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NEA Talks on China’s Policy Guidance for Green Energy Transition


At the end of January 2022, approved by State Council, National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) issued the Opinions on Improving Institutional Mechanisms and Policy Measures for Green and Low-Carbon Energy Transition (the Opinions). Officials from NEA answered the questions regarding the measures to implement the Opinions.

We have noticed that the Opinions is a comprehensive policy document issued in the energy sector as part of the "1+N" policy framework for achieving carbon peaking and carbon neutrality. Could you please explain the considerations for issuing the Opinions at this particular point in time?

China’s President Xi Jinping pointed out that it is a strategic decision to achieve carbon peaking and carbon neutrality. It is also an inherent requirement for implementing the new development philosophy, building a new development pattern, and promoting high-quality development. Since emissions from energy production and consumption account for a relatively high proportion in China's total carbon dioxide emissions, advancing the green and low-carbon energy transition is the key to achieving the dual carbon goals. However, some deficiencies in the current energy mechanisms and policies are as follows, the awareness of transition to green energy consumption needs to be increased the increasing risks of supply security in energy transitionthe inadequate infrastructure to accommodate the large-scale development of renewable energy the insufficient capability for indigenous innovation in critical areas the incomplete energy market system coordination mechanism for energy management needs to be improved and the relatively weak policy support in areas such as investment and financing. Therefore, a systematic and comprehensive approach is needed to plan the institutional mechanisms and policy measures for the green and low-carbon energy transition from a top-level design perspective. The Opinions serves as one of the important safeguard measures within the "1+N" policy framework for achieving carbon peaking and carbon neutrality. It is a concrete implementation of the Opinions of the Central Committee of the CPC and the State Council on Carbon Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy and the Action Plan for Carbon Peaking by 2030 in the energy sector. The Opinions will be implemented in synergy with the series of carbon peaking policies, to systematically advance the green and low-carbon energy transition.

Please briefly introduce the overall ideas of the Opinions regarding the promotion of green and low-carbon energy transition, and explain the considerations behind such arrangements.

As a comprehensive policy document for achieving the dual carbon targets, the Opinions follows a systematic approach to develop green and low-carbon energy, from the perspectives on the reform and innovation of institutional mechanisms and policy guarantees. It highlights four aspects of coordination.

First, it emphasizes the coordinated advancement of energy strategic planning. The Opinions points out that all provincial-level energy plans should specify the goals and tasks of green and low-carbon energy transition. A national monitoring, evaluation, and assessment mechanism for the transition will be established. The Opinions proposes establishing inter-departmental and inter-regional coordination mechanisms for energy security and development. The mechanisms focus on the construction of energy transmission channels, as well as on achieving coordinated efforts between energy development, national spatial planning, and ecological and environmental protection. Ledgers of major projects will be established annually, and supervision and coordination will be strengthened to ensure the orderly and smooth progress of national energy strategy and construction of major projects.

Second, it emphasizes the coordination between energy transition and energy security. The Opinions requires to promote the green and low-carbon transition without compromising the energy security. On one hand, China needs to refine mechanisms for clean and efficient development and utilization of fossil fuels, as well as to promote the orderly construction of a new power system which is dominated by renewable energy. On the other hand, the Opinions aims to enhance China’s energy security and supply, with better energy forecasting and early warning mechanisms, safe operation and comprehensive defense systems for the power system, and system for energy supply security and emergency reserves.

Third, it emphasizes the coordinated transition of production and consumption. On the consumption side, with priority on energy conservation, China needs to improve energy consumption and carbon emissions management systems, and establish mechanisms to promote green energy consumption with specific policy measures in industrial, construction, and transportation sectors. On the production side, it aims to establish new green-oriented mechanisms for energy development and utilization, conducts comprehensive surveys and evaluations of clean and low-carbon energy resources and integrates the results with the national land and spatial information platform. Each area should develop and use local clean and low-carbon energy first, and actively bring in from other areas when needed.

Fourth, it emphasizes the coordinated transition of various market entities. The Opinions proposes strengthening mechanism guarantees and policy guidance to stimulate the market entities transition. On one hand, it aims to create a favorable environment for emerging market entities, by accelerating electricity system reforms, deepening the reform of "Streamlining Administration, Delegating Power, and improving regulation and services" (SADP) in the energy sector, optimizing the approval and filing process for clean and low-carbon energy projects, and removing obstacles that hinder market competition. On the other hand, it seeks to improve the assessment mechanisms for natural monopoly enterprises in the power grid and the oil and gas pipeline networks, focusing on assessing their performance in energy supply security, technological innovation, and ecological environmental protection.

