Currently on target to reach a record-breaking 230 gigawatts of wind and solar installations this year, China leads the global renewables market with more than double the number of U.S. and Europe installations combined.
Wind and solar project investment for China is expected to reach $140 billion for 2023.
China announced its 2060 carbon neutral target in 2020 and since then has been quietly reorganizing the entire power sector to support rapid electrification and expansion of renewables. While some other markets are moderating renewables targets, China has pushed up its 2025 wind and solar outlook by 43 percent, or 380 gigawatts, in just a couple of years.
Since 2020, to help scale up renewables in the country, China has redirected significant investments toward transmission lines, energy storage, flexible backup and manufacturing. As the cost of wind and solar fell in China, the country also withdrew preferential feed-in tariffs for renewables projects in 2022, saving the government hundreds of billions in subsidies.
China has budgeted $455 billion in grid investments from 2021-2025, up 60 percent from the previous decade. This includes long-distance transmission lines more than 600 miles long that have unlocked more than 100 gigawatts of renewable development in inland China.
China has become a leader in grid-connected energy storage, with capacity doubling from 2020 to hit 67 gigawatts in 2023 and an outlook to expand to 300 gigawatts by 2030.
Other government initiatives target grid flexibility. China has been criticized for a pipeline of more than 200 gigawatts of coal plants under development, but new policies have also led to the creation of a fleet of more than 100 gigawatts of flexible plants that burn less coal and are designed to ramp up to backup intermittent renewables. China has also released new policies on the demand side, such as higher peak pricing and setting targets for 50-80 gigawatts of “demand side management” or “virtual power plants” by 2025.
Sharon Feng, a senior power analyst based in Beijing, observed: “While cost inflation has been a major drag in other markets, China has leveraged its massive domestic scale and strong growth in exports to rapidly expand solar manufacturing and lower solar module costs. Today, China dominates over 80 percent of global supply-chain capacity.”
Falling interest rates, low energy costs, intense price competition among domestic suppliers, and government support for research and development and manufacturing have all supported falling costs in China.
This article was excerpted from a report published by Wood Mackenzie, a global research and consultancy group.