A green switch in China’s energy order

Grid reform and increased endorsement of renewables are set to steer the country’s energy transition

China’s 15th Five-Year Plan (FYP) comes with a strong vision for greening the economy. In the recommendations of the Central Committee of the Communist Party of China, green development has been mentioned as a ‘defining feature of Chinese modernisation’, and priority will be given to reducing pollution at source. Non-industrial sectors will increasingly move towards phasing out the use of coal, aimed at reducing the dependence on imports to meet the energy consumption demand.

Renewable energy sources that are likely to see increased investments are wind and solar plant installations, as well as pumped-storage hydropower (PSH). In terms of future technologies, hydrogen energy and nuclear fusion energy will be explored. However, the recommendations do not mention green hydrogen specifically.

Solar has been leading RE installations since 2020 in China. The installed capacity of solar power plants has increased from 253.86 GW in 2020 to 887.10 GW in 2024. Wind energy, on the other hand, has only seen an increase of about 85 per cent. While solar energy’s share went up from 28.32 per cent to 48.81 per cent, the share of wind energy installations reduced from 31 per cent to 28 per cent. This can be attributed to relatively higher costs, longer lead times, and higher curtailment rates for wind energy projects. Amid the low installation rates and an oversupply of wind turbines, key Chinese firms in the sector faced losses in 2023, until the leading firms agreed to consolidate the industry.

During the upcoming FYP period, the wind energy industry is expected to pick up pace as the solar equipment suppliers face overcapacity. Chinese firms have also been leading in wind turbine innovation and project implementation. Additionally, wind power firms collectively published a Beijing Declaration on Wind Energy 2.0 in October, setting a target of 1.3 TWh installed capacity by 2030. This is a significant increase from the previous target set for 2030 – an installed capacity of 800 GW. China has also set a new NDC target for 2035: a combined installed capacity of wind and solar at 3.6 TW. The consolidation of the industry and an increased focus on grid infrastructure will favour the growth of wind energy in the FYP period.

The Central Committee directs that plans be developed for PSH to increase the safety and resilience of the power grid. PSH can fill in the supply gap when variable sources are not able to meet the demand, stabilising the grid and the market as well. It saw an increase in installed capacity from 31.49 GW in 2020 to 58.69 GW in 2024.

Lastly, broad directions on energy transition focus on improving transmission infrastructure to cover regional demands. This includes connecting both small and distributed energy resources, and large RE farms to the grid and consumers. Energy backbone corridors are included to ‘boost high-quality development of clean energy’ that can connect renewable-rich provinces to nearby economic clusters.

Market reforms for RE projects will also be accelerated, which will impact different RE sources unevenly. The reforms will reward fast-delivering, flexible sources that are proximate to demand centres. Therefore, large onshore/offshore wind farms will experience losses or require pricing support, whereas distributed, small wind or solar producers, and PSH producers will stand to benefit in times of higher demand.

Smart grids and microgrids remain a continued priority, carrying over their emphasis from the 14th FYP. The State Grid Corporation budgeted $88.7 billion for power grid investment in 2025. As of May 2025, China’s industrial sector has approximately 300 RE-powered microgrids operational or under construction. China’s RE growth will continue, with better grid integration. However, the move to market pricing creates uncertainty for new projects, and specific targets will be crucial for guiding advancements in RE technology and demand.

India’s takeaways

For India and the world, this transition will mean an increased dependence on Chinese RE equipment. As China accelerates domestic deployment and reduces its fossil fuel dependence, it is also positioning itself at the centre of RE supply chains. This was evident in solar panels, and now, increasingly witnessed in wind turbines.

The focus of Chinese policy on a specific technology not only accelerates decarbonisation and lowers cost for the global supply chain, but also subsequently reshapes energy trade. If successfully implemented, Chinese policies and implementation standards can also shape global norms in RE deployment. For India, the challenge lies in balancing technological advancement while ensuring the competitiveness of domestic RE industries against Chinese imports and maintaining the economic viability of RE projects.

(The writer is a research analyst with the Indo-Pacific Studies Programme at the Takshashila Institution)

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)