How will the Opinions improve the related institutional and policy system to guide and upgrade China’s green energy consumption?

Green consumption is crucial for the green and low-carbon energy transition. The "Opinions" propose a comprehensive institutional and policy system to promote green energy consumption from the following three main aspects,

First, improving the management system for energy consumption, carbon emissions, and non-fossil energy target. In terms of energy consumption and carbon emissions, it is important to strengthen the management of binding indicators for energy intensity and flexibility in energy consumption control. Incremental renewable energy and raw material consumption will not be included in the total energy consumption control. Different regions should have reasonable target-settings for energy intensity reduction, consistent with the dual carbon targets. In terms of implementing non-fossil energy targets, the national targets for the development and utilization of renewable energy should be reasonably allocated to provinces. Mechanisms will be improved to ensure the facilitated consumption of electricity from renewable energy. The objective is to establish a coordinated implementation mechanism to promote the development and utilization of renewable energy and achieve non-fossil energy targets.

Second, establishing mechanisms to promote green energy consumption. It requires profound changes in energy consumption sector, and push for the green transition of energy consumption structure. The "Opinions" aims at driving the green transition of production side by increasing consumers’ green energy preference. The specific measures include establishing green energy consumption certification, promoting the substitution of electricity with green alternatives, and improving the trading of green electricity certificates. The mechanism to promote green energy consumption will provide zero-or-low-carbon pathways for green factories, parks and communities, and help to gain widespread social acceptance.

Third, promoting the transition of energy consumption in key industries, such as industrial, construction and transportation. Supportive policies on feed-in tarrif, trading of distributed generation, and land space guarantees will be proposed to promote the end-use decarbonization and electrification.

In the industrial sector, efforts will be made to encourage renewable energy projects to provide power to nearby industrial parks or enterprises through innovative power transmission and operation methods, and support companies to buy green electricity through the electricity market. In the construction sector, ultra-low energy consumption and low-carbon buildings should be scaled up. In areas with suitable conditions, reforms in heating measurement will be advanced, and support will be provided for the construction of renewable energy supply systems, and the integration of photovoltaics with buildings will be encouraged. In the transportation sector, efforts will be made to promote the electrification of high-capacity public transportation and the adoption of clean energy transportation vehicles such as electric, hydrogen, advanced biofuels, and natural gas. The layout and service facilities for charging, hydrogen refueling, and gas (LNG) stations will be improved, with support provided in terms of land space and other aspects.

To achieve the "dual carbon" goals, what specific policy measures does the Opinions have for building a diversified and clean energy supply system on the energy supply side?

The Opinions is based on China's energy resource endowment, adheres to the principles of “developing something new before discarding something old”and comprehensive planning. It aims to systematically proposes institutional mechanisms and policy measures to support the green and low-carbon transition of the energy supply side.

First, the Opinions emphasizes the structural transition to an energy supply system dominated by the renewables. On one hand, China will accelerate to develop large-scale and solar PV power bases, where existing coal-fired power units should be upgrade to provide supporting regulation capacity. Simultaneously, the country needs to push for a system facilitating more renewable energy consumption, by regulating the transmission from both supply and consumption sides. On the other hand, the “Opinions” encourages each area to use local renewable energy, and actively bring in from other areas when needed. Feed-in-tariff for distributed renewable energy is required to be improved. All these measures help to reshape the energy production and consumption pattern, as fossil stocks will be phased out with renewables as the source of newly added energy demand. 

Second, The Opinions emphasizes on the clean utilization of fossil fuels and the reductions of its pollution and emissions. For a considerable period, China energy mix will remain coal-dominated. A long-term mechanism for the green and intelligent development of coal mines should be established, with comprehensive utilization policies for resources such as coal gangue and mine water. Mechanisms and policies to promote ultra-low emission transformation, flexibility improvement, and heating transformation of coal-fired power units will be enhanced. Captive coal-fired power plants are encouraged to bear their fair share of social responsibility. Efforts will be intensified to expedite the transition of coal-fired power toward an equal emphasis on fundamental power supply guarantee and system regulation. Besides, the clean and efficient exploitation of oil and gas will be enhanced, and collaborative development mechanisms will be improved for oil and gas with geothermal, wind, solar, and other energy sources.

