% for solar, showing progress in integrating renewable sources into the grid.

3. Fossil Fuels and Coal

• Coal remains the dominant energy source, with a share of 57% in total energy consumption in 2020.
• Despite efforts to reduce coal dependency, new coal plant approvals increased in 2020, and provincial governments continued to prioritize coal over renewables.
• Thermal power utilization hours declined to 4216, well below 50%, indicating a shift in the energy mix.

4. Renewable Energy and Clean Power

• Renewables (wind, solar, hydro, nuclear) are expanding rapidly, with a focus on grid parity and market integration.
• Offshore wind is emerging as a new area of growth, with 3 GW added in 2020.
• Rooftop solar saw new installations of 10.1 GW, though most solar remains ground-mounted.
• Renewable policies are in transition, with a shift from short-term targets to long-term planning, but the regulatory environment is still unstable.

5. Electricity Market Reform

• Power market reforms are progressing, with a focus on mid-to-long-term bilateral contracts and the development of spot markets.
• Ancillary services markets are expanding, and more provinces are participating in spot market trials.
• Provincial protectionism remains a challenge, as local governments resist market liberalization and prefer self-sufficiency.

6. New Energy Vehicles (NEVs)

• The electric vehicle market stabilized, with domestic brands like Nio and Xpeng gaining traction.
• Public charging infrastructure grew by 54%, showing a strong commitment to supporting EV adoption.

7. Hydrogen

• Hydrogen is gaining attention as a potential clean energy carrier, with major oil and gas companies investing in production and distribution.
• Most hydrogen in China is derived from coal, which raises environmental concerns.

8. Carbon and Carbon Markets

• The national carbon market is nearing operation, with final regulations published in 2020 and compliance starting in 2021.
• The market is expected to evolve from performance benchmarks and free allocation to allowance auctions and a hard-total cap on emissions.

9. Air Quality

• Air quality has improved in many regions, but challenges remain, especially in areas with high coal usage.
• The Ministry of Ecology and Environment (MEE) criticized the National Energy Administration (NEA) for prioritizing energy supply over environmental protection, highlighting the need for better policy alignment.

Challenges

• Electricity shortages in 2020, particularly in southern provinces, were attributed to both administrative targets and physical constraints.
• Coal plant approvals continued despite efforts to reduce reliance on fossil fuels, indicating policy contradictions.
• Renewable integration is still limited by lack of flexibility in the power system and inadequate market mechanisms.
• The NEA is criticized for not restricting coal expansion in key pollution control regions, leading to a situation where "what should be built is not built, and what should not be built is built."

Future Directions

• The 14th Five-Year Plan sets specific targets for the energy transition, including:
  • Reducing carbon intensity by 18% from 2020 levels.
  • Reducing energy intensity by 13.5% from 2020 levels.
  • Increasing the share of non-fossil energy to 20% by 2025.
  • Targeting 70 GW of nuclear power by 2025.
• The report suggests that market reforms and policy coherence are essential for achieving a low-carbon energy system.
• Societal acceptance of the energy transition is critical, as the concept moves from academic discussions to national policy.

Conclusion

The report underscores that China's energy transition is ambitious but complex, requiring international cooperation and domestic policy reform. While progress has been made in renewable energy development and market reforms, policy contradictions and market inertia remain significant challenges. The carbon neutrality goal is a central theme, but its realization depends on overcoming these obstacles and fostering a more market-driven and eco-friendly energy system.