Accelerating the Construction of New Energy Systems

As the situation in the Middle East becomes turbulent, international crude oil prices are experiencing severe fluctuations, making energy security once again a focal point of global attention. This year, the “Government Work Report” proposed the formulation of a planning outline for building a strong energy nation. It focuses on constructing a new type of power system, accelerating smart grid construction, developing new energy storage, and expanding the application of green electricity. It also emphasizes strengthening the clean and efficient utilization of fossil energy. This indicates the direction for enhancing energy security and energy transition work in the near future.

Accelerating Infrastructure Construction

The “14th Five-Year Plan” explicitly includes “building a strong energy nation” in the national strategic plan for the first time, making systematic arrangements for high-quality energy development over the next five years.

At the recently held 11th China Energy Development and Innovation Conference, Shi Yubo, president of the China Energy Research Society, stated that from a developmental perspective, once the per capita GDP surpasses $10,000, energy consumption will enter a phase of rigid growth for a considerable period. The construction of a strong nation must rely on a robust energy system as a solid support. From a practical challenge, China needs to meet the energy demand for sustained and healthy economic and social development while steadily achieving the “dual carbon” goals. Under this dual constraint, strengthening the energy security barrier is crucial; energy is the “driving blood” of development and the “lifeline” of the nation.

Considering China’s energy resource endowment and the demand for a green low-carbon transition, building a strong energy nation requires greater efforts to develop renewable energy and establish a new energy system. Over the past decade, China has made historic achievements in constructing a new energy system: the proportion of non-fossil energy consumption has first surpassed that of oil, wind and solar power installations have exceeded those of thermal power, and by 2025, the power generation structure of “one decrease and multiple increases” has become the norm, with investments in key areas like new energy storage and hydrogen energy doubling… These iconic changes clearly announce that a new era of energy characterized by green is accelerating its arrival.

“But we must remain clear-headed: China’s energy demand is still in a rigid growth phase, the traditional energy system has a strong path dependence, and the intermittent volatility of new energy poses challenges for stable supply. The market mechanism and policy coordination still have shortcomings,” said Wei Suo, vice president of the China Industrial Development Promotion Association and president of the hydrogen energy branch. To solve these problems, continuous improvement in top-level design is needed, as well as collaboration and efforts from the industry.

The “14th Five-Year Plan” is a critical period for China to accelerate the construction of a new energy system and achieve the carbon peak target. Renewable energy needs to consolidate its position as the main body of energy consumption increase and gradually shift to replacing fossil energy stock, transforming from “supplementary energy” to “main energy.” Liang Zhipeng, chairman of the Renewable Energy Committee of the China Energy Research Society, believes that it is essential to ensure the new installed capacity of renewable energy power generation, expand absorption space through multiple channels, increase the scale of non-electric applications of renewable energy, accelerate the construction of new energy infrastructure, further improve the innovation system for renewable energy, and steadily promote the market-oriented development of renewable energy power.

Aiming for the target of non-fossil energy consumption exceeding 80% by 2060, the ratio of non-fossil to fossil energy will undergo a disruptive change. According to the “China Energy Transition Outlook 2025” published by the Energy Research Institute of the China Academy of Macroeconomic Research, the analysis of the Benchmark Carbon Neutral Scenario (BCNS) and Ideal Carbon Neutral Scenario (ICNS) models indicates that China’s wind power installed capacity will rise from 520 million kilowatts in 2024 to between 3.22 billion and 3.34 billion kilowatts by 2060; the photovoltaic installed capacity will increase from 890 million kilowatts in 2024 to between 5.5 billion and 6.5 billion kilowatts by 2060. It is expected that by 2060, wind and solar power will account for about 77% of total electricity generation, and renewable energy will account for over 90% of electricity generation.

Continuously Increasing the Proportion of Electricity Consumption

Terminal electrification is a necessary means for China to build a strong energy nation. As a high-quality, efficient, and clean secondary energy source, large-scale application of electricity to replace other energy sources is beneficial for improving economic efficiency, ensuring national energy security, and helping achieve the “dual carbon” goals.

Data shows that in 2024, China’s electrification rate will be about 28.8%, an increase of 0.9 percentage points from the previous year, and China’s electrification rate has already surpassed that of major developed economies in Europe and the United States. It is expected that by 2030, China’s electrification rate will reach about 35%, exceeding the average level of 8 to 10 percentage points of OECD countries.

He Yongjian, secretary of the Party Committee and executive director of the State Power Investment Corporation Economic and Technical Research Consulting Co., Ltd., stated that by 2050, the proportion of electricity in terminal energy consumption in China will rise to over 50%, while the current figure for the most developed countries is only about 22%, which will undoubtedly reshape the global energy landscape.