Third, building the energy infrastructure, such as grids and pipelines, that adapt to the green and low-carbon transition. In terms of electricity, efforts will focus on a new type of power system with better top-level design. Adaptability assessments for green development will be conducted for existing power systems to level up its technology and system. The grid system will be improved to facilitate the localized utilization and wide-area transmission of renewable energy. Overall optimization of transmission networks and power system operations will be carried out, while mechanisms for flexible power source construction and operation and power demand response will be enhanced to improve the transmission and consumption capacity of renewable energy electricity. In the oil and gas sector, with the premises on safety, clean fuels will be able to transmitted through oil and gas pipelines, such as hydrogen blending in gas pipelines. The construction of integrated energy service stations that integrate traditional refueling stations, gas stations, and hydrogen refueling stations will be encouraged. In emerging sectors such as integrated energy, it explores the operation of regional comprehensive energy systems by multiple entities in the same market, encourages support from grid enterprises and gas supply companies for comprehensive energy service operators.

The Opinions has made systematic arrangements in strengthening clean and low-carbon energy production factors and reducing non-technical costs. How will the relevant policy measures be specifically implemented?

To achieve breakthroughs and overcome path dependence, strong policy support and guidance are needed. The Opinion puts forward policies that are conducive to the green and low-carbon energy transition, regarding land use, financing, taxation, pricing, and data resources. These policies aim to channel the production factors such as land, capital, and data into the field of clean energy, and accelerate the green and low-carbon transition.

First, China needs to optimize spatial planning for renewable energy development. The Opinions proposes to establish a spatial management mechanism and improve the classification guidance, to address the challenges of mixed land use and coordination difficulties. Besides, it also requires strict and lawful collection of taxes related to energy development on land or at sea, in order to create a favorable environment for clean and low-carbon energy.

Second, the Opinions emphasizes on increasing investment and financing support. On the one hand, it calls for improving diversified investment and financing mechanism for energy transition. Central budget investments should be increased to support energy projects with great contributions to carbon reduction. Local government special bonds are encouraged to cover major renewable energy projects that meet the requirements. . It also leverages the leading role of the National Green Development Fund, real estate investment trust funds (REITs), and other financial instruments. On the other hand, it calls for improving financial support for the green and low-carbon energy transition. Financial institutes should take into consideration of the growth potentiality of related industrial chains and their contributions to dual carbon targets, while rating and making load approvals for renewable companies. The Opinions also proposes to innovates green financial products tailored to the characteristics of clean and low-carbon energy.

Third, it focuses on improving pricing policies. For green energy consumption in industrial sector, it proposes to cut cross subsidization and system standby fees for power generation using waste heat, pressure, and gas. For green energy use and clean heating in buildings, it encourages enterprises and individuals to get off-peak price by using electric heating. Peak pricing, residential tiered electricity rates, and transmission and distribution pricing mechanism could be also supportive in comprehensive application. For the development of distributed energy, it proposes to improve pricing policies that support self-generation for self-consumption and market trading. For construction of energy storage and power regulation, it suggests improving electricity pricing policies for energy storage applications, and enhancing the price compensation mechanisms for the operation of regulation power coming from flexible coal-fired power units, natural gas peak-regulation units, and solar thermal power generation and energy storage. 

Fourth, it highlights the importance of data support in energy sector. The Opinions suggests to conduct detailed surveys and comprehensive evaluations of clean and low-carbon energy resources nationwide. The aim is to dynamically update the national database of renewable energy. Efforts will be made to establish a national energy infrastructure information and sharing platform, integrating information across the entire value chain of energy industry, and promoting the digital economy in the energy sector. Additionally, capabilities in renewable energy-related meteorological observations, resource assessments, and forecasting techniques should be further improved.

What is the overall direction of the Opinions in deepening energy reform and innovation and stimulating market vitality?

The Opinions proposes a series of measures to adapt to the energy governance system and capacity building for green energy transition. It focuses on deepening the reform of the energy system to improve its operation efficiency and resource allocation, by fully leveraging the decisive role of the market in resource allocation while playing the government role better.

