China’s wind, solar energy sectors need the right incentives and market reforms to meet Xi Jinping’s carbon neutrality goals

Capacity will almost triple to more than 1,200GW by 2030 as China increases the share of non-fossil fuels, President Xi Jinping said in a weekend speech

A key challenge is to ‘incentivise the entry of flexible generation capacity’, says Lucas Zhang Liutong, director of WaterRock Energy Economics

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The Lijiaxia Hydropower Station in northwest China’s Qinghai Province. Photo: Xinhua

Published: 7:16pm, 15 Dec 2020Updated: 9:52pm, 15 Dec 2020

China’s wind and solar power producers need the right incentives and market reforms to increase the contribution of non-fossil fuels to 25 per cent of the total energy consumption mix by 2030, analysts said.

The capacity to generate electricity from wind and the sun will nearly triple to more than 1,200 gigawatts (GW) by the end of the third decade of the century as China increases the share of non-fossil fuels on its path to reach carbon neutrality by 2060, according to a weekend speech by President Xi Jinping at the United Nations’ Climate Ambition Summit.

“The key challenge is to incentivise the entry of flexible generation capacity,” said Lucas Zhang Liutong, director of WaterRock Energy Economics. “They need to enhance the current regulatory framework and market design to incentivise the investment of flexible capacity, like battery energy storage, hydro-pumped storage and natural gas power plants.”

The solar and wind farms installation goal represents an average annual installation of 72GW in the next decade, according to Zhang.

Daiwa Capital Markets’ head of utilities and renewables research, Dennis Ip, has a similar forecast. “The target announced by Xi is achievable because we had already forecast China would have 90.4GW of combined average annual wind and solar capacity installation between last year and 2025,” Ip said in a note.