While enhancing electrification levels, utilizing new energy effectively is key to avoid increasing carbon emissions. China has clearly stated that by the end of the “14th Five-Year Plan,” the demand for new electricity will primarily be met by newly added renewable energy generation. It is expected that by 2030, the proportion of wind and solar power generation will reach about 30%, and the installed capacity of wind and solar power will reach around 3 billion kilowatts.

Research shows that once the penetration rate of new energy electricity exceeds 15%, every additional 5% increases the system cost by about 0.1 yuan/kWh. At the same time, the system cost is non-linearly related to the proportion of new energy electricity; as the proportion of new energy increases, the system cost will rise more rapidly. If the “13th Five-Year Plan” mainly focused on reducing the cost of new energy, then the key for the “14th Five-Year Plan” is to further increase the proportion of new energy in total electricity consumption through technological innovation and improvement of institutional mechanisms.

Wei Suo suggested focusing on key areas such as efficient photovoltaics, advanced wind power, new energy storage, hydrogen production and storage, advanced nuclear energy, and smart grids to increase R&D investment and technological innovation, actively develop new technologies and industries, explore new models and new business formats, and promote digitalization and intelligence, leading industrial transformation through technological innovation.

Achieving the “dual carbon” goals also relies on market-oriented tools. Shi Yubo stated that during the “14th Five-Year Plan,” a national unified electricity market system should be basically established, and a scheduling mechanism for oil and gas “national network” should be improved; a pricing mechanism that matches the new energy system should be established, promoting the market-oriented reform of grid connection prices by category, creating a stable, transparent, and predictable market environment, and fully stimulating the vitality of various operating entities.

Exploiting Hydrogen Energy’s Decarbonization Potential

As an important component of future energy, hydrogen energy is a secondary energy source that is abundant, green, low-carbon, and widely applicable, playing a significant role in reducing carbon dioxide and other greenhouse gas emissions and achieving carbon peak and carbon neutrality goals. This year’s “Government Work Report” proposed the establishment of a national low-carbon transition fund to cultivate new growth points such as hydrogen energy and green fuels. This indicates that the policy positioning of hydrogen energy is shifting from a single technology demonstration to a systematic deployment linked with industrial funds, green finance, zero-carbon parks, and carbon reduction in key industries.

Li Jingguang, Party Secretary and Chairman of China Energy Construction Hydrogen Energy Co., Ltd., stated that developing the hydrogen energy and green fuel industry is beneficial for replacing oil, ensuring energy security, reducing carbon emissions, promoting green development, and enhancing the utilization and absorption of new energy, which is an important direction for the development of new productive forces in the energy sector.

Currently, the planned production capacity of green ammonia in China is about 20 million tons/year, and the planned production capacity of green methanol is about 26 million tons/year. It is estimated that green ammonia can reduce oil import dependence by about 1.77% and natural gas import dependence by 62.67%; green methanol can reduce the dependence on oil imports by 2.33% and natural gas import dependence by about 82.79%. The future development potential of the green ammonia and green methanol industries is enormous and will effectively ensure national energy security.

In terms of carbon reduction capacity, compared to fossil fuels, green methanol, green ammonia, and sustainable aviation fuel (SAF) show significant performance in terms of greenhouse gas emissions, with green methanol reducing carbon dioxide emissions by 81% compared to oil, green ammonia reducing carbon dioxide emissions by 81%, and sustainable aviation fuel reducing carbon dioxide emissions by 86%, providing a highly competitive clean energy alternative for industrial fuels, aviation transport, and deep-sea shipping.

From a resource perspective, China’s new energy resources are mainly distributed in the western and northern regions, with sufficient exploitable reserves. “Overall, the layout of new energy development does not match the absorption capacity. Converting new energy non-electric consumption into other forms of energy will further enhance the efficiency of new energy utilization and reduce dependence on the absorption capacity of the power system, thus addressing issues such as ‘abandoned wind and solar power,’” said Li Jingguang.

Regarding how to continuously optimize the energy structure and expand the supply and application scenarios of green energy, Wei Suo suggested leveraging the deep decarbonization potential of hydrogen energy and hydrogen-based fuel raw materials in industries, transportation, and energy, making them the main force in building a clean, low-carbon, safe, and efficient modern energy system. Using hydrogen energy as a medium to create a new type of industrial model and ecosystem that integrates cross-industry collaboration, connectivity among different types, and regional synergy and coexistence. (Economic Daily reporter Wang Yichen)