First, accelerating the development of the electricity market. This process aims to develop green and low-carbon electricity through market-oriented means, including, the establishment of a unified national electricity market system, the expedited construction of auxiliary service markets for electricity, improved connections between medium-long term and spot and auxiliary service transactions of electricity, exploration of capacity market trading mechanisms, deepening reforms in key areas such as transmission and distribution.

The pricing mechanism between provinces and regions is refined to facilitate the wider integration of renewable energy.

Second, the Opinions outlines specific policies and mechanisms for localized market-based trading of distributed generation as follows, supporting the trading of distributed generation (including energy storage, electric vehicles and ships) through electricity trading platforms among power users within the same distribution network, providing technical support for transmission, metering, and transaction settlement by grid companies (including incremental distribution network enterprises) and refining pricing policies and market rules that support market-based trading of distributed generation.

Third, it utilizes market-oriented approaches for green transition on the demand side. The Opinions proposes to push for the establishment of a national market covering carbon emission trading, energy-use rights trading, and green electricity trading. Improvements are made to the electricity trading mechanisms that prioritize the utilization of renewable energy, pilot projects for green electricity trading are conducted, and long-term power purchase agreements are encouraged between renewable energy generators and power users or power supply companies. Independent participation in electricity trading is supported for emerging market entities such as microgrids, distributed power resources, energy storage, and load aggregators.

Fourth, China will deepen the SADP reform in the energy sector, which means implementation of the negative list system for market access, optimization of approval and filing procedures for clean and low-carbon energy projects, simplification of management procedures for distributed energy investment and innovation of construction and management mechanisms for integrated energy service projects. Grid companies are required to enhance their power integration from eligible renewable energy and/or distributed generation projects. Also, they need to disclose the dynamic information on capacity for renewable connection in their operating areas, and provide inquiries.

The Opinions proposes to improve the innovation and incentive mechanisms in the energy sector,especially the innovation capability of core technologies. Please introduce the relevant policy measures.

The green and low-carbon energy transition not only requires industrial restructuring but also relies on innovation of energy technology. The Opinions aims to improve the top-level design, the technology innovation and incentive mechanisms in the energy sector. Indisputably, core technologies innovation is the driving force for green energy transition.

First, it establishes a collaborative innovation system for major clean and low-carbon energy technologies. The Opinions supports leading enterprises in the industry to jointly establish national energy research and innovation platforms with universities, research institutes, and industry upstream and downstream enterprises, with the guidance of nation’s strategic forces on science and technology such as national energy laboratories. The platforms will advance collaborative researches on critical technologies of basic parts and components, basic software, basic materials, and basic techniques in the energy sector, and implement collaborative innovation researches on major energy technologies.

Second, it establishes a collaborative innovation mechanism for the production chain and supply chain of clean and low-carbon energy the Opinions proposes relying on major energy projects such as large-scale new energy bases to promote collaborative R&D, manufacturing, and application of advanced technologies and equipment among upstream and downstream enterprises, thus forming advanced technologies and industrial capabilities through engineering integration. To improve the public technical support system for technological innovation and industrial development in China, the Opinions proposes to improve the service platforms for renewable technology innovation, and promote in-depth integration of scientific and technological service industries such as R&D design, metrology testing, inspection and certification, and intellectual property services with renewable industry. In addition, the Opinions suggests to establish mechanisms for evaluation, conversion, and promotion of clean and low-carbon energy technological achievements.

Third, it improves incentive policies for technological innovation in green and low-carbon energy transition. To fully stimulate the innovation vitality of various market entities, the Opinions proposes exploring market-oriented ways to attract social capital for funding strategic renewable technology researches and demonstration projects. It also suggests organizing major key technology breakthroughs with methods like open competition, and improving policies that support the demonstration and application of the first set of advanced energy technology equipment.

The green energy transition in rural areas is an inherent requirement to meet the people's demand for a better life and an important component of building a modern energy system. It is of significant importance to consolidate and expand the achievements in poverty alleviation, achieve dual carbon goals, and advance agricultural and rural modernization. What are the important measures proposed in the Opinions regarding the integration of green energy transition in rural areas with rural revitalization?

The green and low-carbon energy transition in rural areas is not only an important component of the overall green energy transition, but also a crucial pathway to drive rural revitalization. The Opinions proposes a series of measures involving policy support, mechanism innovation, and localized trading of renewable energy generation, to support rural revitalization with accelerated green energy transition in rural areas.

