China’s energy transition 1.0 or 2.0: How can it trigger a greater share of renewable energy?

While China is encouraging the increase in renewable energy following Germany’s example, Germany has – in recent months – been focusing its energy discussions increasingly around the need to reform its electricity market. This experience can offer highly valuable lessons for China and other countries for the time when these too have to begin designing their energy systems to account for larger shares of intermittent renewable energies. The current Chinese Energy Transition 1.0 is not sufficient to allow for a much greater share of renewables in the energy system, explains Yang Yu.

(Photo by High Contrast, CC BY 3.0 DE)

German discussions on an integrated and structured Energiewende can serve as a blueprint for other countries. (Photo by High Contrast, CC BY 3.0 DE)


How do we make sure renewables offer the best economic and sustainable energy option of the future? With no doubt, the main answer has to be that we need renewable energy in order to reduce global greenhouse gas emissions.

China can benefit from the German Energiewende test case and figure out how best to integrate a larger part of renewable energies into its energy system at a lower cost. And China will be able to find its own solutions by asking which factors resulted in some of Germany’s market issues and how they were fixed. Generally speaking, the lack of a comprehensive market design can lead to a distortion of price and to inadequate technological innovation. When the government pursues the expansion of renewable energy, we ignore their ability to actually reduce emissions. When the government protects renewable energy investors from risks associated by the intermittent nature of wind and solar, we deprive other technologies which stabilize the grid by providing flexible back-up, of receiving the pro-renewable subsidy. One example would be China’s “Golden-Solar” program, which benefits a bunch of strategic players rather than substantially improve their technologies.

Germany’s energy policy is changing. In contrast with the old scheme, the Energiewende 2.0 represents a comprehensive and structured approach rather than a portfolio of several separated designed policies, which may conflict with each other. Furthermore, the Energiewende 2.0 emphasizes the need for a functioning market mechanism to incorporate a larger share of renewables. For example, the new plan clearly requires electricity providers, no matter whether conventional or renewable, to guarantee the stability of their electricity supply. In addition, the Energiewende 2.0 focuses increasingly on balancing the improvement of the renewable generation technologies with the innovation of renewable distribution and storage technologies.

Twenty years ago, Germany was one of the first countries to use the so-called feed-in tariff to encourage the rapid build-up of renewable energy. Today, the country acts as a pioneer when rethinking models for a holistic energy system, in which renewables will provide the majority of electricity. By observing this process, China and other countries should critically examine their own renewable schemes. These countries need to design comprehensive energy solutions rather than investing in an old scheme that is being abandoned by Germany.

By Yang Yu. He is a Ph.D. candidate in Department of Civil and Environmental Engineering in Stanford University. He is also pursuing a M.A. degree in Department of Economics. His research field is energy and environmental economics. His current studies include market design for integrating renewable energy, price scheme for demand side management and adaptive dispatch grid, and impacts of fuel efficiency standard on the automotive market. He worked as an internship in the World Resource Institution (WRI) Beijing office for financing energy efficiency projects of small and middle businesses in 2010. In 2011, he took his internship in the California Independent System Operator (CAISO) for the research on integrating renewable energy in to the grid.

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