First, innovative mechanisms for the development and utilization of renewable energy in rural areas are encouraged. The Opinions suggests that rural areas could develop decentralized wind power and distributed solar pv projects, and develop investment and operation models featuring unified planning, decentralized layout, cooperation between agricultural enterprises, and shared benefits. Rural collective economic organizations are encouraged to invest and operate renewable energy projects through buying shares with land tenure, forming joint ventures, and other legal means. These innovations not only open up the potential of decentralized and distributed renewable energy, but also give a major impetus to rural revitalization.

Second, enhanced policy support is emphasized. The Opinions proposes that central fiscal funds be further directed towards energy infrastructure construction in rural areas. Existing funding channels should be used to support the rural energy supply infrastructure, winter clean heating in northern regions, and building energy efficiency. Policy support will be given to the utilization of biomass energy, including large-scale biogas, bio-natural gas, and solid biofuels, as well as geothermal energy. Companies are encouraged to level up rural power grids. Financial institutions are encouraged to provide financial support to renewable energy projects. These supportive policies will foster strong synergies in promoting the utilization of clean energy in rural areas, improving energy conditions, and driving rural revitalization.

Third, localized trading of renewable energy is supported. The Opinions proposes strengthening innovations in rural grid technologies, operations, and electricity trading methods. The aim is to provide low-cost green energy for public and domestic energy needs in rural areas as well as industries related to rural revitalization. Priority is given to the grid connections of distributed solar pv, biogas power and other biomass power generation, which are suggested to be purchased by grid companies. Leveled-up rural grid facilities and localized trading mechanisms will help to promote pilot projects in country-level network. These policy measures will create favorable conditions for the local production and consumption of clean energy in rural areas and reduce energy costs.

The Opinions proposes the establishment of a comprehensive system addressing both green energy transition and energy security. Could you please introduce how this system will help ensure stability and security of energy supply?

The premise for the green and low-carbon transition is to ensure energy security. The Opinions promotes the transition in an orderly manner while ensuring energy security.

First, it highlights strategic coordination and strengthened accountability. A coordination mechanism for energy security and development across departments and regions will be established, in order to coordinate the construction of cross-regional energy transmission channels, reserves, and other infrastructure. Furthermore, the Opinions proposes to improve the assessment mechanism for natural monopoly enterprises such as power grids, oil and gas pipelines, etc., with a focus on evaluating their performance in ensuring energy supply, technological innovation, and ecological and environmental protection.

Second, it emphasizes risk identification and highlights that carbon cuts must happen in a secure and orderly manner. The Opinions proposes the establishment of an energy prediction and early warning mechanism, information systems covering the whole energy industry chain, and a joint response mechanism for extreme weather events. It points out the importance of coal as the primary energy source in China's energy endowment and calls for an accelerated transition of coal-fired power toward an equal emphasis on fundamental power supply guarantee and system peak regulation.

Third, it focuses on improving institutional mechanisms. On one hand, it proposes the establishment of a comprehensive system that prioritizes both green energy transition and energy supply security. On the other hand, it promotes the inclusion of demand-side adjustable resources into power load balancing, utilizing its capacities for peak shaving and power supply-demand balance. Additionally, it calls for improved price compensation mechanisms to support the operation of regulating power sources, such as flexible coal-fired power units, natural gas peak load adjustment units, hydropower, solar thermal power, and energy storage.

What more needs to be done in the implementation of the Opinions? What is the plan?

In the next phase, NDRC and NEA will work with relevant departments to collectively and effectively implement the policies and measures outlined in the Opinions, ensuring positive results in the green and low-carbon energy transition.

First, efforts will be accelerated to improve the policy framework for green and low-carbon energy transition. Clear division of tasks will be established, and policies and measures will be further refined based on the mechanisms promoting the energy transition, facilitating coordinated and orderly actions by all parties involved.

Second, pilot demonstrations will be organized. Support will be provided to eligible regions, key industries, and enterprises to actively explore and carry out pilot projects, aiming to establish replicable and scalable effective models that can provide valuable experience to realize energy transition within the designated timeframe.

Third, policy evaluation and dynamic adjustments will be strengthened. NDRC, NEA and relevant departments will closely monitor and regularly assess the progress of work in various regions and sectors. Policy implementation evaluations will be conducted, and dynamic adjustments will be made based on the implementation status.

Source: National Development and Reform Commission of the People's Republic of China (NDRC)


国家发展改革委 国家能源局